Product Managers Prepare For The Next Step In Making Payments

Facial recognition may be the next step in payment systems
Facial recognition may be the next step in payment systems
Image Credit: Jeff Hitchcock

In order to make sure that people want to buy their products, product managers have to stay on top of changes in the technology that people use to make payments. This used to be fairly easy: once upon a time everyone used cash, then they migrated to using credit and debit cards, next came PayPal and the like. Over in China product managers are once again moving forward in the area of payments and they are making changes to their product development definition. Chinese product managers are trying to get people to put their mobile phones away and make payments using facial recognition systems.

How Can You Use A Facial Recognition System To Make A Payment?

In China there are two large mobile payment networks. These are operated by Ant Financial Services Group and by Tencent Holdings Ltd. Their services are called Allpay and WeChat Pay. Product managers at these firms are competing to dominate the new field of facial recognition payment systems. Both companies are in the process of installing their own branded facial-recognition systems at retail points-of-sale throughout China. The product managers are marketing their screens as being a way to speed up sales at stores and improve efficiency.

Both companies are approaching this market differently. In just a few months, both companies have started to roll out their facial-recognition systems along with an upgrade to them. Allpay currently has over 700 million active users in China. They were the first to launch a facial-recognition payment machine for checkout cashiers. Later, WeChat Pay unveiled its facial-recognition system. The WeChat Pay system can either scan a QR code that is on a customer’s phone or it can scan their face. The system used is based on the customer’s preference. Following this, Allpay brought a new system to market that was smaller. This one is the size of an iPad Mini and costs a store approximately US$290. This cost was roughly 1/3 of the cost of Allpay’s initial system.

The people who study the market for payments believe that the new breed of facial-recognition systems is here to stay. The thinking is that in China, facial-recognition systems have developed into a fairly mature market and will probably be adopted as a standard feature for cashless transactions in the future. This is a big deal because together, Allpay and WeChat Pay currently handle roughly 90% of all third-party mobile payments in China. Last year the number of transactions totaled $23.16 trillion dollars. Clearly handling even a small portion of this market would look good on anyone’s product manager resume. Allpay and WeChat Pay both collect a small fee from retailers when customers use their payment system. Growth is slowing in user numbers and transaction volumes. This means that product managers at both companies are fighting to get customer to use their systems more.

What Does The Future Hold For Facial Recognition Systems?

The company Ant has announced that they are preparing to spend $434 million to subsidize merchants who purchase their facial-recognition system. They are also planning on providing financial rebates to customers who make purchases with the new systems. These systems are new and neither company is revealing how many merchants have already implemented them. However, the machines have already started to show up in grocery stores and hospitals. In order operate correctly, both machines contain what is called a “three-dimensional camera” which is used to capture enough facial detail to verify a customer’s identity.

In China, facial-recognition technology has become a big business. It is currently being used in everything from corporate and government surveillance of its employees and citizens to allocating supplies to customers. A great deal of investment has been made into the companies that develop the facial-recognition software. When customers use the Allpay facial-recognition system, the first thing that they have to do is to link the service to their Allpay account by entering a phone number. Once they have done this, they can then use the machines to make payments without having to use their phones.

With new technology comes new concerns for the customers who are using it. In China, customers who are being offered the facial-recognition technology are already expressing some privacy concerns. A survey of potential customers has revealed that 85% of mobile payment customers were willing to make payments using biometric systems such as facial and fingerprint recognition systems. However, 70% of the same customers expressed concern about the safety of their personal data as being one of their biggest issues. Facial-recognition systems do not operate seamlessly all the time. The initial linking of a face to an Allpay account can be difficult to do and may require multiple attempts. Additionally, if the facial-recognition camera is pointed to high it may have difficulty capturing the person’s face.

What All Of This Means For You

As product managers, we want the purchasing of our products to be as easy and as seamless as possible for our customers. In China, a new type of payment system is being implemented, facial recognition. Product managers are going to have to take the time to fully understand this new technology and how it may impact the products that we offer and our product manager job description.

