The adoption of QR (Quick Response) code payment systems in Nigeria was heralded as a revolutionary step toward a cashless economy. Promoted by financial institutions, fintech companies, and even the Central Bank of Nigeria (CBN), QR code payments were expected to simplify transactions, reduce cash dependency, and foster financial inclusion. However, despite the initial enthusiasm, the system has failed to gain widespread traction. This article explores the advent of QR code payments in Nigeria, the reasons for its failure, and the lessons that can be learned from its implementation. It also compares QR code systems to Point of Sale (POS) terminals and examines why QR codes succeeded in other countries but faltered in Nigeria.
The Advent of QR Code Payments in Nigeria
QR code payment systems were introduced in Nigeria around 2017-2018, coinciding with the global trend of digital payment innovations. The system allowed merchants and customers to conduct transactions by scanning a QR code linked to a bank account or mobile wallet. Visa was instrumental to one of the rollout of QR code payment system across Africa including Nigeria.
One notable project was the partnership between Ecobank and Visa to roll out ‘Ecobank Scan+Pay with mVisa’ in 33 African countries, including Nigeria, in 2017.
The Central Bank of Nigeria, in collaboration with the Nigeria Inter-Bank Settlement System (NIBSS), launched the Nigeria Quick Response (NQR) Code in 2021 to standardize and promote the use of QR codes for payments.
Promoters of the system, including banks like Zenith Bank, Access Bank, and fintech companies like Paga and Opay, touted its advantages: low cost of implementation, ease of use, and the potential to reach unbanked populations. The CBN also saw QR codes as a way to reduce the volume of cash in circulation and curb fraud associated with physical cash transactions.
Current transaction levels show the decline in value and volume. NIBSS figures show that NQR value dropped from 1.89 billion Naira in 2023 to 825.78 million Naira in 2024 while volume declined from 214,150 transactions to 81,000 transactions.
Why QR Code Payments Failed in Nigeria
Despite the promising start, QR code payments failed to gain widespread adoption in Nigeria. Several factors contributed to this failure:
- Customer Convenience
POS transactions are quick, simple, and highly user-friendly. Customers only need to provide their card to the merchant, insert it into the terminal, and enter their PIN to complete the transaction in seconds. This straightforward process requires minimal effort and is widely understood, even by Nigerians with limited technical knowledge or exposure to digital payment systems. In contrast, QR code payments involve a more complex and time-consuming process. Customers must unlock their smartphone, open a mobile banking or payment app, locate the QR code feature, activate the camera to scan the merchant’s QR code, and then enter their PIN to authorize the transaction. This multi-step process not only takes longer but also demands a higher level of digital literacy and familiarity with mobile apps—skills that many Nigerians may not yet possess. - Lack of Awareness and Education
Many Nigerians, especially in rural areas, were unaware of how QR code payments worked. Unlike POS terminals, which were heavily marketed and visibly present in stores, QR codes required a level of digital literacy that was lacking among a significant portion of the population. Merchants and customers alike were hesitant to adopt a system they did not fully understand. - Poor Internet Connectivity
QR code payments rely on stable internet connectivity to process transactions. In Nigeria, where internet penetration is low and network reliability is poor, especially in rural areas, this became a significant barrier. Failed transactions and delays eroded trust in the system. - Competition from POS Terminals
POS terminals had already gained a strong foothold in Nigeria before QR codes were introduced. POS systems were familiar, reliable, and widely accepted, even in remote areas. Merchants were reluctant to switch to QR codes when they already had a functional system in place. - Security Concerns
Many Nigerians were wary of the security risks associated with QR codes. There were reports of fraudulent QR codes being used to steal funds, which further discouraged adoption. Unlike POS terminals, which are physical devices managed by banks and fintechs, QR codes were perceived as less secure. - Inadequate Infrastructure
The infrastructure required to support QR code payments, such as smartphones with QR-scanning capabilities and reliable payment gateways, was not universally available. Many small businesses and individuals could not afford the necessary technology. - Widespread adoption by the banks
The low adoption of QR code payments by Nigerian banks is a major factor limiting its success. Without strong bank support, seamless integration, clear ROI, and aggressive marketing, QR codes will continue to struggle against more established payment methods like POS terminals and bank transfers. - Non-Standardized Fee Structure
Unlike POS transactions, where fee distribution is well-defined (Issuer: 30%, Acquirer: 32.5%, Payment Terminal Owner: 25%, Local Switch: 5%, and PTSA: 7.5%), QR code payments have varying transaction fees depending on the bank or payment service provider. The absence of a similar standardized fee structure for QR code payments has led to variability in charges across different banks and payment service providers, contributing to the slower adoption of QR code payments in Nigeria. Also, major banks find standardised prices introduced by some product owners unsatisfactory. - Cultural Preference for Cash
Nigeria remains a cash-centric society, with many people preferring physical cash for its immediacy and tangibility. This cultural preference made it difficult for digital payment systems, including QR codes, to gain widespread acceptance. - Regulatory Enforcement
While the CBN has provided frameworks, inconsistent enforcement and a lack of comprehensive policies have impeded the seamless adoption of QR code payments. Since there is no penalty for non-enforcement of the use of QR codes, most banks have not adopted this payment system.
