China Issues First Industry Guidelines for Facial Recognition Payments
As Chinese embrace the use of facial recognition for mobile and offline payments, an industry group issued self-discipline guidelines to prevent related risks.
The guidelines, released Monday by the Payment & Clearing Association of China, outline several principles that payment process providers should follow in the use of facial recognition, including user consent and collection of minimal information.
In a country where mobile payment is already widely used, customers now can make purchases at offline stores simply by posing before point-of-sale machines equipped with cameras, with an image of their faces used as identification verification for linked digital payment accounts.
The guidelines stress that users’ facial image information should be stored in an encrypted way and separated from users’ other information such as bank account numbers and identification numbers. Merchants and other payment-receiving parties must not keep users’ facial image information.
Disputes often arise over data retention in the use of facial recognition, said Wang Xinyue, a senior partner at Beijing law firm Anli Partners. Based on the guidelines, licensed financial institutions should sign agreements with merchants and other payment recipients to restrict keeping of users’ facial image information by intermediary parties, Wang said.
Users should be provided opt-in and opt-out choices, and if users opt to use the facial recognition payment feature, they should be alerted to the service agreement in an obvious way, according to the guidelines.
Facial features shouldn’t be the only identification verification factor, and reliable multi-factor verification, such as user password, should be used depending on the risk level, according to the guidelines.
The guidelines also suggest establishing a compensation mechanism, including funds set aside for risk provision, insurance plans and emergency response, to make timely compensation for capital losses resulting from failure to effectively verify users’ identification.
While more and more Chinese retailers from big shopping malls to street vendors have started accepting facial recognition payments, their use is not regulated by specific laws.
Will industry self-regulation be enough to prevent risks associated with facial recognition payment? Wang said he thinks the digital economy always faces the dilemma that, without exploration, any risks won’t be exposed and thus be managed. Instead of passing legislation prematurely, self-regulation is a feasible way to establish a convention through industry associations at the present stage, which can not only encourage innovation but also prevent risks and have a certain effect on actual implementation, Wang said.
Chinese Internet giants Tencent Holdings Ltd. and Alibaba Group have pioneered the use of facial recognition in their payment systems, which together dominate more than 90% of China’s third-party mobile payment market.
Sources close to Tencent and state-owned China UnionPay Co. Ltd. told Caixin the two companies have reached an agreement to work together on payments based on facial recognition technology.
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