PayPal’s CFO explains why the payment giant is going against the grain and betting big on QR codes as the new way to pay in-store

  • PayPal is betting that US shoppers will start using QR codes at checkout.
  • Last week, it announced that CVS Pharmacy would be the first national chain to offer PayPal’s QR payments in-store.
  • PayPal’s CFO John Rainey told Business Insider that when the pandemic hit, PayPal reprioritized its QR code project, which it launched in May.
  • While QR payments are prevalent in markets like China, they’ve yet to catch on in the US.
  • Visit Business Insider’s homepage for more stories.

Contactless payments are on the rise in the US, as the coronavirus pandemic has consumers rethinking daily habits like touching cash or credit card terminals.

But while credit card companies and banks are pushing for contactless cards and mobile wallet adoption, PayPal is taking a different route, betting on QR codes, which it introduced to its platform in May

“This has been something that has been on our project list for some time, but when the pandemic hit globally, we reprioritized it to be our top initiative for the back half of this year,” John Rainey, CFO of PayPal, told Business Insider. 

Using the PayPal or Venmo app, shoppers can scan a QR code that has been printed out or presented on another screen to make purchases.

Read more: POWER PLAYERS: Meet the 8 PayPal execs shaping the payment giant’s future as its stock skyrockets and e-commerce surges

Last week, PayPal announced that CVS Pharmacy would be the first national retailer to integrate QR codes as a way to pay in-store at 8,200 stores.

PayPal’s QR play will be rolled out through its core PayPal platform and its peer-to-peer app Venmo. In July, Venmo started offering business profiles for merchant users.

“We do see this as an inflection point, a moment in time where perhaps real change can be driven,” Rainey said.

‘If it were a no brainer, it would have already been done.’

To be sure, there is some skepticism in the industry around whether US consumers would adopt QR codes as a way to pay, given the prevalence of competing contactless options like cards and mobile wallets.

“I think the skepticism is warranted,” Rainey said. “If this were a no-brainer, it would have already been done.”

What’s more, many US consumers prefer to use credit cards at checkout to earn rewards. PayPal acquired shopping rewards startup Honey last year, which it plans to integrate into its PayPal and Venmo apps, CEO Dan Schulman said during PayPal’s second quarter earnings call last week.

Like contactless cards, Rainey expects that consumer concerns around health and safety could lead to adoption of QR codes, too. 

Some restaurants, for example, are starting to use QR codes to give diners access to digital menus. And a recent survey from payments consultant The Futurist Group found that 30% of consumers would also pay at those restaurants using QR codes.

“This is not just something that we want. It’s also what consumers and merchants want,” Rainey said. “They want to provide a safer way for their customers to pay, but also for the safety of their employees.”

Read more: Here’s how PayPal is looking to boost its credit business by leaning into a buy now, pay later frenzy

While e-commerce is on the rise, in-store sales still represent the majority of US retail sales — in 2019, e-commerce only represented 11% of US retail spending. For PayPal, which historically has been digitally-focused, rolling out QR codes is a way for it to tap into in-person purchase volumes.

To be sure, PayPal has its sights set on card payments, too, launching its Venmo debit card in 2018 and working on a Venmo credit card, which PayPal is expecting to launch at the end of this year, Rainey said.

And while QR codes may take a while to catch on, Venmo’s broader growth strategy includes both the QR products and the cards, Rainey said.

“We’ll go through this time period where maybe QR codes haven’t been rapidly adopted yet, there’s going to be some time where that builds up, well they’ve got physical cards they can use in-store,” Rainey said.

The US is lagging markets like China in adoption of QR codes to pay

Outside of the US, QR codes are popular, especially in mobile-centric markets like China, where 81% of smartphone owners use their phones to pay in-store, according to a 2019 eMarketer report. Compared to the US, a smaller portion of China’s consumers have credit and debit cards, which leaves room for mobile payment options like QR codes to catch on.

In the US, QR codes haven’t been widely adopted as an in-store payment method. Instead there’s been more traction with contactless credit and debit cards, as well as mobile wallets like Apple Pay. But PayPal is betting that the coronavirus pandemic could be the catalyst for QR adoption.

“We can all imagine a day when everyone uses a phone to pay and doesn’t need to carry around a wallet,” Rainey said, “but any major technology trend that has been adopted by consumers in the last 15 to 20 years has been one that’s solved a problem for consumers.”

Historically, contactless payments have been a solution looking for a problem in the US market, Rainey said.

But the coronavirus pandemic has created that problem: consumers are reluctant to handle cash or exchange cards at checkout. Contactless payments, be it via card, mobile wallet, or QR code, minimize contact at the point of sale, making both shoppers and merchants more comfortable.

“This is a seminal moment in the shift around contactless payments in an offline setting,” Rainey said.

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