In China there are two firms that are competing for the mobile payments market. These firms are Allpay and WeChat Pay. Allpay was the first company to offer a facial-recognition system but then WeChat Pay offered one that could read QR codes or a person’s face. Allpay followed up their initial offering with a much smaller system that cost a great deal less. It appears as though facial-recognition systems are here to stay. Allpay and WeChat Pay control most of the mobile payments that are made in China and they make money off of each payment so they want to make it easier for people to use their systems to pay for things. Allpay has announced that they will pay both merchants and customers to use their new facial-recognition system. Facial-recognition systems are big thing in China and firms are working to make the initial sign up to use one easier to do. Personal privacy issues are on customer’s minds and the systems do not always work correctly all the time.

We are on the edge of a new way of making payments. The arrival of facial-recognition technology means that no longer will customers have to carry credit or debit cards or even their phones with them when they want to buy something. There will be, of course, privacy and security issues that will have to be worked through, but if product managers can solve these issues, then perhaps we may have found a way to make purchasing our products even easier for our customers to do!

– Dr. Jim Anderson Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: What do you think that product managers could do to reassure customers about the privacy of their facial-recognition data?

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What We’ll Be Talking About Next Time

It almost goes without saying that we all know about Amazon – the book seller who has turned into the seller of just about everything. What you may not know about Amazon is that they decided a while back to that they were going to enter into the lucrative video gaming market. With the power of Amazon behind you, you’d think that there was no way that they could ever not be successful. However, so far things have not gone the way that the Amazon product managers had wanted it to go. What are they going to have to do to turn their product development definition around?

The post Product Managers Prepare For The Next Step In Making Payments appeared first on The Accidental Product Manager.

Tech firms face higher levies as Kenya plans to double digital service tax

Kenya plans to double the digital service tax (DST) to 3% beginning July this year, as the government taps the growing online economy to increase its domestic revenues.

It is expected that the new rates, proposed in the Finance Bill by the country’s Treasury department, will likely be passed by the lawmakers. The increase comes slightly over a year after the DST came into effect in Kenya, affecting tech companies such as Amazon, Uber, Spotify and Netflix.

“The Third Schedule to the Income Tax Act is amended… by deleting the expression ‘one-point-five percent’ appearing in paragraph 12 (digital service tax rate) and substituting therefore the expression ‘three percent’,” Kenya’s Treasury cabinet secretary Ukur Yatani wrote in the Finance Bill 2022.

The DST is a tax on gross transaction values of tech companies within a particular country. In Kenya, East Africa’s biggest economy, companies or individuals (non-residents) are obliged to pay it if they “provide or facilitate provision of a service to a user who is located in Kenya.”

The taxable services, as per the country’s revenue authority, include over-the-top services like video-streaming and podcasts, subscription-based media including news, digital marketplaces, and downloadable digital content like e-books and films.

Others include electronic data management services, electronic ticket booking, online distance learning and the sale, and licensing or monetization of any data collected about Kenyan users generated from places like digital marketplaces. Overseas companies without offices in Kenya are required to register electronically or appoint a tax representative in the country to file the returns and make payments.

The uptake of DSTs was said to have been accelerated by the Covid pandemic and efforts by the Paris-based Organization of Economic Co-operation and Development (OECD) to ensure that countries increased taxing rights over the revenues of multinationals with operations in their countries.

In a tax deal brokered last year, out of the 140 OECD members, only 4 – including Kenya (which had already implemented DST) and Nigeria – abstained from an agreement that set a 15% minimum corporate tax rate for multinational enterprises.

OECD said that the move will ensure that these multinationals pay a fair share of taxes in countries where they have operations.

Chinese esports player VSPN closes $60M Series B+ round to boost its international strategy

Esports “total solutions provider” VSPN (Versus Programming Network) has closed a $60 million Series B+ funding round, joined by Prospect Avenue Capital (PAC), Guotai Junan International and Nan Fung Group.

VSPN facilitates esports competitions in China, which is a massive industry and has expanded into related areas such as esports venues. It is the principal tournament organizer and broadcaster for a number of top competitions, partnering with more than 70% of China’s esports tournaments.

The “B+” funding round comes only three months after the company raised around $100 million in a Series B funding round, led by Tencent Holdings.

This funding round will, among other things, be used to branch out VSPN’s overseas esports services.

Dino Ying, founder and CEO of VSPN, said in a statement: “The esports industry is through its nascent phase and is entering a new era. In this coming year, we at VSPN look forward to showcasing diversified esports products and content… and we are counting the days until the pandemic is over.”

