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Can QR codes become mainstream in Europe?

Founders and investors weigh in on the rise of QR codes in Europe — and its future, post-pandemic.

By Tom Matsuda

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Credit: Source: Photo courtesy of Sunday

Enter any commercial establishment today and you’ll confront a printed image of mishmash black and white lines. The quick response code (colloquially known as QR), along with surgical masks, has become emblematic of the times we live in. It’s another feature of daily life in Asia which has seen a recent and rapid adoption in Western states with the advent of the pandemic. 

Despite being invented in Japan over 25 years ago — long before the pandemic — it was seldom seen in Europe. However, we now rely on QR codes to access menus and order food in restaurants. With the launch of the NHS contact tracing app, it’s even become the key to our wellbeing in the UK, with a quick scan allowing us to be notified whether we’ve come into contact with Covid — the impetus to the so-called ‘pingdemic’. 

QR codes are 2D black and white barcodes that contain information ranging from contact details to website links and most notably, payment information. They’re used by merchants to eliminate the payment pain at the point of sale (POS) and to enable payments that are even more contactless than contactless itself. 

In China, through the magic of QR codes, messaging app WeChat has long been a one-stop-shop for payments. By depositing money into your digital wallet via bank transfer, a quick scan of the app can be used for services such as taxis and cleaning, bike rental and even for self-service convenience stores. 

This technology has enabled China in particular to leapfrog over cards, with the QR itself now operating as the payment du jour, with low merchant fees as a key selling point for SMEs.

QR comes to Europe 

Will a similar story unfold in Europe? A 2021 Ivanti survey revealed that 90% of UK respondents have used a QR code in the last month. 69% were also open to using QR codes for future payments, suggesting that QR code payments are on the brink of breaking into the mainstream in the UK, post-pandemic. 

So far in Europe, QR hasn’t operated as the payment method, but rather the vehicle unto which payment can occur via Apple Pay or card. This suggests that the European story will be fundamentally different to the Chinese one, in that it will accompany card payments rather than replace it. 

Vincent Choi, CEO of London’s Pomelo Pay — a QR code payment business that was founded pre-pandemic, but has since seen its customer base grow to 3.5k merchants in the UK and 35k worldwide — doesn’t see QR as competing with contactless in Europe, as it operates as a route to the payment.

Pomelo Pay CEO Vincent Choi and CTO Simon Varraest.

The key advantage over contactless, he says, is that the client doesn’t have to be at the centralised POS — i.e. the card reader, to pay. QR codes can enable the client to choose an item from a list, input their payment details and complete the transaction without interacting with anybody. 

“Some of our merchants get really creative with how they use the QR system.”

“Some of our merchants get really creative with how they use the QR system,” he says. “So we have a client who sells a cleaning service via QR so they can add the menu to [it] which they put on their business cards. They [the customer] scan it, select what they want and book a service in.”

Money between the (barcode) lines

So, which startups are poised to cash in on the quick response to QR? Increased consumer familiarity with the black and white 2D barcode has not gone unnoticed by investors. Late last year, Pomelo Pay received £2.1m in seed funding from Force Over Mass Capital.

The most sizeable investment recently, however, comes in the form of Sunday, a QR code payment system to speed up restaurant checkouts. The startup raked in €21.8m seed funding in a round led by US investor Coatue, with participation from New Wave VC — a new kid on the VC block set up by ex-Stride partner Pia d’Iribarne. It was the largest seed funding round in Europe this year. 

Sunday is a very 2021 startup, in that it was born out of the pandemic. Cofounders Victor Lugger and Tigrane Seydoux, who founded the restaurant group Big Mamma, looked to innovate by placing QR codes on restaurant tables linked to the point of sale, reducing the payment point to 10 seconds.

“Everyone now knows how to use a QR code, from seven-year-olds to 77-year-olds — Covid has democratised QR codes completely.”

Orderli, another QR-based tableside ordering platform, is taking part in the spring/summer Y Combinator batch — indicating how the hospitality sector may be the first frontier for QR in Europe.

“I think pre-Covid, no one in Europe knew what a QR code was — now, it’s obvious,” says d’Iribarne.