Lessons from POS Terminals: Why QR Codes Should Be Reconsidered
While QR code payments failed in Nigeria, POS terminals thrived. The success of POS systems offers valuable lessons for the potential adoption of QR codes:
- Ease of Use
POS terminals are straightforward to use, requiring minimal technical knowledge. For QR codes to succeed, they must be equally user-friendly, with intuitive interfaces and clear instructions. - Reliability
POS systems are known for their reliability, even in areas with poor internet connectivity. QR code systems must be designed to work offline or with minimal data usage to overcome Nigeria’s connectivity challenges. - Merchant Incentives
The widespread adoption of POS terminals was driven by incentives for merchants, such as low transaction fees and commissions. Similar incentives could encourage merchants to adopt QR code systems. - Satisfactory Fee Structure for all Stakeholders
Merchants prefer POS systems because they offer predictable fees and settlement structures. Establishment of a standardised fee structure will indeed help in the adoption of QR codes by all stakeholders - Regulatory Support
CBN’s involvement and total support is one of the reasons POS usage have been successful in Nigeria. Though CBN in collaboration with the Nigeria Inter-Bank Settlement System (NIBSS), launched the Nigeria Quick Response (NQR) Code in 2021, it must do more than this. It should persuade the banks to adopt this payment mode essentially because a functional QR code based payment will reduce POS importation thereby conserving our scarce foreign exchange and strengthening the value of the Naira. - Public Awareness Campaigns
The success of POS terminals was partly due to aggressive marketing and public education campaigns. QR code systems would benefit from similar efforts to raise awareness and build trust.
Global Success Stories: Why QR Codes Worked Elsewhere
In countries like China, India, and Kenya, QR code payment systems have been highly successful. For example, China’s Alipay and WeChat Pay dominate the payment landscape, with QR codes used for everything from street vendors to luxury stores. Similarly, India’s Unified Payments Interface (UPI) and Kenya’s M-Pesa have integrated QR codes into their payment ecosystems.
The success of QR codes in these countries can be attributed to several factors:
- Strong Digital Infrastructure
Countries like China and India have robust internet connectivity and widespread smartphone penetration, enabling seamless QR code transactions. - Government Support with Practical Incentives
In China, the government actively promoted digital payments as part of its economic modernization strategy. In India, the government launched the UPI system to standardize and simplify digital payments. These efforts were driven by the highest level of government, not just the Central/Reserve Bank. - Cultural Acceptance
In these countries, digital payments were embraced as a convenient and secure alternative to cash. This cultural shift was facilitated by public awareness campaigns and incentives for both merchants and consumers. - Integration with Existing Systems
QR codes were integrated into popular platforms like WeChat and M-Pesa, making them easily accessible to users.
The Nigerian Context: A Different Environment
Nigeria’s environment presents unique challenges that hindered the success of QR code payments. Unlike China or India, Nigeria lacks the digital infrastructure and government support needed to drive widespread adoption. Additionally, the country’s cash-centric culture and low levels of digital literacy created significant barriers.
However, these challenges are not insurmountable. With the right strategies, QR code payments could still succeed in Nigeria. For example, partnerships between fintech companies and telecom providers could improve internet access, while public education campaigns could increase awareness and trust in the system. However all these would fail if the necessary push is not provided by the apex regulatory body. CBN should establish a standard fee structure for all stakeholders and also help to gently nudge the banks to adopt this payment system.
Conclusion: A Second Chance for QR Codes?
The failure of QR code payments in Nigeria highlights the importance of understanding local contexts when implementing new technologies. While QR codes failed to take off initially, they still hold significant potential for driving financial inclusion and reducing cash dependency. By learning from the success of POS terminals and global examples, Nigeria can create an environment where QR code payments thrive.
For QR codes to succeed, stakeholders must address the barriers to adoption, including poor internet connectivity, lack of awareness, and security concerns. With the right investments in infrastructure, education, government support and incentives, QR code payments could yet become a cornerstone of Nigeria’s cashless economy.