Ming Liao, the co-founder of PAC, commented: “As a one-of-its-kind company in the capital market, VSPN is renowned for its financial management; these credentials will be strong foundations for VSPN’s future development.”

Xuan Zhao, head of Private Equity at Guotai Junan International said: “We at Guotai Junan International are very optimistic of VSPN’s sharp market insight as well as their team’s exceptional business model.”

Meng Gao, managing director at Nan Fung Group’s CEO’s office said: “Nan Fung is honored to be a part of this round of investment for VSPN in strengthening their current business model and promoting the rapid development of emerging services and the esports streaming ecosystem.”

From the U.S. to China, Korea, India and Europe, antitrust action against tech is gaining serious momentum

After decades of global expansion and consolidation in the tech sector, antitrust is now a headline issue for the industry across the world.

What has been a slow and sputtering series of disparate actions over the past decade has coalesced in just the past few weeks into a rapid and comprehensive series of actions against the industry, with the United States being a notable laggard worldwide.

Nowhere are these actions more prominent than in China, where the competition authorities have — after many years of a reasonably laissez-faire policy to its internet giants — suddenly decided to take sweeping action against its largest tech companies.

That movement started after Chinese regulators thwarted Ant’s record-shattering IPO in early November. Ant is one of China’s most important tech companies, a fintech company that was looking at a valuation north of $300 billion and that has 1.3 billion active users globally centered on China and the overseas Chinese diaspora.

That regulatory action led to a $60 billion dollar immediate drop in Alibaba’s market cap, given Alibaba’s 33% stake in Ant.

The bad news from Beijing has continued for the tech industry though. Earlier this week, market regulators laid out a “rectification” plan for Ant, including tougher lending standards that are expected to deeply impact the high-flying company’s revenues, margins, and growth. The Wall Street Journal reported this morning that China also specifically intends to “shrink” Jack Ma’s own influence over his business empire, with the government itself potentially acquiring larger ownership stakes in tech companies.

Furthermore, Beijing seems ready to force Alibaba and Tencent to play nicer with each other and create breathing space for startups outside of their two inter-locking corporate webs. Earlier this month, authorities fined Alibaba a nominal amount and also reviewed a Tencent acquisition, actions that were perceived by analysts as the opening shots in a new round of antitrust intervention. More action is expected in 2021.

It’s not just China though that has been bringing tech companies to heel. Almost exactly a year ago, Germany-based Delivery Hero announced a $4 billion takeover of Seoul-based Baedal Minjok, a popular food delivery app. Yesterday, South Korean competition authorities ordered Delivery Hero to divest its existing local delivery assets to get approval for the acquisition — a demand that undermined one of the reasons for acquiring Baedal Minjok in the first place. Delivery Hero has said that it will sell its unit to complete the transaction.

Meanwhile this month, Europe and soon-to-be-Brexited Britain announced a spate of new policies and regulations designed to heighten competition in the tech sector, including increasing legal liabilities for illegal content, broadening transparency around services, and mandating open competition on major platforms. Those policies have been a long-time coming, but now that they are starting to gain traction, they portend huge changes on how the highest-scale tech companies can operate on the Old Continent.

While many of these global policies are designed to undo the consolidation and scale of the industry, in India, regulators are working to prevent such scale in the first place. Local competition authorities there announced in November a framework that would prevent any company from owning more than 30% of local payments volume, and also mandating financial interoperability standards. That policy appears to be designed to avoid the kind of fintech duopoly seen in China between Alipay and WeChat Pay.

With all this global antitrust action bubbling, the laggard has actually been the United States, perhaps since the largest tech giants are all headquartered domestically. While Congress, the president, and dozens of state attorneys general have become increasingly strident on the scope of companies like Amazon, Google, and Facebook, action remains very early against the giants.

The largest and most notable action so far has been a massive lawsuit by 46 states against Facebook that was filed earlier this month. As we reported then, the lawsuit “alleges that the company bought competitors ‘illegally’ and in a ‘predatory manner’ in order to grow and preserve its market power. The suit cites Facebook’s acquisitions of Instagram and WhatsApp as prominent examples.”

