QR Code Explosion Unlocks Billion-Dollar Informal Economy

Claire Jiao and Grace Sihombing, from Bloomberg News are reporting on how QR codes are helping to unlock Indonesia’s billion dollar informal economy, saying that QR (Quick Response) codes let customers make payments by scanning it with their mobile phones, making transactions fast, easy and cheap for merchants.

As a merchant applying for your own QR code costs less than USD 2, which is helping it find widespread adoption among satay stalls and roadside sellers across the country. Cash is making less of an appearance, and some shops won’t accept it at all. 

The uptake is paving the way for Indonesia to capture the billions of dollars of informal economic activity overlooked in taxation and even statistics due to small businesses’ reliance on cash. Over 22-million merchants have signed up and the total is set to double this year to 45-million. That’s about half the number of merchant locations accepting Visa payments globally, report Bloomberg.

Indonesia is bringing its small businesses, which account for over 60-percent of national output, into the formal economy and within the tax office’s reach. Regional governments are among the earliest to benefit as their revenue rises 11-percent a year with QR helping businesses pay local taxes.

The pandemic has accelerated a global shift to digital finance. In Indonesia, that move found an early champion in the central bank, say Bloomberg.

In January 2020, well before Covid-19 spurred lockdowns across the world, Bank Indonesia (BI) required digital payment services to use standardized QR codes known as QRIS to ensure all banks and electronic wallets are interoperable.

Customers can use their GoPay app to top-up their Bank Mandiri e-wallet or pay at a GoFood stall with their OVO account.

“Indonesia was one of the few to act early and decisively by mandating the use of a unified QR payment system,” said Davids Tjhin, managing director and partner at Boston Consulting Group in Jakarta. Standardization made QR more convenient for consumers and cheaper for merchants, spurring faster adoption, he said.

Indonesia is now a distant first place in Southeast Asia both in the use of e-wallets and QR payments. The value of QR transactions has risen exponentially to hit IDR 98.5-trillion (approx. USD 6.5-billion) last year, and should gain further traction as the central bank doubles the transaction limit to IDR 10-million.

“Gone are the days when merchants need to have card terminals, which are costly,” said Budi Gandasoebrata, managing director at GoTo Financial, which oversees the nation’s most widely-used e-wallet GoPay. “Today, with just a printer and an image file they can start accepting payments in QR.”

Indonesia’s young population and pervasive mobile-phone use helped QR become the perfect springboard for it to leave cash behind. That’s true at least in major cities.

Bloomberg say that for the easternmost islands, central bank officers must brave seas and drive armored trucks for days to distribute cash. This year, they will give out about IDR 3-trillion of new bills to 85-islands so people there can transact as old cash tends to tear or stain. Bank Indonesia expects broader QR use to reduce the need for their grueling cash journeys.

Soon, you may not need a mobile phone to use QR. The central bank is testing facial recognition technology for places like schools where students aren’t allowed to carry phones. They can shop in the canteen using money in their bank accounts by showing their faces, report Bloomberg.

BI is also setting its sights beyond the border. It’s doing a pilot run with Singapore and Thailand to integrate their QR payment systems, while Malaysia is set to follow.

Singapore has linked its system with India and Malaysia. The Philippines seeks to quicken its QR rollout by requiring banks to adopt the national standard by July.

Indonesia’s success will be a useful blueprint. Southeast Asia needs to remain a “first mover” to “maintain a high degree of controllability” over the rapid expansion of digital finance, said incoming Bank Indonesia Deputy Governor Filianingsih Hendarta, who oversaw QRIS’s development.

“The future of money, payments are undoubtedly digital,” she said. “There is no room for us to just sit and wait.”

Source: Bloomberg

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