Quick Response (QR) codes are emerging as a popular payment acceptance alternative to point of sale (POS) terminals in Pakistan. These little- to no-cost acceptance solutions not only support digital financial inclusion among micro-merchants, but can also support governments’, central banks’ and regulators’ strategies to drive a more digital economy by removing cash from the banking and payments ecosystem.

Mastercard QR is a payment solution that can be embedded into a digital wallet or banking app. It securely links to person’s card, digital wallet or bank account to provide a fast, convenient and safe way to pay merchants.

To accept payments, the merchant simply registers a unique QR code as a proxy for their bank account details. They display this code as a tent-card or sticker at their store counter, or digitally within their merchant app. When a person pays in-store (or online), they simply scan the QR code, which prepares a fund transfer to the merchant’s account. They enter the amount to pay and authorise the payment. Micro-merchants benefit from reduced cost and time needed for cash management and reduced risk from carrying cash.

Mastercard QR became Pakistan’s first interoperable mobile payment solutions when it launched in 2016. From initial objective to displace cash, Mastercard and its partners have since grown its user base and acceptance by supporting new use cases and driving sustainability and adoption through education and awareness.

Low-cost acceptance solutions fuelling micro-merchant growth

The majority of a micro-merchant’s business activity involves small, low-value transactions — it’s not always necessary for them to invest in a contactless or Chip & PIN terminal, and given that micro-merchants often operate in non-traditional venues, stationary POS equipment can be impractical. QR is a powerful yet cost-effective tool for micro-merchants and small businesses to quickly enable digital acceptance and enter into the formal economy.

Sham Sundar is the owner of Adarsh Spare Parts Shop — a tiny store front selling electrical goods and accessories in western Hyderabad, Pakistan. Until recently, his small store had no means of accepting digital payments, which meant all his custom was in cash.

“We used to face a lot of trouble managing cash, for which we had to often go to the bank.” But having to accept cash is not just a hassle, it’s a detriment to Adarsh Spare Parts Shop’s overall sustainability. “Because of COVID-19, the trouble escalated: customers weren’t comfortable with exchanging paper currency.” Sham’s business took a downturn as a result.

It was a customer that told Sham about the QR-based acceptance solution from Mastercard. Intrigued, he sought more information about it. “Today, we receive payments from customers using QR code, and we don’t face issues anymore,” he says. “In fact, it has helped to improve our sales…. [it’s] amazing.”

"Today, we receive payments from customers using QR code... it has helped to improve our sales…. [it’s] amazing.”
Sham Sundar, Pakistan micro-merchant

Tahir Ali Agha runs Baily Bachat Superstore — a superstore in nature if not in size. Like Sham, the impact of the coronavirus pandemic exacerbated his need to accept digital payments. “In order to help us better deal with the challenges posed by COVID-19, this service ensures the safety of our customers and ourselves.”

Adopting the Mastercard QR acceptance solution has had myriad positive impacts: “We don’t have the trouble of managing cash like we used to in the past… and we receive fast payments directly into our bank account,” he says. Enabling digital acceptance has also boosted his profits: he reports up 30 percent increase in sales. “We are truly satisfied and so are our customers… [it] offers convenience to everyone.”

Across the city is United Fabrics, a microbusiness run by Muhammad Nawaz. “My customers would often ask me about QR code,” he says. “I’d seen it myself a few times.” Perceiving that accepting payments by QR code, he found a solution that was available from Digital Access Group — a Mastercard issuer in Pakistan. From that first conversation, it took no time or hassle for United Fabrics to start accepting digital payments. Now, all his payments are received via QR code. “Because of it my life has become easy and my business is running smoothly.”

Convenient, secure payments for larger merchants, too

It’s not just micro-merchants that are benefitting from low-cost acceptance solutions. Pizza Hut (part of the global franchise) is Pakistan’s largest and one of its best-loved restaurant chains with over a hundred restaurants across the country. Four years ago, it became the first brand to partner with Mastercard to start accepting payments via Mastercard QR.

“Pizza Hut is always looking for ways to make customer experience smoother. While our core business was always cash-dependent, we were the first food chain to offer card payments across Pakistan and e-commerce with Internet Payment Gateways through alliances with our banking partners,” explains Arsalan Mahmood, Chief Commercial Officer for Pizza Hut in Pakistan.

“When Mastercard introduced QR acceptance in Pakistan… we immediately knew that this would be a game changer in improving our customers’ experience."
Arsalan Mahmood, Chief Commercial Officer for Pizza Hut in Pakistan

“When Mastercard introduced QR acceptance in Pakistan… we immediately knew that this would be a game changer in improving our customers’ experience. We wanted to be the pioneers in exploring the digital payments space with [Mastercard’s] help.”

