Paying Via Facial-Recognition Machines

Chinese technology giants have leapfrogged U.S. companies in popularizing mobile payments. Now, they are trying to get people to bypass their smartphones and make payments by simply looking into screens. Ant Financial Services Group and Tencent Holdings Ltd., rivals that operate, respectively, Alipay and WeChat Pay, China’s two largest mobile-payments networks, are competing for dominance in the next stage of China’s cashless society. Each is racing to install its own branded facial-recognition screens at retail point-of-sale all over the country, marketing the screens as a way to speed up sales and improve efficiency.

In the space of a few months, the two giants have rolled out two competing systems and an upgrade. In December, Ant’s Alipay, which has more than 700 million active users in China, was first to launch a facial-recognition payment machine for checkout cashiers. Ant is an affiliate of Alibaba Group Holding Ltd. Then, in March, Shenzhen-based Tencent unveiled its WeChat Pay system that can either scan QR codes on people’s phones or scan their faces, based on individuals’ preferences. The following month, Ant rolled out an upgraded Alipay facial-recognition system that was smaller—roughly the size of an iPad Mini—and cost 1,999 yuan (about $290), about one-third less than Alipay’s first facial-recognition payment system. Analysts say the machines are here to stay.

“In China, facial recognition has developed into a fairly mature state and will likely be adopted as a standard feature for cashless transactions in the future,” says Zheng Qingzheng, an analyst with Suning Financial Research Institute. The moves are notable because Alipay and WeChat Pay together already handle close to 90% of China’s third-party mobile payments market, where transactions totalled 160 trillion yuan ($23.16 trillion) last year, according to BigData-Research, a Beijing-based firm focused on the internet industry. Alipay and WeChat Pay collect small fees from retailers when people use their payment networks, and as growth slows in user numbers and transaction volumes, both are fighting to get customers to use their services more. In April, Ant said it plans to spend 3 billion yuan ($434 million) subsidizing merchants that purchase the new devices and providing financial rebates to shoppers who make purchases with it. Neither company has disclosed how many merchants have adopted the new technology so far. But facial-recognition machines accepting Alipay or WeChat Pay have appeared on vending machines, in grocery stores and even in hospitals across the country. The devices of both companies contain three-dimensional cameras to capture enough facial details to verify identities.

China has been at the forefront of developing facial-recognition technology, which is now used in everything from government and corporate surveillance of citizens and employees, to toilet-paper dispensers in public bathrooms. Both Ant and Tencent have invested in other companies that specialize in facial-recognition technology. Facial-recognition software leaders SenseTime raised hundreds of millions of dollars from Alibaba, while Megvii received investments from both Alibaba and Ant Financial in private funding rounds. Ant in 2016 also acquired EyeVerify, based in Kansas City, Mo., which changed its name to Zoloz the following year. In Hangzhou, where Ant is based, a KFC outlet was the first store in China to use Alipay’s facial-recognition payment technology. First-time users have to link the service to their Alipay accounts by entering a phone number, then they can use the machines to make payments without their mobile phones.

Credit: Stella Yifan Xie for The Wall Street Journal, 10 June 2019.