.svg)
Findings from a new Bank for International Settlements (BIS) study suggest that access to quick response (QR) codes helps micro firms build up a credit history and that using bigtech credit can ease access to bank credit.
QR code-based mobile payment systems have been a gamechanger in regions such as South-East Asia and China.
Data from China has been a central source for BIS research looking into QR code-based mobile payments as it accounts for one-third of payments in the country and is used by half a million Chinese firms.
The BIS has found that the creation of a digital payment footprint allows firms to access credit provided by the same bigtech company, transaction data generated via QR codes can generate spillover effects in terms of enabling access to bank credit and there are positive effects of access to bigtech credit on sales, including during the COVID-19 pandemic.
The BIS study provides a more positive outlook on the role of bigtech in financial services, especially given previous issues such as anti-competitive behaviour and the role of stablecoins that the "world’s central bank" has warned about.
Increasingly, bigtechs have become substantial players in payments in several advanced and emerging market economies, and they account for 94 percent of mobile payments in China, the study says.
Globally, bigtech credit also grew by 40 percent in 2020 alone, to a total of more than $700bn, and in some jurisdictions, bigtechs have participated in government credit schemes during the COVID-19 pandemic period.
Although this evidence is encouraging and sheds some additional light on the effects of bigtechs’ entry into finance, much remains to be done to address the larger economic questions, the BIS suggests, adding that results obtained from China should be compared with other countries.
For example, in many African countries, digital lending through mobile network operators is captured in the credit registry, only because the loans are done in partnership with a commercial bank.
In addition, the BIS suggested that it is important to look at what the implications of bigtechs are for relationship lending.
A bank acquires soft information from its clients by developing long-term relationships, but in contrast, credit scoring with advanced analytics does not necessarily rely on long-term, one-to-one relationships and instead takes advantage of patterns of consumer preferences and behaviour using big data, BIS said.
In many jurisdictions, momentum among consumers for QR codes has failed to come to fruition as well. For example, in jurisdictions such as the UK and EU, the use of near-field communication by bigtech platforms such as Apple has cemented itself as the most popular solution.
Use of QR codes in these jurisdictions tends to be based on non-payment options, such as their use during the COVID-19 pandemic in the UK for proof of vaccination, and allowing consumers to be traced when entering establishments like restaurants.
In Europe, meanwhile, some have suggested that there is potential for QR code payments, but that standards are still needed, with its scalability being limited by a lack of standardisation among different EU member states.
