31 Jul 2019
The widespread adoption of QR codes during the pandemic is likely to continue to expand for some time to come. The use of QR codes for mandatory check-in systems will evolve into digital ‘vaccine passports’ and become integrated into COVID-safe check-in systems in Australia and globally, such as the EU Digital COVID Certificate.
The pandemic has also accelerated using QR codes for event ticketing, restaurant menus and marketing material. There is a growing industry focus on the potential for using QR codes for making contactless mobile payments in Australia and in other developed markets - something which has been commonplace in China for several years. Yet, few people know where QR codes come from as a technology.
“The codes could also be read at ten times the speed of traditional bar codes; hence they were called ‘Quick Response’ codes or QR codes for short.”
QR codes are two-dimensional black and white barcodes that can reveal a URL (web address) or other information with a scanning device. The QR codes we know today were invented in 1994, almost 30 years ago, for use in Japanese auto manufacturing by an engineer named Masahiro Hara at the Denso Company.
Part of the Toyota group of companies, Denso was - and remains - one of the world’s largest automotive component manufacturers. The unit Hara worked for became a subsidiary called Denso Wave.
At Denso Wave, Hara and his team were responsible for developing barcode scanners and Optical Character Recognition (OCR) devices for inventory management and production control. According to Hara, the shift to ‘flexible’ or just-in-time production in the Japanese automotive industry during the 1990s required more careful production control of components.
Under what has become known as the Kanban system, engineers sought to reduce production mistakes and improve the throughput in the production process by carefully tracking and limiting component workflow.
To do this, engineering teams turned to traditional barcode technology. Single dimensional or linear barcodes were widely used in Japanese manufacturing during the 1980s and 1990s to label and manage the throughput of auto components in the production process.
However, linear barcodes had a limited information capacity of up to 20 alphanumeric characters. To convey enough information, up to 10 barcodes had to be used on each component. Scanning these was a time-consuming and error-prone process.
In 1992, Haro and his team were asked to develop a barcode with increased capacity. Solving this problem with single-dimension barcodes proved difficult.
According to Hara, the idea for QR codes came to him from his liking for playing strategy games: “I used to play GO on my lunch break. One day, while arranging the black and white pieces on the grid, it hit me that it represented a straightforward way of conveying information. It was a eureka moment.”
In 1994, after a year and a half, Hara’s small development team developed his idea into a QR code system that could encode 7,000 figures, including Japanese Kanji characters. The codes could also be read at ten times the speed of traditional bar codes; hence they were called ‘Quick Response’ codes or QR codes for short.
Hara’s team also designed QR codes to be read by scanners from any angle, including high-speed cameras on the production line, allowing automated component scanning.
Hara’s team at Denso couldn’t secure the further development and the necessary adoption of the technology on their own, so they made the technology patents open by holding them but not exercising their right to them.
Firms across Japan then took up the QR code technology. In Japan, the use of QR codes expanded beyond the factory in three phases, beginning with product and inventory management in automobile, pharmaceutical and retail industries. Later, QR codes spread to consumer use with camera-enabled flip phones in the early 2000s and later to smartphones.
Denso’s decision to make the QR code open patent contrasts with earlier experience of 2D bar code invention. The first 2D bar code was invented in 1987 by David Allias in the United States. Still, like several other 2D barcodes that followed it, it was not widely adopted as it remained proprietary technology.
QR codes were approved by an international ISO standard in June 2000, ensuring widespread use internationally. The low cost of QR code systems also made them affordable for companies in developing countries for industrial and retail uses.
Another boost to QR code use came in 2017 when the latest mobile phones no longer required a separate application to read QR codes. With iOS 11 in 2017, Apple added native QR code scanning to the iPhone camera app and Android devices were equipped with native QR code scanning with Android version 8, released in 2018.
Driving mobile payments
QR codes provided a low-cost way for consumers and merchants in developing countries to make and accept mobile payments by displaying or scanning a printed QR code - without the need for expensive point of sale (PoS) hardware and before Near Field Communication (NFC) equipped devices – which allow so-called mobile wallets - were widely available.
QR codes have become the dominant mechanism for initiating mobile payments in the two largest developing countries of the world - China and India. In China in particular, QR code initiated mobile payments have displaced the use of cash in most low-value transaction scenarios - from in-store purchases to paying for a taxi. QR codes have also been widely adopted for remote e-commerce because they allow users to pay by scanning a QR code displayed online or on a poster displayed offline.
QR codes are also enabling the rapid growth of mobile payments in Southeast Asia, in countries like Indonesia, Thailand and Malaysia.
As consumers have turned to their mobile phones to scan QR codes for mandatory check-ins, they have also increasingly turned to the use of mobile wallets for making contactless payments. Given this, there is a growing industry focus on the potential for QR-code initiated payments in Australia and other developed markets.
These include the soon to be merged eftpos, BPAY and the New Payments Platform, under what will be called Australian Payments Plus (AP+). Under the merger agreement, the Australian Competition and Consumer Commission is enforcing the development of a shared open industry QR code payment standard by the end of June 2022.
Now as Australia’s east coast emerges from stringent lockdown with the rise in vaccinations, the role of the QR code in the management of COVID-19 exposure and tracking will continue to push the technology’s profile.
Dr Luke Deer is an independent researcher and finance tutor at the University of Sydney Business School
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
31 Jul 2019
21 Mar 2018