Inside China’s Effort To Marry Digital ID With Mobile Payments

It’s a prospective marriage that Chinese government authorities and digital commerce executives are pushing hard, including via a recently announced test involving Alibaba: combining the country’s mandatory ID program with mobile payment functions.

And don’t count out the role of biometrics in making that relationship work.

As China strives to take its national ID program further into the digital realm, some of the country’s leading online firms are applying payment features to that effort. The latest major example of that is a pilot involving Chinese eCommerce giant Alibaba that will soon take place in the cities of Quzhou, Fuzhou and Hangzhou, according to various media reports.

The plan is to see what happens when consumers carry digital ID functions inside of Alibaba’s mobile payment app, Alipay, which says it has some 520 million users. Chinese residents must carry their national IDs at all times — perhaps one of the best 21st-century examples of a captive audience — and use them for a variety of daily tasks, including taking mass transit, checking into hotels and accessing pension services.

Consumers who want to use Alipay must provide their real names and national ID card numbers. Registering for Alipay then initiates the process to store the national ID on the payment app. To create a digital ID, those consumers then select “Web ID” under “Card Wallet,” after which those consumers submit to smartphone-based facial recognition to further authenticate themselves.

A roughly similar project also could deepen the ties between China’s ID program and mobile payments.

The project involves WeChat, the social messaging app designed and operated by China-based Tencent. Residents of the Nansha District of Guangzhou, a southern port city of some 13.5 million that serves as the capital of Guangdong province, have been using smartphones and facial recognition technology to link their national ID cards with their WeChat accounts. A national rollout is ongoing, according to reports. The project has such heavyweight backers as the country’s Ministry of Public Security and the China Construction Bank.

WeChat, which claims at least 980 million active monthly users, offers a variety of services — including eCommerce and payments — under a single brand. It also operates the WeChat Pay mobile payments tool. Combining the digital ID with WeChat would enable consumers to have a single app through which they could perform a variety of daily payments tasks that also require Chinese citizens to prove their identities, as is the case with the Alibaba pilot.

WeChat has an advantage that U.S. competitors do not: Chinese censors often ban or limit American apps, essentially making WeChat into a default messaging app not only for Chinese consumers living in China, but also Chinese nationals living overseas who want to communicate with relatives and friends back home. “WeChat becomes harder and harder for its users to opt out,” said Yuhua Wang, a USC student and Shanghai native who researches social media and its use in China.

In fact, comparing WeChat to other forms of social media and messaging services almost seems like a fool’s errand, suggested at least one analyst.

“There is nothing in any other country that is comparable: not LINE, not WhatsApp, not Facebook,” Ben Thompson, a Taiwan-based technology analyst, wrote on his Stratechery blog. “All of those are about communication or wasting time: WeChat is that, but it is also for reading news, for hailing taxis, for paying for lunch, for accessing government resources, for business. For all intents and purposes, WeChat is your phone, and to a far greater extent in China than anywhere else, your phone is everything.”

The ubiquity of WeChat will likely lead to even more payment-related features in the near future, according to analysts quoted by the South China Morning Post. They anticipated that WeChat-based electronic social security cards will soon come with a payment function, enabling consumers to pay off medical bills at terminals located in hospitals by using smartphones and QR codes.


New PYMNTS Report: The CFO’s Guide To Digitizing B2B Payments – August 2020 

The CFO’s Guide To Digitizing B2B Payments, a PYMNTS and Comdata collaboration, examines how companies are updating their AP approaches to protect their cash flows, support their vendors and enable their financial departments to operate remotely.