The return of the QR Code and China’s obsession to it

 

451915-2IJTaz1463580687

Image Source

A few days ago, I had a LinkedIn discussion with Richard Turrin on QR Codes and their relevance in today’s go-cashless world. A few commentators on the post felt QR codes were the thing of the post, and I had a different view. I believe, in a world that’s getting digitised in a hurry, QR code is what bridges the digital world with brick and mortar.

QR Codes have gone through ups and downs since they were first created in 1994 by Japan’s automobile industry. QR – stood for “Quick Response”. However, those were days when mobile phones were clunky and the user journeys weren’t as friction-free as the ones we have these days.

When a customer scanned a QR code, an app or a website would be launched on the mobile using EDGE or GPRS. Once the website came up, users would have to use the clunky interface to fill in relevant details. I guess, that was enough to kill the QR code – or so many thought at that time.

QR Codes are more efficient than Barcodes because they are able to hold more information than Barcodes. This is because, QR codes have a two dimensional layout, where as with Barcodes it is just a one dimensional horizontal layout. And purely from a marketing perspective, QR Codes can be customised with a firm’s brand on it, unlike bar codes.

Utility of QR Codes seem better than Barcodes. But are they safe to store our information? For example, can I store my bank card details in a QR code and claim it is more secure? It certainly is – atleast in most scenarios.

Credit card thefts and frauds come in different shapes and forms. Even in a contactless payment mode, account details are still transmitted to the point of sale (PoS) device. So if the PoS device is hacked, hackers can get hold of the customer’s payment details. If at the point of sale, there is an issue with the internet, the customer experience could be poor.

The other hiccup is the case of lost devices, as QR codes do not check for user identity. This can however be overcome by asking for biometric information from the user at the time of registering. It could also be a selfie of the user at registration. At the point of sale, the device using QR codes, may have to use some ways of identifying the user.

Since QR codes rely on Wi-Fi networks, a hacker could get into the network and overlay fake QR codes. And then there is this issue of different variations of QR codes released by different vendors. There needs to be standards for ease of use from a customer’s stand point.

Despite some of these downsides, what makes QR codes special?

  • Simplicity
  • Versatility
  • Expanding mobile internet and
  • Smartphones adoption.

With better internet access and smartphone penetration, QR codes have become more common place in Asia. Smartphone penetration in China has risen to 63% and to 35% in Asia as a whole. In Latin America (Argentina), customers have taken to QR codes as it is a simple interface for the unbanked to perform digital transactions.

Pictures showing Alipay and WeChat QR codes in China and PayTM QR Codes in India have brought the concept back to life – in a big way. In India, PayTM are running campaigns to get millions of small and medium entreprises onto QR Codes. In Africa, firms like Dumapay are using QRCode to simplify the point of sale payments process. It has become easy for a roadside shop to accept payments using a QR code print out and no Point of Sale device.

Apart from payments, QR Codes can be used for several other interactions. They can be use for

  • Offering discounts,
  • Sending a pre-defined message,
  • Sharing contact details
  • Embedded pricing information
  • Linking to marketing videos or pages

China has taken the use of QR codes to a whole new level, as observed in the picture below. A quick google search on China and QR Codes reveal some really cool use of this tool.

d43d7e21c660168583b843

Image Source

As QR Codes are versatile, most top apps like Pinterest, Snapchat, Wechat and device manufacturers like Xiaomi, Motorola, Samsung, Huawei all have inbuilt QR Code readers.

But in the wrong hands, QR Codes can be used to lead a customer to a malicious page and get hacked in the process. There is definitely caution needed when using QR Codes.

It may be hard for the west to embrace QR Codes like Asia, Latin America (in some parts) and even Africa. But several firms across the world are creating their own customised QR Codes to stay relevant. QR Codes may not have succeeded in the past and they may not be the future either. But they most certainly have a place in the present.


Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Subscribe by email to join Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).


 

$2 Trillion – India payments rise force regulators on data protection

161129150332-india-cashless-payments-780x439

Image Source

2016 was a pivotal year in India’s digital economy. Demonetization was deemed a execution failure by many experts. However, it has triggered a digital payment boom in the country. In the last two years, transaction sizes in India have grown 50 times to $2 Trillion (143 Trillion INR). Some claim demonetization wasn’t the reason for the payment boom. If not causation, there is definite correlation between the two.