Of course, as some of us remember from the 1990s with the U.S. government’s case against Microsoft, antitrust lawsuits often take years to full wend their way through the courts — and often don’t even lead to much if any change in the end anyway.

Whether a Biden administration will dramatically change the course of these actions remains unclear, with the transition offering very limited insight as it prepares to take office next month.

Nonetheless, all of these antitrust actions happening simultaneously across the globe within weeks of each other portends huge regulatory fights for tech in 2021.

Why Florida residents may soon be seeing jet-powered ‘flying taxis’

Florida is renowned for its strange news stories. In recent weeks alone, one resident reported an alligator in her garage that turned out to be a pool floatie; another discovered a python in her washing machine; and a horse needed to be pulled out of a septic tank by firefighters.

Still, don’t dismiss Orlando residents who report seeing flying taxis overhead because they may just be coming. Lilium Aviation, a five-year-old, Munich, Germany-based startup that designs and makes electric vertical take-off and landing jets, is reportedly seeking tax incentives from the city to build a 56,000-square-foot transportation hub with the promise that it will create 100 high-wage jobs in return.

According to the Orlando Business Sentinel, the proposed facility — a takeoff and landing area that would be part of Lilium’s first transportation network in the U.S. — would represent a $25 million investment and, according to the city’s own estimates, generate $1.7 million in economic impact in a 10-year period. (Lilium in September began separately exploring with Germany’s Düsseldorf Airport and Cologne Bonn Airport  how to turn the two airports into regional air mobility hubs.)

It’s probably a smart time for Lillium — whose planes aren’t expected to be up and running until 2025 — to be talking with cities about additional airport revenue. Passenger traffic has fallen through the floor, owing to the pandemic, and cargo traffic has not been immune, either. Meanwhile, 95% of revenue from airports comes aeronautical and non-aeronautical services.

Lilium also has a little more spending money, after raising $35 million in fresh funding in June led by Baillie Gifford, the largest investor in Tesla, a round that brought the company’s total funding to date to $375 million.

Earlier investors in the company include Atomico, Tencent Holdings and Freigeist.

We sat down with Atomico founder Niklas Zennström in late 2016 when the firm had just led a €10 million Series A in Lilium, a bet that seemed early at the time despite the existence already of rivals like Terrafugia and AeroMobile, yet that may be a reality fairly soon. Indeed, there are now at least 15 flying ‘cars’ and ‘taxis” in development.

Tencent leads $100M Series B funding round into China-based esport provider VSPN

Further confirmation that the esports market is booming amid the pandemic comes today with the news that esports ‘total solutions provider’ VSPN (Versus Programming Network) has raised what it describes as ‘close to’ $100 million in a Series B funding round, led by Tencent Holdings . Other investors that participated in the round include Tiantu Capital, SIG (Susquehanna International Group), and Kuaishou. The funding round will go towards improving esports products and its ecosystem in China and across Asia.

Founded in 2016 and headquartered in Shanghai, VSPN was one of the early pioneers in esports tournament organization and content creation out of Asia. It has since expanded into other businesses including offline venue operation.

In a statement, Dino Ying, CEO of VSPN (see also our exclusive interview) said: “We are delighted to announce this latest round of funding. Thanks to policies supporting Shanghai as the global center for esports, and with Beijing, Chengdu, and Xi’an expressing confidence in the development of esports, VSPN has grown rapidly in recent years. After this funding round, we look forward to building an esports research institute, an esports culture park, and further expanding globally. VSPN has a long-term vision and is dedicated to the sustainable development of the global esports ecosystem.”

Dino Ying, VSPN CEO

Dino Ying, VSPN CEO

Mars Hou, general manager of Tencent Esports, commented: “VSPN’s long-term company vision and leading position in esports production are vital for Tencent to optimize the layout of the esports industry’s development.”

We had a hint that Tencent might invest in VSPN when, in March this year, Mark Ren, COO of Tencent Holdings, made a public statement that Tencent would provide more high-quality esports competitions in conjunction with tournament organizers like VSPN.

As we observed in August, Tencent, already the world’s biggest games publisher, that it would consolidate Douyu and Huya, the previously competing live-streaming sites focused on video games.

In other words, Tencent’s investment into VSPN shows it is once again doubling-down on the esports market.