“On top of that, I think restaurants have really accelerated their digital transformation. Now, there are a lot of them looking at more digital [payment] solutions.”

Whereas in China, QR codes came about due to a market environment where card readers were expensive and seldom-owned, adapting to the pandemic for physical premises appears to be paving the way for European adoption of QR.

“So, 18 months ago, this would have been a challenging product to launch because a lot of people didn’t know how to use QR codes,” says Sunday cofounder and US CEO Christine de Wendel. “18 months later, Covid has disrupted the way people use their phones.”

“Everyone now knows how to use a QR code, from seven-year-olds to 77-year-olds — Covid has democratised QR codes completely.”

Sunday now boasts 700k users across its restaurants in Europe and the US, adds de Wendel.

Barriers to adoption

However, there remain key infrastructure issues that will most likely hamper adoption.

Thibault D’hondt, an investor at Force Over Mass, says that the prevalence of expensive POS terminals already in place at merchants will slow uptake — but new businesses will leap at the chance to use software-based payment systems such as QR.

“[Regarding] merchants with existing payment infrastructure, it’s not that easy to tell them like, hey, what you have there and what you paid 1000s of dollars for — you don’t need that any longer,” he says.

As the story of tech has so far told us, anything that comes quickly and conveniently usually comes with some inherent downsides. In Asia, the QR code has also accompanied the rise of the so-called super app, presenting possible privacy issues for a European consumer in its ability to collect data. In certain restaurants in China, scanning a QR code to pay facilitated the transfer of one’s WeChat name, profile picture and region.

“Suddenly, your offline activity of sitting down for a meal has become part of the online advertising empire.”

Jay Stanley, senior policy analyst at the American Civil Liberties Union, told the New York Times last month: “People don’t understand that when you use a QR code, it inserts the entire apparatus of online tracking between you and your meal.”

“Suddenly, your offline activity of sitting down for a meal has become part of the online advertising empire.”

The ICO also recently fined a contact tracing firm for sending unsolicited spam via QR code technology.

Sunday cofounders Tigrane Seydoux, Christine de Wendel and Victor Lugger.

The startups Sifted spoke to did admit that the possibilities behind increased consumer-to-merchant interaction that QR could offer were intriguing to them. “Yes, there’s a huge opportunity to monetise the data,” says de Wendel —  but only as long as they upheld regional privacy laws. This is likely to be another fork in Europe’s road to QR adoption when compared to China.

In particular, de Wendel imagines a future where information about your allergies and data on your morning coffee preferences can be used to customise the hospitality experience once Sunday becomes more widespread. “If you’re allergic to shellfish, when we show you a menu, there’s no reason we should show you shellfish dishes,” she says.

Choi says that they’ll never try to circumvent GDPR laws and it’ll be up to the customer to opt in, but stressed that the startup exists to benefit the merchants primarily.

The future of QR in Europe

When Sifted quizzed investors about how confident they are in QR becoming mainstream in Europe — d’Iribarne says “it’s a no brainer”— but thinks that it’ll start in hospitality and then spread to other sectors in the long term.

D’hondt cites the potential away from SMEs, with the possibility of large retail stores enabling QR-based payments via tablet to upsell or present other items to the customer.

It’s no question that the dominance of QR payments in East Asia is black and white. But in Europe, where it’s in its infancy, we must leave it up to our newly unlocked world to tell the tale of the rise of this 2D barcode.

Tom Matsuda is an editorial intern at Sifted. He tweets from @_tommatsuda 

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Sikander Hauser
Sikander Hauser

Great read and nicely put together! Adding three comments to the discussion: (1) Covid is not a trend setter, but an accelerator The overall trends and points are valid, but we shouldn’t fall for the myth of Covid bringing QR to the market in Europe – banks started to prepare for QR payments from 2016 with Alipay already. Two separate pan-European-QR-Wallet collaborations were announced in 2019. But it’s fair to say it isn’t as big as cash & cards, and probably won’t be for some time. We know that earlier attempts failed, including giants like PayPal. With the momentum now,… Read more »