March 23, 2020
by Mr. Li Yan Wiseasy Founder and CEO
November 27, 2019
Recently, the choice of making transfers using facial recognition has become a hot topic in the payment and smart terminal manufacturing fields. With the introduction of Alipay’s ‘dragonfly’ and WeChat’s‘frog’, the advantages of facial payment, and whether current implementations will re-define the industry, are questions that have attracted a lot of attention.
When talking about mobile payment, China is definitely the leader. Since‘code payment’ became most popular in the industry, WeChat Pay and Alipay dominated the market, with Wechat payment having an overwhelming advantage over Alipay. Will the innovation of facial payment technology bring about new competition and change in the current market structure What about pushback from different players in the payment ecosystem? Will the war on facial payment start soon? Before rushing into any conclusion, let’s take a look at three basic questions first.
Will the innovation of facial payment technology bring about new competition and change in the current market structure?
At present, some big commercial markets and some vending machines support facial payment. I myself have felt good with the experience. On the one hand, The registration is simple and the user experience is very smooth, saving the users a series of actions, from taking out the mobile phone, to opening the APP, and then showing the code or opening the camera to scan the merchant’s code.
When the series of code payment actions are replaced by just showing one’s face to a camera, it feels really convenient.Yet, compared with previous revolution of plastic replacing cash and code payments replacing plastic, paying with your face does not improve the user experience that significantly. In other words, it is not 10 times better than the original technology (10x Thinking). At the same time, the mobile phone is still the information tool that the user is most likely to carries at all times. Being able to pay with your face does not mean there is no need to bring your phone with you any more. Even though the user experience is good, it will be hard to overthrow the dominant place of code payment as the latter did to card payment.
What about pushback from different players in the payment ecosystem?
Theoretically, paying with your face is not safer than paying with your code. Like barcodes, faces cannot be used as separate financial IDs, and can only be associated with other financial IDs. However, the barcodes can be changed in real time by encryption, and the face cannot (please ignore the face changes in the Sichuan Opera).
What makes it more risky is that if the face, fingerprint, iris or other biometric data are stolen, we cannot find replacements. Once leaked or falsified, the risk is systematic.
If the card is hacked, the user can simply cancel the card and apply for a new one. While if the facial data is stolen, there is no good solution to unbind and disable the authentication mechanism related to the data.
In addition, the safety of users’ private data may be a more worrisome source of risk.
Why then is facial payment popularity growing so rapidly without a ‘10x improved user experience’ and with much higher costs and risks?
In 2018 Alibaba may have deployed no less than 40,000 facial payment terminals. Tencent and JD.com are were not far behind in their deployment figures and China UnionPay only deployed a small number. However, there was no very accurate data for such a small market.; the data for a small market measurement is not very accurate. In 2018, the facial payment market situation was that “Alibaba is actively promoting, while JD.com is passively following-up.” So, why?
What motivates Alibaba’s promotion of facial payments is the expectation of setting the standard for the competitive landscape. QR code payment is an application payment system (in-app payment). Whether scanning or being scanned, both need to be done in an APP. QR code payment involves the competition between APP installation and APP opening frequency – which is also the fundamental reason that UnionPay and many banks cannot gain an advantage in this field no matter how many subsidies they can give to the users.
Similarly, due to the ‘frequency of opening’ gap between WeChat and Alipay, Alibaba suffered a loss in the code payment market. While facial payment does not require user to launch any in-app payment interface, it appears to be Alibaba’s only chance to reshape the current payment market landscape. Vigorous promotion of facial payment is Alibaba’s chosen strategy to “deviate from the real economy to be a virtual economy”
Tencent does not have to give up its advantage in code payment to actively promote facial payment. At the same time, it must follow up on the competitive threat of facial payment. This is because facial payment is a competition of merchant numbers. More merchants mean bigger chance to win. At present, facial payment devices are being invested in by Alibaba, Tencent and other manufacturers, which means the machines will only support their own payment accounts. Once they occupy the facial payment terminal of the merchants, it’s subsequently difficult to revert to other payment accounts. This forces the big players to follow up, and it has the logic of an arms race. All are fighting for the market share of the high-frequency payment scenes, completely like a ‘war of annihilation’ wherein there is no room for half-engaged players.
With respect to the future of facial payment, I personally think the year 2019 is about ‘local wars’. In the high frequency and high value transaction scenario, Alipay and WeChat will compete. But in other payment scenarios, because of the relatively high cost and limited improvement on user experience, the battle range is limited, and the two-dimensional code payment will still be the main form of mobile payment. Wiseasy, although we have launched the first-generation intelligent AI service terminal and third generation of smart terminals this year, we will continue to keep a code-paying professional module in our products, based on our assessment of the market. Facial recognition could be a great innovation but the future of it still seems very limited.