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Can Facial Pay Work in China?

By Pete Reville
September 22, 2020
in Analysts Coverage, Authentication, Contactless, Credit, Customer Experience, Data, Debit, Emerging Payments, Merchant
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biometric payments, Biometrics Identity Verification, biometrics payments global standard

Not too long ago, there was a significant amount of press given to the idea of paying via facial recognition. This technology was being promoted in China by Ant Financial’s Alipay and by its rival WeChat.

The idea is simple; when a consumer is at the POS, a scan of their face serves as their payment method and authorization. In other word, a consumer walks up to the POS, allows the POS to take their picture, and viola, the transaction is complete—at least in theory.

Truth be told, it isn’t quite that easy. An app needs to be opened and the user has to enter some type of PIN to complete the transaction.

Even though Ant and WeChat have spent a considerable amount of money promoting the technology and subsidizing the new-fangled POS systems, early reports indicate that consumers are slow to adopt this technology. As an article in the Wall Street Journal, In China, Paying With Your Face Is Hard Sell, published over the weekend, pointed out:

The payment technology has largely failed to gain popularity, analysts say, as some consumers have found the sign-up process cumbersome and had concerns about how their images and data would be used. It shows that even a major fintech innovator with a large customer base can face privacy concerns and struggle to change user habits.

Now they may be able to clean up some of the UX issues around signing up and the POS experience, but the concerns about the use of the facial recognition data are much harder to overcome. Even in a country like China, where facial recognition is used widely, consumers have concerns.

A survey of more than 6,000 people in China last October found that nearly 80% were concerned about personal information leakage due to the use of facial-recognition technology. Another 57% were concerned about being tracked, according to data from Nandu Personal Information Protection Research Center. About 41% of those surveyed were willing to scan their faces for payments while another 39% said they weren’t.

What the future holds for this technology remains to be seen. Companies have made new technology work with refinements over time, changing consumer trends through sheer brute force. At this point, however, they face an uphill battle if they want this to take off in China.

One of their battles will be convincing consumers that the new technology provides a better value proposition than the old technology. The Chinese people have become very comfortable with QR codes as a method of payment. What does facial technology provide that makes the payment experience all that much better?

At the end of the day, it all boils down to one underlying principle. Just because the technology exists, users don’t necessarily see value in using it. Without a compelling value proposition, consumers will stick with what they know. Sometime new technology or ideas is just a solution in search of a problem. I fear sometimes companies lose sight of this and chase the new “shiny object.”

Overview by Peter Reville, Director, Primary Research Services at Mercator Advisory Group

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Tags: AliPayAnt FinancialWeChat

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