The Central Bank of Kenya (CBK) has mandated banks, telcos, and other payment service providers to adopt Quick Response (QR) codes in a bid to promote digital payments. As part of the National Payment Strategy, 2022-2025, the CBK is releasing the Kenya Quick Response Code Standard 2023 to provide guidance on the issuance of QR codes to businesses and consumers. The CBK aims to provide a secure, fast, efficient, and collaborative payments system that supports financial inclusion and innovations that benefit Kenyans through the use of modern payment solutions, largely driven by fintech developments.
QR codes and banking
Quick Response codes are two-dimensional barcodes that store information in a pattern of black and white squares. In the context of banks and CBK, QR codes are increasingly being used to streamline operations and provide convenience to customers. For example, banks can assign unique QR codes to each of their users, which can then be used to quickly transfer money to others. Scanning the code will redirect the money sender to a secured landing page where they can indicate the amount to send. Through this method, users no longer have to give out personal details such as their full name and account number to another person, which promotes a safer transaction.
QR codes can also be used to provide additional security to ATM, debit, or credit cards. Banks can integrate a vCard QR code on every teller’s desk, showing their name and payment options, including their picture. This makes it easy for customers to leave reviews, track or follow up on transactions with tellers, and keep transaction records on their phones.
With QR code payments projected to reach $2.7 trillion globally by 2025 and the number of users expected to reach 2.2 billion, fiscal organizations must leverage QR codes to remain competitive. QR codes can help financial businesses like banks offer a seamless and personalized experience, enhance security, and improve customer engagement and satisfaction.
What’s in it for you as a consumer?
First they enable fast and easy transactions, as customers can scan the code using their smartphones without needing to carry physical cards or cash. This is particularly useful in situations where carrying cash or cards is inconvenient, such as when traveling or during the pandemic when contactless payments are encouraged.
QR codes provide an added layer of security, as they can be encrypted and personalized to each user in-turn preventing fraud and theft, as users no longer need to share their personal or financial information with other parties.
Moreover, they offer a personalized experience, as they can be assigned to individual users and customized to their preferences. i.e banks can assign unique QR codes to each user, which can then be used to quickly transfer money to others.
Ultimately, QR codes will help reduce costs for both consumers and businesses by avoiding transaction fees associated with using credit or debit cards, while businesses can save on processing fees associated with traditional payment methods.
Potential disadvantages to consider
Using QR codes requires a smartphone which may not be accessible to all consumers in Kenya due to affordability and internet connectivity issues.Many consumers in Kenya may not be familiar with QR codes or how to use them, which could lead to confusion and potential errors during transactions.
While QR codes can enhance security in financial transactions, they can also be vulnerable to fraud and scams if not implemented correctly, however with education on how to identify legitimate QR codes this can be avoided. .
They rely on technology and can be impacted by technical issues, such as network connectivity or app malfunctions, which could disrupt transactions and inconvenience consumers. Owing to the fact that internet penetration in Kenya is not at 100%, meaning majority of the citizens do not have access to the internet and those that have, it's expensive and cant be regularly affordable.
If different banks use different QR code systems, it could lead to confusion and limit the convenience of the technology for consumers who use multiple banking services.
While QR codes have the potential to improve financial services for consumers in Kenya and Africa at large, it is important to address these potential disadvantages and ensure that they are implemented in a way that is accessible, secure, and convenient for all consumers.
QR codes are increasingly being used in the banking and financial services industry to enhance security, convenience, and efficiency. They can be used for secure and encrypted transactions between parties, making it difficult for hackers to intercept and steal sensitive information. QR codes can also be used for Know Your Customer (KYC) and Anti-Money Laundering (AML) verifications, helping banks comply with data protection regulations.
QR codes have various uses in banking, including facilitating money transfers, employee identification, online transactions, touchless banking, and digital services. QR codes assigned to each user can be shared for quick money transfers without giving out personal details, promoting safe transactions. VCard QR codes on teller's desks show their payment options and picture, allowing customers to leave reviews and track transactions. QR codes can also optimize in-bank transactions by providing editable forms accessible through scanning the code.
The move by the Central Bank of Kenya to boost digital payments using QR codes will create convenience for merchants and customers, leading to more sales and the ability to offer new services such as loyalty and rewards. This effort towards creating a secure, fast, efficient, and collaborative payments system supports financial inclusion and innovations that benefit Kenyans. The use of QR codes in banking can help promote secure and efficient financial transactions, making it an important tool in the context of tech.
We hope this blog post has been informative and engaging, and we invite you to visit our website to learn more about our work at the Lawyers Hub.