Nu 122bn worth of transactions through mobile and internet banking

QR code payment system, a game changer?

Banks and non-banks are testing whether QR codes to merchants and consumers can provide a simple solution for payments

The coffee corner, at the clock tower in Thimphu, plays the part of the hipster café very well. Norbu bread is stacked on shelves, baskets brim with oranges and apples, and tables are abuzz with young professionals with laptops and smartphones. A smattering of foreign visitors has strayed off the main tourist trail. But the Coffee corner’s modernity has gone a step further. Since the start of the year, this has been a cashless café.

A lady manager, who heads a team of waiters armed with iPads, says it was a smooth transition. “Almost 80% of our customers were already paying with QR code, so it was a logical next step.” Banning cash not only chimes with the feel of the place, but it has also saved time and money – an hour bank run two or three times a week.

Crucially, it has also made Coffee corner safer. “Last year,” says the manager, “we had two break-ins, where thieves targeted our cafe. That was the driving force for this security.” And yet, for all the logic of the cafe’s decision, the set-up is pretty unusual.

In addition, she said QR codes have also started to be used for payments, with customers making payments by scanning a QR code and having the amount transferred directly from their account to the merchant, without the need for a POS terminal.

However, a quick response code (QR code) is a two-dimensional code made up of black and white squares that can be read by smartphone cameras, point of sale (POS) terminals, or other devices. QR code usage has exploded over the past years, as multitudes of consumers are increasingly using QR codes to access media on the Internet, download offers, find product information, and more.

According to the recent Royal Monetary Authority’s (RMA) payment system report, a total of 21.07mn transactions of value 18.64bn were made during the 3rd quarter of payment, which is equivalent to 56.61% of the mobile banking transactions in terms of volume and 15.40% in terms of value.

The transactions have increased by 97.95% by volume and 86.58% by value when compared to the same quarter of the previous last year.

The increase is because of the launch of Bhutan QR by the RMA in July 2021, enabling interoperable use of common codes issued by member banks. Since then, QR scan code has been gaining popularity in shops, restaurants, cafes, and even in taxis as they are contactless, touchless, and easy to use.

However, Bhutan OR code has further helped during this pandemic as its limits in-person transactions making it less likely for the virus to spread to others through cash exchanges.

A manager said that in an age of technological advancement, carrying cash is odd. “It feels downright primitive that most of us still walk about with cash rattling in our pockets, much as ancient Anatolians did nearly three millennia ago when minted coins first appeared.”

She added that for now, Coffee corner’s cashless initiative may still be a rarity. But in hot spots around the world, the modernizers are starting to win the argument that digital payment methods should trump old-fashioned notes and coins.

An official from RMA said that the banks have onboarded 6,638 new QR code merchants taking the total QR issued till now to 54,261 which is an increase of 13.94% compared to the total merchant registration as of previous quarters.

A rough calculation shows that compared to the same quarter of the previous year, there is a decrease of 13.57% in the Bhutan QR code merchant registration he said, adding which is equivalent to 1,042 merchants.

“There is a drastic decrease seen in Paro Dzongkhag with a 251.47% drop. They registered 1,311 QR Code merchants in the third quarter of 2021 but it has reduced to 373 in the same quarter of 2022,” he said, adding that this is followed by Gasa Dzongkhag and Bumthang Dzongkhag with 241.18% and 152.47% drop respectively.

“The decrease could be because of the availability of self-generating features on the mobile banking apps which allows individuals and merchants to generate their QR code for receiving payments,” he said.

The highest issuance is still in Thimphu Dzongkhag with 2,532 new registrations so far, owing to the maximum merchant base.

Further, on a sunny weekday in April, at the fruit, vegetables, and flower stalls of Centenary Farmer’s market, it is observed that not much cash was changing hands. Instead, many things were being bought via a popular app that allows making payments with a mobile phone number or QR code.

A shopper, 47, says it has been a month since she last bought anything with notes. “I carry very little cash. I use cards and I use MBOB. It’s easy.”

She said that anyone wanting to buy things just has to scan the code with their app. “When I started, I was taking much more cash,” she says. “But nowadays half my transactions are with QR codes.”

Meanwhile, unlike other payment instruments, it has been observed that there is a decreasing trend for card payments every year. In terms of volume, there is a decrease of 42.30% and in terms of value, there is a decrease of 31.95% as compared to the same quarter of the previous year.

Card payments refer to cash withdrawals/transactions from ATM terminals in the country using domestic ATM cards. A total of 0.55mn transactions worth Nu 2.53bn were transacted.

There is a drastic decline in ATM transactions in all the Dzongkhags except in Chukha and Tashiyangtshe Dzongkhang as compared to the same quarter of the previous year.

The maximum decrease was seen in Trashigang Dzongkhag with 87.20% followed by Wangduephodrang and Haa Dzongkhag with 61.58% and 54.69% respectively in terms of volume.

In terms of value, the maximum decrease was seen in Trashigang Dzongkhag with 86.38% followed by Wangduephodrang and Gasa Dzongkhag with 56.24% and 49.37% respectively.

The domestic PoS transactions have recorded 975 transactions of value Nu 20.73mn during the third quarter of 2022. It is an increase of 160% in terms of volume and an increase in value by 1157.80% as compared to the same quarter the previous year.

Similarly, cheque payments are still observed to be used for making large-value payments in the country. A total of 116,837 cheques worth Nu 45.80bn was recorded in the 3rd quarter of 2022.

It is also observed that there was a decrease of 2.93% by volume and a decrease of 40.64% by value as compared to the same quarter of the previous year.

Some young people also feel at risk. Several teenagers cited repeated muggings as a reason they no longer carry cash. Robberies involving individuals in the country remain low compared with many countries.

Back at the Coffee Corner in Thimphu, a man go to pay his bill but his neighbor beats him to it, gets up from his seat, burrows into his pocket, and pulls out the right money to pay the Nu 550 he owes.

“I’m sorry, we don’t take cash,” says the manager. “Well, he mBoB Nu 550,” he says, defiantly. “I don’t use cards.” And he strides from the café without a backward glance.

Kinley Yonten from Thimphu