CVS Pharmacy’s chain of 8200 stores will be the first in the US to offer Paypal’s QR payments in-store. Paypal first launched the QR project in May and has re-prioritised it to take advantage of the prioritisation of contactless payments during the pandemic. While already widely adopted in the mobile-centric markets of Asia, QR payments are still relatively unused in the US, with consumers preferring to utilise credit cards or mobile wallets.
For Paypal, QR payments represent a means by which the payments platform can transition the effectiveness of its digital model to physical stores. An extremely attractive proposition given that e-commerce makes up only 11% of total US retail. In spite of the crowded contactless payments market, Paypal is banking on the ease of its deployment to merchants to assist its adoption. Where current contactless payments at a minimum require merchants to host at least one physical NFC device, QR codes can be deployed digitally to merchants through their Paypal vendor accounts and printed out and displayed immediately following set-up. Paypal will also be making QR payments available for Venmo accounts. Merchants, for the most part, offer more than one means of contactless payment, therefore the decision to include QR payments will likely depend more on whether the merchant is already a Paypal vendor or not. And the lack of requirement to manage an NFC device at the checkout counter may be an added incentive for smaller businesses to onboard with Paypal.
For consumers who are already Paypal and Venmo users, the availability of QR payments in physical stores will assist in the payments platform garnering a deeper footprint in consumer’s daily lives. However QR payments will be competing with ingrained point-of-sale behaviour and the adoption of the technology, even by existing customers, will rely on whether Paypal can augment its payment option with additional incentives. US consumers’ preference for credit cards are often tied to rewards systems and Paypal’s recent purchase of Honey, a shopping rewards start-up could be an avenue to achieve this.
Given the technology’s ease of deployment, the re-prioritisation towards QR payments seems a sensible strategy for Paypal in the wake of the pandemic. The challenges will rest more in onboarding consumers than merchants and even if Paypal successfully triggers point-of-sale behaviour change its competitors won’t be far behind in taking advantage of QR payments. In the interim, it is a useful mechanism by which Paypal can enter physical retail where it lags significantly behind its digital payments competitor Stripe and other mobile and contactless payment providers.