Recently, Maha Prasad Adhikari, governor of Nepal Rastra Bank, the central bank, was seen flashing his mobile phone in front of QR code stickers placed at two different vegetable and fruit markets in Kathmandu. The governor’s point was to draw people’s attention towards QR code-based payments. Several days after visiting those markets, the governor said additional policy arrangements would be made to promote digital transaction, including the use of QR codes. He made this statement during the half-yearly review of the Monetary Policy.
These initiatives and announcements have sent a clear message that the central bank wants to gradually institutionalise digital transaction in the country by promoting QR code-based payments. These are steps in the right direction.
Nepal has long been trying to promote digital transactions to reduce the cost of printing paper money and, most importantly, to build a cashless economy, which not only traces money transfers but helps to curb corruption. Earlier, it did try to encourage consumers to use cards to promote digital payments. But since Nepal did not have its own payment gateway, it had to rely on international companies, like VISA and MasterCard, which impose exorbitant fees on transactions. Also, small businesses, like shops, found it expensive to install point-of-sale terminals.
The central bank now wants to promote QR code-based payments because the technology is inexpensive. All merchants need to have are a smartphone, internet connection, a bank account and a QR code sticker. Once customers scan the QR code using their phones, they will be guided to their digital wallets or online bank accounts and payments are made instantaneously.
It may not be very difficult to promote QR code-based payments in Nepal as mobile phone penetration rate has jumped to 128 percent, while the internet penetration rate has increased to 81.5 percent with mobile broadband penetration rate standing at almost 60 percent. Besides, one need not be tech-savvy to use QR code, as transactions can be completed by simply holding the phone in front of the code.
But there is a caveat. The QR code-based payments may fail to take off if the codes are not interoperable. Currently, most of the QR codes are proprietary, meaning they could only be used via apps developed by the company that designed the code. This compels consumers to download multiple apps to make QR code-based payments. Those who find this practice annoying may not use QR codes at all to make payments.
India is currently dealing with the same problem. But its central bank has already decided to phase out proprietary codes by March 2022. Nepal needs to do the same. It should set a deadline and completely halt the use of proprietary QR codes. To promote QR code-based payments, India has also directed businesses with an annual turnover exceeding INR 5 billion to mandatorily issue invoices to consumers with dynamic QR codes from April 1, 2021. Nepal can also emulate this practice, as it will encourage consumers to rely more on mobile payment service.
China has witnessed rapid growth in mobile payment services because of the widespread use of QR codes. The QR code stickers allow enterprises, especially micro and small, to accept digital payments without spending too much money on hardware such as a point-of-sales terminal. The use of QR codes will also reduce the expenses of banking institutions, as QR code stickers are very cheap to print compared to plastic debit and credit cards.
But caution needs to be practiced while scanning QR codes, especially if the codes redirect users to some other website. Just like hesitating to open an e-mail in the ‘spam’ folder, users should not click on every URL that the codes generate, as those links could guide them to websites containing malware. Once they enter your phone, such malware can cause damage to software and hardware, and, worse, take undue advantage of any software vulnerability leading to theft of personal information.