China’s largest domestic smartphone maker, Xiaomi, has entered into a partnership with the the country’s biggest e-commerce company, Alibaba, to develop mobile payment systems using wearable technology. The venture is to fall under Alibaba Group’s subsidiary, Alipay and is said to be a first for China’s major tech firms. While wearable payments have yet to really catch on in China, this merger could be a sign of change in this trend.
Xiaomi’s Mi Band smart fitness bracelet is an impressive little piece of technology. Sold at the low price of $13, it originally allowed users to check their daily fitness progress through pre-specified movements with the band. In this joint effort, Alibaba and Xiaomi aim to create wearable devices which can be linked to the users’ identity so that they can make wireless payments. So, while making a payment through Alipay, the user will not be required to insert a password while wearing the wristband. With the growing number of cyber thefts, Alipay has made sure that the encrypted link will avoid potential security pitfalls of near-field communications (NFC) wireless technology, which has been extensively criticised for its vulnerability. Huami, a startup that makes wristbands for Xiaomi, said the device could also be used as identity cards for users.
This new function will be available for use on version 8.6 of the Alipay Wallet for Android OS, which is the platform that all Xiaomi smartphones run on. There is currently no compatibility for iPhone users, but it is rumored that an iOS version of the Alipay wallet app will be released soon.
Alibaba also recently announced facial recognition technology which makes mobile payment as simple as capturing a selfie. This new payment method was revealed by Alibaba’s founder, Jack Ma as “Smile to Pay” which he demonstrated at the 2015 CeBit technology trade fair held in Hanover, Germany; he had simply smiled to buy a souvenir stamp from Alibaba’s website, as per reports.
According to a study, payments has been the single biggest unmet demand in China. The country has a very low rate of credit card penetration and lacks secure payment mechanisms. The payments environment in the country has been highly bank-centric, rather than user-focused, and the trust level is extremely poor. While all of these factors surely pose a challenge for the digital payments industry, there is also a growing opportunity for innovation and development in this sector. In recent years, there has been a rise in the middle-class and consumer economy in China. Reforms are also being made in the banking sector, the financial industry is opening up and the country has established itself as the largest mobile phone market with the second largest internet user base in the world. As a result, there is growing demand for new modes of payments.
This joint move by Alibaba and Xiaomi certainly marks a milestone in the country’s burgeoning e-payments industry.