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How QR codes work in retail finance

Written by Content Team

QR codes have revolutionised the way much of the world transacts. Take India as an example. Instant, frictionless payments are enabled 24/7, 365 days a year via United Payments Interface, a QR code-based instant payment scheme. They’re so ubiquitous and easy to use that over 75% of India’s retail transactions are now made through QR-code based payments. Similar situations exist across Asia such as PayPay in Japan, WeChat Pay in China, and Navar Pay in South Korea.

In the UK, we’re not yet as used to making payments this way. But that is likely about to change. Adoption of QR-code based payments is growing among British retailers for innovative retail finance. A leading high street grocery and fashion department store now offers QR codes for retail finance payments in physical stores across the UK, powered by Divido’s whitelabel tech stack. With branded QR codes, customers can apply for revolving credit, and accrue loyalty points using their loyalty account.

But how do QR codes work for retail finance? What’s the difference between an open and closed loop system? And how do customers benefit?

In retail finance, QR codes are a fast and convenient way for consumers to communicate with the lender and merchant via their smartphone. Almost every smartphone now natively supports QR code scanning, and with any iPhone you just need to open the camera app and the URL link is displayed onscreen.

QR codes also allow consumers to instantly (and discreetly) check their eligibility for finance. A soft credit check can save potential embarrassment if customers are declined, and it can move customers from passively browsing to actively shopping.

For higher-value items like furniture and electronics, QR codes facilitate face-to-face conversations between a merchant’s customers and their sales representatives. The QR code customer messaging must be clear and concise, nudging customers toward speaking to a member of staff for more information. When scanned, customers can speak to a sales rep, which provides the merchant with an opportunity to build a relationship. Personalised interactions like these also strengthen efforts to upsell customers to grow average order value.

Finally, QR codes can be deeply integrated with loyalty programs, offering dual benefits for customers applying for credit. By simply scanning a QR code at checkout, customers can access convenient financing whilst seamlessly accumulating loyalty points and offers. This approach borrows from successful credit card programs.

If you’re a lender wanting to enable your merchant clients with retail finance using QR codes, you’ll first need to decide whether to launch an open or closed loop system.

In open-loop systems, consumers apply for finance and can spend the credit many businesses that the lender has onboarded. Whilst this offers greater flexibility for the lender, it requires more effort on their part. Lenders must encourage uptake via advertising and targeted promotions, which may be expensive and a hard sell if merchants want to retain full control over their branding.

A closed-loop system works in a similar way. The difference is that the credit is locked into just one retailer cannot be spent at other retailers. The QR codes are often co-branded or whitelabel to better leverage the merchant brand and consumer relationship. In this case, it’s best to deeply integrate the retail finance into the merchants loyalty program. Here, you take on a more active role in promoting the finance option, leveraging in-store promotions, staff training, and exclusive offers to incentivise adoption.

A leading UK retail bank has chosen to offer QR-code based retail finance in a closed-loop. Using Divido’s whitelabel retail finance tech stack, customers at a leading grocery and fashion department store can now check their eligibility, spark up a conversation with a sales rep and access revolving credit using a QR code.

The QR codes are merchant branded which gives the merchant control over their brand and promotional activities. The codes are peppered throughout the customer’s journey. As far as customers are aware, they’re interacting directly with the merchant brand. The reality is they’re plugged into Divido’s world-leading retail finance platform, which handles the point-of-sale integration and communicates with the lender’s loan management system.

Whether you’re a lender looking to launch a retail finance solution or a merchant seeking to optimise your existing offerings, exploring QR code features with Divido can unlock a world of possibilities. We can guide you through the process, ensuring seamless integration and maximum value for both lenders and consumers alike.

QR codes are a transformative tool reshaping the retail finance landscape. By embracing this technology and adopting best practices, lenders and merchants can stay ahead of the curve, catering to evolving consumer preferences and driving growth in the retail finance sector.

If you’d like to learn more about QR code-based retail finance, speak to our team today.

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