Cashless Payments [Article 3] The Future of the Cashless Society as Seen through Advanced Use Cases in China―Individual Authentication for Payments Creates New Business Opportunities

Alongside various moves in Japan toward implementing the consumption tax hike in October 2019, a program to promote cashless payments is about to take shape in the country. Although its final form is still unknown, the spread of cashless payments will greatly change our lives and business. Thus, this article examines several use cases in China, an advanced cashless country, to understand what an advanced cashless society is like and what business opportunities and issues arise in such a place.

Unmanned Convenience Stores with Self-Service Payment Systems Now Common

China's cashless transition is represented by cashless payment services that use smartphone apps. The two major smartphone payment services, namely Alibaba Group's Alipay and Tencent's WeChat Pay, have prevailed; smartphone-app-based cashless payments are available at almost all stores ranging from street stalls to luxury department stores.

An advanced example is unmanned convenience stores that accept smartphone-app-based self-service payments. In China, many businesses have entered the unmanned convenience store market. The pioneer is Bingo Box, a chain with five outlets in Shanghai alone. Bingo Box started as a temporary store in a town square; the company's stores are now found in malls as well.

To use Bingo Box, shoppers download a special app and scan a QR code displayed in-app with the scanner installed at the store entrance, which causes the front door to open. Shoppers then pick up the items they want to buy in the store and bring them to a self-checkout machine. When the total price is shown, they use their smartphones to pay for their purchases.

Bingo Box does not offer more attractive or cheaper products than other convenience stores. At the moment, the company seems to be running its stores with a focus on finding issues with unmanned operation, not on improving its attractiveness as a convenience store chain.

A Bingo Box outlet in a building basement
The front door is unlocked by presenting a QR code that serves as an ID using the downloaded smartphone app. Shoppers place the items they want to purchase on the tray of the self-checkout machine, which shows the total price, and then they make payments on their smartphones by themselves.

Launch of Cashierless Convenience Stores Like Amazon Go and Stores that Manage Entry by Face Authentication Alone

Since self-service payments are also possible at convenience stores in Japan, they are a somewhat common purchasing experience. In addition, the process of making a self-service payment―the price is shown and confirmed before proceeding to the payment procedure―is basically the same purchasing experience as buying something from a vending machine. There are many vending machines that accept payments with transportation IC cards in Japan, and to those who are accustomed to such convenience, the procedure of opening an app on a smartphone and then scanning a QR code may feel tedious.

One method to eliminate such inconvenience when making smartphone-app-based payments is in practical use at Amazon Go, Amazon.com's cashierless store chain. Shoppers' purchases are determined using sensors, including camera. Moreover, a payment process is automatically carried out when shoppers leave; they are notified of the results by email. In short, shoppers can purchase items simply by holding their smartphones in front of the gate when entering and leaving the store. In China, too, cashierless stores are now in business.

For example, LePick is an Amazon Go-type cashierless convenience store operated by CloudPick. Although this store requires shoppers to display QR codes using a special app in front of a gate when entering and leaving, their purchases are determined automatically and the results of automatic payments are emailed to shoppers after they leave.

LePick, a cashierless store in a mall
Opening a special smartphone app and scanning a QR code with the reader at the entrance gate causes it to open. A shopper can leave the store with the desired items in hand by scanning the QR code at the exit gate scanner. Shortly after, an automatic payment notification is sent.

There are other advanced stores such as the cashierless convenience stores that Jian 24 operates. These stores use face authentication so shoppers do not need to take out their smartphones when they enter or leave. The key point is to register face authentication data when a shopper enters the store and his or her QR code is scanned for the first time. At this timing, the QR code is associated with the facial data, so the gate will open by face authentication alone upon the second visit. Shoppers enter the store without taking out their smartphones, pick up what they want, and then go to the exit gate. Face authentication is here performed again to open the exit gate. In other words, shoppers can enter the store, purchase items, and leave the store without using their smartphones.

Jian 24 cashierless convenience store on the first floor of an office building
When a QR code is scanned to enter the store, face authentication data is registered. From the second visit, face authentication is used instead of a smartphone to open the gate to enter and leave the store. Picking up the desired items and leaving the store causes payment to be settled automatically, and a payment record is sent by email.
Face authentication device installed at the gate of a Jian 24 cashierless convenience store
Associations between QR codes and face authentication data are not permanent; as a rule, registration will have to be performed again after some time passes.

Although using biometric authentication (e.g., face authentication) instead of QR codes to authenticate purchasers' identities eliminates the inconvenience imposed on shoppers, practical use requires the development of new techniques to improve the recognition rate and accuracy and to reduce recognition processing times. Since experimental operation involves fewer concurrent shoppers, long processing times may not cause serious trouble. However, when introducing biometric authentication to large stores, the key to stable operation is the development of new technology to authenticate many shoppers fast and concurrently. Some research and development projects have been launched to this end. For example, Fujitsu Laboratories Ltd. is developing a biometric authentication technology to identify shoppers based on palm veins and facial information in cooperation with Fujitsu Research and Development Center (China). Looking to the future, both companies aim to achieve identity verification for use by a million people when making payments at real stores and entering event venues.

Facial information is used for selecting candidates and palm veins for identifying shoppers.
Hands-Free Easy Payment based on face and palm vein authentication (Japanese)

Individual Authentication for Payments Creates New Purchasing Experiences

Cashless payments offer advantages by simplifying payment procedures, such as reducing the number of personnel and cash management workloads. In addition, use of the shopper authentication process, which is not present in cash settlement, is expected to create new purchasing experiences and customer value. An example of a new purchasing experience resulting from individual authentication for payments is purchasing and refunding horse racing betting slips using a cashless machine. The Japan Racing Association (JRA) started to use cashless machines in September 2018; with these, betting slips can be purchased by holding one's palm over the machine instead of using cash.

Users register their palm vein information in advance and associate it with their JRA-UMACA membership IC cards, with which cash can be deposited. Touching the JRA-UMACA card to a cashless machine and holding one's palm over it makes it possible to purchase and refund betting slips. This cashless machine was jointly developed by Fujitsu and Fujitsu Frontec Limited.

Cashless machine and performing individual authentication with the machine