When we talk about Asia Fintech/Payments, China’s $40 Trillion market perhaps takes precedence over the other economies. However, if India continues to grow at the current pace, we may see yet another leap frogging Asian Fintech economy. I must confess, I was pretty excited when I first read about the 50X growth of the payments market.

Several global players have set up shop in India. Google, Amazon and Alibaba have all taken part in the payments boom in different ways. While these tech giants keep clashing, the Indian government has led the way in setting up the core infrastructural elements through the Unified Payments Interface (UPI). This is perhaps one of the few instances where a government has pioneered innovation at this scale.

I recently spoke to Elizabeth Chapman, CEO of ZestMoney – a fintech lender in India. As a Westerner, now running a startup based out of India, she is perhaps best suited to assess the developments there, especially in comparison to the west. There were two key developments she was very pleased about.

One, getting a digital identifier for 1.3 Billion people. Getting the Aadhaar programme up and running in under two years, was no mean feat. The data base has been linked to several governance aspects, like tax for example. The other development Liz was impressed about was the UPI, which has catalysed the payments boom.

Now coming back to India payments, Facebook is a key player. Whatsapp payments was tested with a limited audience in India. While the uptake was very good for the functionality, regulatory support was missing. The Reserve Bank of India (RBI) initially came up with a rule that customers’ payments data can’t be stored outside of India.

The Government of India also imposed a rule that any data classified as critical personal data cannot be stored outside of India. Most international technology firms have expressed their dissatisfaction with these data protection rules. One of the key reasons why Whatsapp Payments didn’t take off in India was because of this rule.

In an emerging markets context, consumers care less about data protection and privacy. As long as they get to be part of the banking system and the financial ladder, getting paid is all they care about. Which is why QR codes and PayTM wallets have become so commonplace on Indian roadside shops.

cashless_Reuters

Image Source

In a recent Linkedin conversation, one of the comments were about decentralised ways of storing assets in a wallet. It is a great concept in the west, and I love to talk about it till the cows come home. However, this was hyped as a great development in an emerging markets context. I don’t believe that is true.

Emerging markets consumers DO NOT care about decentralisation. I am not talking about the college graduate in south east Asia who is writing a Blockchain and has 10 different wallets to store cryptos.

I am talking about the lady who is selling the turmeric in the picture above. All she cares about is an easy way to get paid, so that she can cook dinner for her kids, and pay their school fees. They care about how inflation could take away all their wealth in Latin America and parts of Africa. Therefore, a solution that solves their day to day problems will see massive uptake.

We have already seen the rise of digital payments in India. With the removal of these data localization rules by RBI and the Government of India, there will be more explosive growth. With Facebook’s Libra (Sorry, couldn’t help mentioning it) around the corner, getting rid of the data localization rules, may not necessarily be a bad thing.

For Facebook, India is the biggest market – be it based on population or internet growth, or middle class income or financial inclusion. All the metrics point to India for Facebook.

For me, Financial Inclusion comes ahead of Data Protection. We thought Identity with Aadhaar – we didn’t think decentralisation. Let’s get them all on to the next generation payment network, get an economic identity created for them. Data protection, privacy and decentralisation will soon follow as awareness of the risks of the digital economy becomes more prevalent. For now, let us just help the lady selling the turmeric get paid.


Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Subscribe by email to join Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).


 

One97 – From selling Astrology services over the phone to a Global Fintech Unicorn

Screen Shot 2018-12-03 at 9.26.18 AM

A glance at the infographic with the top global Fintech unicorns[1] (as of Q3), fired several thoughts. Gold and bronze position to Chinese born giants, Ant Financial and Lu. The top seven Fintech unicorns that could fit their balloons which reflect their relative size in USD, included no European born companies. The US gave birth to four out of the seven Fintechs, which still operate mostly locally – Stripe, Coinbase, Robinhood, and Sofi.

One97 with a $10bil valuation, sitting right in the middle, was the only one that I honestly didn’t recognize with a blink. Once I started looking into the entity, I realized that a visit to New Delhi is long due. India is where One97 Communications operates. It is the leading mobile internet company offering mobile content and commerce services to millions of mobile consumers. Vijay Shekhar Sharma is the founder of this Unicorn which was launched in 2000!

