Over the last decade, the use cases of quick response (QR) codes have evolved from being a tool to facilitate information sharing into a pivotal tool for facilitating payments.
Notably, QR codes have experienced rapid growth since the COVID-19 pandemic, becoming a dominant force in the global retail economy, especially in countries such as China and India. This evolution, especially with payments, has been driven by the increased global penetration of smartphones, convenience, cost-effectiveness, and versatility of QR codes. Reportedly, 44.6% of internet users had scanned a QR code at least once, as of 2023. This rise is further linked to the growing popularity of contactless payments, and QR code use is expected to reach $3 trillion globally this year.
Nigeria, with its rapidly growing fintech ecosystem, teeming youth population and increasing smartphone usage, is enabling the adoption of QR codes in retail transactions, offering merchants and consumers an easier, faster, and safer alternative to cash and traditional card payments.
In this newsletter, we have explored the legal and regulatory framework governing the use of QR codes as a payment method within Nigeria’s retail market. We have further highlighted the roles of key participants involved in supporting the end-to-end lifecycle of QR code-based transactions.
Additionally, the newsletter assesses the potential impact of QR systems on retail payments, particularly as the Central Bank of Nigeria (CBN) continues its drive toward a widespread contactless payment regime.
Types of QR code payments
Retail QR code payments use one of two code types. Merchants choose based on scale, technology access, ease of setup and customer preference.
- Static QR codes are usually printed and carry fixed details, such as the merchant’s name and account or wallet ID. Because nothing is transaction-specific, the customer enters the amount manually after scanning.
- Dynamic QR codes are generated for each transaction. They embed the exact amount, a unique reference, a timestamp and sometimes an expiry date, so no one can reuse them.
There are also two operating models. In the merchant-presented model, the merchant displays the code and the customer scans it with a banking app or wallet. In the customer-presented model, the customer displays a code for the merchant to scan. Notably, the CBN has directed that Nigeria adopt only the merchant-presented model as the standard.
The legal framework for QR code payments in Nigeria
In January 2021, the Central Bank of Nigeria issued the Framework for Quick Response Code Payments in Nigeria. It sets acceptable QR code standards, interoperability obligations, participants’ roles and risk management principles.
The Framework also empowered the Nigeria Inter-Bank Settlement System (NIBSS), as a Payment Terminal Service Aggregator, to certify QR payment applications and drive interoperability. NIBSS then issued the Framework for Certification of Quick Response Code 2021, which sets out how institutions certify the codes they develop. In addition, on 16 March 2021, NIBSS launched the NQR payment solution for person-to-business and person-to-person transfers.
Who does what
- Merchants present the code at the point of sale.
- Customers scan it and authorise payment.
- Issuers provide the apps and wallets customers pay through.
- Acquirers give merchants the infrastructure and accounts to receive and settle payments.
- Payment service providers run the platforms, APIs and security protocols that connect everyone in real time.
Issuers and acquirers also carry responsibility for behavioural monitoring and fraud management, to prevent fraud and money laundering.
What QR code payments mean for retail
The benefits are practical. A merchant needs only a printout or a smartphone, so QR codes cost far less than POS terminals and scale easily across branches. As a result, cash-only businesses can move to digital payments more cheaply.
Speed matters too. Scan-and-pay checkout avoids the delays that network problems or faulty POS devices can cause. Electronic audit trails also reduce exposure to theft, counterfeit notes and record-keeping errors, while making revenue easier to track.
There is one caution, however. Static codes display fixed details, so they are more open to tampering, and merchants using them need extra safeguards.
The CBN continues to push towards contactless payments, so QR adoption should keep growing. Our notes on the CBN agent banking guidelines and the draft guidelines on ATM operations cover related payments regulation.
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