This Series B funding round comes four years after VSPN’s 2016 Series A funding round, which was led by Focus Media Network, joined by China Jianteng Sports Industry Fund, Guangdian Capital, and Averest Capital.

Now, VSPN has become the principal tournament organizer and broadcaster for PUBG MOBILE international competitions, and China’s top competitions for Honor of Kings, PUBG, Peacekeeper Elite, CrossFire, FIFA, QQ Speed, and Clash Royale. This will tally-up 12,000 hours of original content. The company has partnered with over 70% of China’s esports tournaments.

In March, another huge esports player, ESL, joined forces with Tencent to become a part of the PUBG Mobile esports circuit for 2020.

In addition to its core esports tournament and content production business, VSPN has branded esports venues in Chengdu, Xi’an, and Shanghai. In May, VSPN launched its first overseas venue, V. SPACE in Seoul, South Korea.

And even offline events are coming back. VSPN hosted the first large-scale esport event with offline audiences in August this year. And the LOL S10 event will open 6,000 tickets. However, all tournaments will operate under strict COVID-19 prevention measures and approval processes by the Chinese government, and not all esports events are allowing offline audiences. In the main, only high-level ones are approved.

VSPN said it will continue to focus on building an esports short-form video ecosystem, improving the quality of esports content creation, and reaching more users via different channels. VSPN currently houses more than 1,000 employees in five business divisions.

TikTok files for injunction against pending Trump app ban

TikTok’s fight with the Trump administration doesn’t yet appear to be over, regardless of what the deal that was signed between its parent company ByteDance and Oracle says.

Earlier today, the company filed a motion to stop the Commerce Department from enforcing a ban against the popular social app. That ban was supposed to come into place on Sunday, but after the signing of the ByteDance/Oracle deal, it was delayed by a week, with additional delays expected as the deal closes in the coming weeks.

Now though, the company seems to be taking more aggressive action to stop the government. It’s perhaps looking at the plight of another app, WeChat, whose users successfully argued for an injunction in San Francisco federal court this weekend that blocked the app from being banned on Sunday by the Commerce Department. Unlike in WeChat’s case, where the lawsuit was brought by American citizens rather than its owner Tencent, TikTok itself filed its lawsuit against President Trump and the government, originally filing its lawsuit on September 18th, according to court records.

In its filing for an injunction, the company says that it has “made extraordinary efforts to try to satisfy the government’s ever-shifting demands and purported national security concerns, including through changes in the ownership and structure of [its] business, and [we] are continuing to do so.”

In particular, the company noted that the damage of the ban could be significant, arguing that “hundreds of millions of Americans who have not yet downloaded TikTok will be shut out … six weeks before a national election.” The company argues that President Trump and the Commerce Department exceeded its authority under existing legislation to enforce a ban, which mirror arguments made in the WeChat case this weekend.

It’s just the latest challenge in a sprawling situation that changes by the hour. Overnight, my colleague Rita Liao noted that China itself may not even approve the ByteDance/Oracle deal, calling it “extortion” and putting in doubt the whole framework for TikTok moving forward.

Trump administration’s WeChat ban is blocked by U.S. district court

A few days ago, the U.S. Commerce Department published a series of rules that aimed to block the downloading of TikTok and WeChat by American users, following an executive order signed by President Trump back in August. TikTok got a last minute reprieve yesterday following its signing of an investment and cloud services deal with Oracle and Walmart, which delayed the implementation of its download ban at least for a week. However, WeChat was effectively going to be shut down today, with a ban on downloads and a ban on any services that powered the service.

Now, there is a new wrinkle in the battle over the future of the social app, which is widely used in Chinese-speaking communities and is owned by China-based Tencent. A district court judge in San Francisco has temporarily stayed the nationwide ban, following a lawsuit of WeChat users arguing that the ban undermined the free speech rights of American citizens. That court case, U.S. WeChat Users Alliance v. Trump, will be allowed to proceed.

In her short opinion published yesterday, United States magistrate judge Laurel Beeler, argued that the government’s case showed weaknesses on First Amendment grounds, its authority to act within existing legislation to allow the government to control industry, and its overall vagueness compared to the damage a ban would likely have on the Chinese-speaking community in the United States.

