Guide to QR Codes: How they work, Benefits and Challenges

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These square-shaped codes, packed with data, can be scanned by a smartphone or other device to quickly access information or complete transactions. Their relevance has surged in recent years due to the growing demand for contactless solutions, particularly in the wake of the COVID-19 pandemic.²

This article explains how QR codes work, their advantages and challenges, and how they can be used for bill pay.

What are QR codes?

Originally developed in the mid-1990s by Denso Wave, a subsidiary of Toyota, QR codes were initially used to track automotive parts during manufacturing.³ Over time, their ease of use and ability to hold more data than traditional barcodes led to their widespread adoption across various industries, from marketing to mobile payments.

Today, QR codes have risen to prominence, offering an almost seamless way to connect the physical and digital worlds.

What is the difference between QR codes and traditional barcodes?

The primary difference between QR codes and barcodes lies in their structure and data capacity. Traditional barcodes are one-dimensional and store information in a linear fashion; they're typically limited to numeric data, such as product codes or pricing.

QR codes, on the other hand, are two-dimensional and can store much more complex information, including alphanumeric data, URLs, and multimedia content.

While barcodes are commonly used for inventory management and point-of-sale (POS) systems, QR codes offer a wider range of uses, including digital payments, marketing campaigns, and authentication processes.

How do QR codes work?

QR codes are made up of a series of black squares and dots arranged in a square grid on a white background. These patterns encode data that can be quickly scanned and interpreted by a smartphone or other device with a camera and a QR code reader.

When a QR code is generated, it translates the information — such as a website URL, payment details, or contact information — into this matrix of squares and dots.

When scanning a QR code, the device's camera captures the image, and the QR code reader software decodes the pattern. The process is almost seamless and usually takes just a few seconds, making it efficient for a variety of uses.

In retail settings, for example, QR codes are often used at checkout counters. Shoppers can scan a QR code displayed by the merchant to make payments almost instantly, without the need for cash or physical cards.

Advantages of using QR codes

QR codes can be an excellent choice for both businesses and consumers. Some key benefits include:

Fast and efficient:

• QR codes transmit information quickly, making them ideal for directing users to websites or facilitating payments.
• Their speed is especially valuable in busy environments, such as shops, restaurants, and bars, where quick transactions improve customer satisfaction.

Enhanced security:

• QR codes reduce the need for physical contact, which has gained importance in a post-pandemic world.
• Payment transactions via QR codes are encrypted, making it difficult for unauthorized parties to intercept or alter the data.

Versatile applications:

• QR codes can be used almost anywhere.
• In shops, they simplify the payment process.
• In restaurants and bars, they link to digital menus or payment portals.

Challenges and limitations of QR codes

While QR codes offer convenience and efficiency, there are some important considerations to keep in mind regarding their safety and accessibility. Here are a few potential risks and limitations to be aware of:

Potential security risks:

• QR codes can be manipulated by fraudsters to lead users to phishing sites or malicious links.
• Scanning unsafe QR codes can result in financial loss or data theft.
• To reduce risks, only scan QR codes from trusted sources and avoid unsolicited codes received via email or text.

Dependency on smartphones and digital wallets:

• Not everyone has access to a smartphone or reliable internet connection, limiting the use of QR codes in areas with poor connectivity.
• Demographics less inclined to use mobile technology may struggle with QR code adoption.

Learning curve for some users:

• While QR codes are easy to use, not all users are familiar with how to scan them, which may create a barrier for some.

To learn more about how to stay safe from fraud, review PayPal’s fraud protection resources.