One97 is endorsed by international big brand name investors:

  • Alibaba Group and Ant Financial (AliPay), own 40% of One97 shares.
  • Japan’s SoftBank became a shareholder in May 2017, injecting $1.4 billion in One97 for a 14.2% stake.
  • Berkshire Hathaway invested $356 mln in One97 (3%-4%) on the 28th October 2018, which brought the valuation up to $10bln[2].

One97 Communications is the mama of the flagship Paytm, born in 2010. This is the brand name that we all recognize.

PAYTM, at a glance

Paytm is a leading payment solutions provider to e-commerce merchants using a semi-closed wallet, approved from the Reserve bank of India.

Paytm started off in 2010 as a prepaid mobile and recharge platform and added a data card, postpaid mobile and landline bill payments.

In 2014, it launched the Paytm Wallet, and the Indian Railways and Uber added it as a payment option. It continued into E-commerce with online deals and bus ticketing.

In 2015, Paytm broadened its services with use-cases like education fees, metro recharges, electricity, gas, and water bill payments. It also started powering the payment gateway for Indian Railways.

In 2016, Paytm launched movies, events and amusement parks ticketing as well as flight ticket bookings and Paytm QR. It later launched rail bookings and gift cards. Paytm in India is considered the pioneer of QR based mobile payments.

In 2017, Paytm became India’s first payment app to cross over 100 million app downloads. It launched Paytm Gold, a product that allowed users to buy as little as ₹1 of pure gold online (₹ the new Rupee sign as of 2010).

It also launched the Paytm Payments Bank and ‘Inbox’, a messaging platform with in-chat payments among other products.

In 2018, it started allowing merchants to accept Paytm, UPI and Card payments directly into their bank accounts at 0% charge.

It also launched the ‘Paytm for Business’ app, allowing merchants to track their payments and day-to-day settlements instantly.

The company also launched two new wealth management products – Paytm Gold Savings Plan and Gold Gifting to simplify long-term savings. And an Indian robo-advisor. Paytm Money with various mutual fund products.

It also stepped into gaming with a mobile games platform Gamepind.

Just a glance at the Economic Times under One97, is sufficient to realize how it continues to make the headlines:

Paytm registers 600% growth in UPI transactions in 6 months

Now, you can pay LIC premium through Paytm

One97 Mobility Fund, the ecosystem play

While One97 Communications is the proud mama of Paytm, they have launched a $100M fund that invests in early stage mobile companies  – the One97 Mobility Fund (OMF). Their portfolio currently includes:

  • Paytm
  • TheMobileGamerPublisher of mobile social games for South East Asia reaching out to over 500M mobile users.
  • Ciqual: enables Mobile Operators to improve their data services through customer insights.
  • RainingCloud Technologies: develops AppSurfer (previously known as DroidCloud), a platform enabling Android access across multiple devices like non-android phones and PCs.
  • Dexetra: focuses on Artificial Intelligence around personalized Search and Mobility.
  • Plivo: a cloud telephony solution which helps enterprises and service providers setup, manage and run their own private or public telephony clouds.
  • IImjobs: A job portal run focused on mid-to-senior level placements.
  • CRAFTBY PRODUCTS: Engrave is an India-based design collective engaged in the pursuit of creating lifestyle products with fine craftsmanship.
  • Santa Claus Couriers: is an Indian eCommerce platform
  • MobiSwipe Technologies: allows merchants to use Android mobile phones or tablets as Point of Sale.
  • Zepo Technologies: helps small business owners to setup their online shop.

Why One97?

197 was the telephone directory number in New Delhi. Vijay Shekhar Sharma launched a call center selling Astrology services over the phone, which he named as One97. Eighteen years later, One97 Communications is the 4th Fintech unicorn on the global marketplace. An Indian mobile internet company which has earned the liking of international large investors and which acts like an ecosystem.

[1] Included in the Redefining Financial Services newsletter

[2] Source: https://www.cnbc.com/2018/08/28/reuters-america-update-3-berkshire-hathaway-takes-stake-in-indias-paytm.html

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.