Even for such a big franchise as Pizza Hut, the process for accepting payments via QR was seamless. “Having the amount transferred directly from the customer account to the merchant proved to be efficient and fast. It required lower capital cost and was easy to integrate,” says Arsalan. The same benefits of low-cost acceptance solutions for micro merchants are amplified a hundred-fold for a business that’s a hundred times the size.

The speed, security and convenience afforded to customers by solutions like Mastercard QR has driven the adoption of QR payments at scale. “The instant popularity and acceptance of QR payments in Pakistan was faster than any other country in our region,” Arsalan says. The success of introducing QR acceptance solutions for Pizza Hut in Pakistan has since been used as a case study for Pizza Hut Middle East to popularise similar payment options throughout the region.

Accepting payment by QR code allows more people to transact more simply and securely. The ease in opening online bank accounts and making payments digitally introduced a whole new market segment. “In [a country] where the major part of the population was still getting used to conventional banking and plastic money, digital payments proved to be a catalyst in improving the customer [payment] experience.”  It also helps to reduce their reliance on cash.

QR payments for goods bought online and other use cases

QR acceptance solutions also have the potential to displace cash in payment on delivery scenarios, where merchants commonly use third-party delivery agencies. Typically, delivery personnel collect cash from customers, and are trusted to pass it to a money depositing agent at the end of the day. The agent then makes an electronic transfer into the merchant’s account — minus a service fee. It’s slow, costly, and there’s a high risk of theft or fraud.

Cheetay is the fastest growing NOW-commerce platform in Pakistan, which allows people to order food, groceries and medicines for delivery in ten cities. The lifestyle app supports more than three thousand vendors and has more than half a million active users who place more than fifteen thousand orders a day.

“Cheetay is committed to digitisation of the economy and local SME business enhancement,” says Ayesha Jalil, Manager for Alliances and Partnerships at Cheetay. “Previously, payment by card or cash on delivery were the only options available via the Cheetay app. “Now, we offer not one, not two — but nine payment methods.” These include payment on delivery using Mastercard QR.

“We launched Mastercard QR just prior to COVID-19 hitting Pakistan, and it made a big difference for our customers in terms of health and safety”, she says. Cheetay is the first and only eCommerce service in Pakistan to accept payment this way.

To accept payment, the merchant simply registers a unique QR code as a proxy for their bank account details. On arrival, the rider presents the merchant’s QR code within their rider app for the customer to scan. The customer then enters the amount to pay and authorises the payment. Merchants benefit from lower costs and improved security, while riders benefit from reduced risk from carrying cash.

“Cheetay is committed to digitisation of the economy and local SME business enhancement,” says Ayesha Jalil, Manager for Alliances and Partnerships at Cheetay. “Previously, payment by card or cash on delivery were the only options available via the Cheetay app. “Now, we offer not one, not two — but nine payment methods.” These include payment on delivery using Mastercard QR.

“Enabling transactions by [Mastercard] QR has allowed customers greater access to the convenience of contactless, cashless payments.”
Ayesha Jalil, Manager for Alliances and Partnerships at Cheetay

“We launched Mastercard QR just prior to COVID-19 hitting Pakistan, and it made a big difference for our customers in terms of health and safety”, she says. Cheetay is the first and only eCommerce service in Pakistan to accept payment this way.

To accept payment, the merchant simply registers a unique QR code as a proxy for their bank account details. On arrival, the rider presents the merchant’s QR code within their rider app for the customer to scan. The customer then enters the amount to pay and authorises the payment. Merchants benefit from lower costs and improved security, while riders benefit from reduced risk from carrying cash.

“Enabling transactions by QR code via mobile phone has allowed customers greater access to the convenience of contactless, cashless payments,” says Ayesha. It’s resulted in a 15 percent surge in digital payment transactions. “With Cheetay and Mastercard working together, it’s only a matter of time before you do all your shopping and transactions without taking a single step outside your home… the future is just a click away.”

A future for QR code payments beyond retail

Beyond retail payments, QR-enabled payment solutions can also provide a solution for other person to business payment use cases, such as paying household and other personal bills. With QR, people can scan a biller’s QR code on their bill statements to make a one-off payment, or provide their QR code to register for a recurring automated request to pay service. QR solutions can also be used to make donations to charities and non-profits, or paying government taxes.

For these reasons and more, QR is fast becoming the most popular solution for low-cost digital acceptance in Pakistan and elsewhere. In 2019, The State Bank of Pakistan (SBP) issued a QR standard for commercial banks in Pakistan to ensure interoperability of QR-enabled financial and payment services and streamline QR code-based mobile payments to both people and merchants.

The opportunity is to enable QR payment interoperability across borders; something that will require a great deal of industry collaboration to realise and will benefit the people, micro-merchants and businesses of the region enormously.

Hayden Harrison, Storyteller, Mastercard

Hayden is Mastercard and Vocalink's resident storyteller. She writes about a range of topics from financial inclusion to innovation that matters, and also curates our topics.