From her opinion:

Certainly the government’s overarching national-security interest is significant. But on this record — while the government has established that China’s activities raise significant national- security concerns — it has put in scant little evidence that its effective ban of WeChat for all U.S. users addresses those concerns. And, as the plaintiffs point out, there are obvious alternatives to a complete ban, such as barring WeChat from government devices, as Australia has done, or taking other steps to address data security.

Given the likelihood of a lawsuit proceeding and the immediate damage a ban would have if implemented, the judge initiated a nationwide injunction against implementation of the Commerce Department’s order to ban the app.

Commerce will have a chance to respond to this development, and whether it chooses to edit its order, pursue other avenues through the courts, or just rescind the order entirely, we will see in the coming days.

TikTok and WeChat will be banned in the U.S. from Sunday

The Commerce Department announced this morning that it will require mobile app stores to remove popular social media apps TikTok and WeChat. New users will not be able to download these apps, and while existing users will still be able to use their existing apps installed on their phones, new updates will not be allowed to be installed. In addition, the Commerce Department is also banning any payment transactions through WeChat within the United States.

The bans will go into force Sunday, September 20.

Those decisions are in line with an executive order signed by President Trump on August 6, which put ByteDance and Tencent, the respective owners of TikTok and WeChat, on notice of the government’s intention to block access to their products over purported concerns about national security.

That executive order precipitated the last few weeks of feverish dealmaking to avoid a shutdown of TikTok, discussions that remain on-going and are not finalized. As of today, Oracle and what looks like Walmart are still negotiating with the White House, Treasury Department, and ByteDance to come to a deal that will be acceptable to the president. China also has authority to approve a sale of TikTok.

Over the last few weeks, the administration has promoted a policy known as “Clean Network” designed to eliminate foreign interference in applications and cloud infrastructure that powers American technology. That policy calls for the removal of certain apps, data sovereignty to onshore American user data to the United States, mobile network infrastructure built from “clean” equipment, and a host of other measures to create a “clean” computing environment for U.S. citizens. While those policies are generally written broadly, their clear target has been China, based on speeches from administration officials.

TikTok and WeChat are not the only app removals announced over night. In India, one of the most popular payment apps in the country — Paytm — has been removed from Google’s Play Store for “repeat policy violations.” The app has tens of millions of monthly users. In late June, the country also announced a list of 59 apps developed by Chinese companies that would be banned, including TikTok.

Such national fights over the future of technology have increasingly come to a head as tech drives a larger segment of the global economy and increasingly becomes intertwined with competing national interests.

Inside Udaan’s push to digitize India’s B2B retail market

During a recent visit, Microsoft chief executive Satya Nadella reiterated his company’s commitment to India and revealed a new fund to help SaaS startups in the country.

And then Nadella and Anant Maheshwari, president of Microsoft India, discussed the success story of B2B platform Udaan in three separate onstage public appearances.

Headquartered in Bangalore, Udaan is a business-to-business e-commerce marketplace founded by former Flipkart executives Amod Malviya, Vaibhav Gupta and Sujeet Kumar. The startup used Microsoft’s free Azure credits to scale in its early days; as in some other markets, Microsoft, Amazon and Google offer free cloud credits in bulk to early, promising Indian startups in a bid to onboard them and see if their solutions could be relevant to other clients down the road.

More often than not, these bets don’t work, but sometimes they pay off. Udaan, valued at about $2.7 billion after raising nearly $900 million from investors like Lightspeed Venture Partners, Tencent Holdings, GGV Capital and Hillhouse Capital, has become one of Microsoft India’s biggest clients in the last three years.

Udaan was founded in 2016 at the tail end of India’s e-commerce frenzy, when scores of startups that had attempted to build business-to-consumer online shopping platforms were conceding defeat.

At the time, very few players — like Power2SME and Moglix (industrial products) and Bizongo (packaging for businesses) — were looking at the business-to-business market in India.

Udaan is valued at about $2.7B after raising nearly $900M from investors like Lightspeed Venture Partners, Tencent Holdings, GGV Capital and Hillhouse Capital and has become one of Microsoft India’s biggest clients.

But despite venturing into a road less traveled, Udaan had ambitious dreams. The startup was building its own logistics network, a herculean task that even Flipkart and Amazon avoided to a certain measure for years, yet it was reaching an audience that had never sold online.