Facial recognition is now enabled for China bank accounts and ATMs have been upgraded.
This service follows on the Alipay Smile to Pay campaign that was launched two years ago. Its adoption by Chinese banks underpins just how advanced, secure and reliable facial recognition technology has become in China. It’s just one waypoint on China’s digital highway construction.
This is in contrast to many Western examples of facial recognition software that have an irritatingly low success rate. It’s in stark contrast to banking systems in the United States that continue to rely on credit cards with magnetic strips, or even Australian systems with embedded chips and easily hackable four-digit passwords. China is a digital economy we cannot afford to dismiss or ignore.
This digital highway is already close by the Northern Territory border. We, and Australia, are tasked with making choices about driving on the highway, or staying on slower secondary roads that use different standards and protocols. The choices are more urgent for the Territory because much of our export trade is with countries already using this digital highway.
Indonesia’s National Single Window customs clearance program is part of this China-inspired highway and replaces a cumbersome, time-consuming and corruption-friendly process that relied on multiple bits of paper spread across multiple official desks. Australia is aware of INSW but is not participating. Taking part in INSW can deliver immediate benefits to Territory exporters to Indonesia, and to other countries to our north as the INSW template is rolled out.
But if we don’t know the highway exists, or reject using it for non-commercial reasons, then we cut ourselves out of trade and commercial opportunities. The Northern Territory engagement with China – and other countries in our region that trade with China – rests upon our ability to develop and deploy compatible technology to work with these advanced digital systems.
The new Silk Road is a digital road and it’s of such importance that China President Xi Jinping has overseen a government study on innovation, blockchain and digital currency. China already has a leading role in its development and has integrated blockchain in various state-owned or managed sectors, such as customs, healthcare, and banking. The Smile to Transact service at my local bank ATM is one aspect of this progress.
The multilateral trade system on which the Territory relies is safeguarded by building a digital currency alternative to the dollar-based trade settlement system. This means free trade and cross-border transactions cannot be threatened or hijacked by unilateral decisions to deny access to the SWIFT settlement system and the system of US-based co-respondent banks. How this may be integrated into global foreign currency trading systems was the subject of my Beijing keynote at China’s first digital currency conference.
China’s central bank’s digital currency project has the highest profile, but we cannot ignore the deep integration of blockchain in artificial intelligence, big data, and the internet of things. Already smart cities, transportation, energy, employment, medical health, commodity anti-counterfeiting and food safety are all actively using blockchain.
Meat from Mongolia uses block chain certification to guarantee quality and product authenticity. This meat sits in the premium shelves in Chinese supermarkets competing with Australian beef that is plagued by supply chain substitution. The danger is that Australian attempts to develop a blockchain solution may use different standards to the Chinese blockchain protocols.
It is easier to access this Belt and Road market, to sell digital innovation into this market, to transact cross-border trade in this market, if we acknowledge and adhere the development standards. We need a licence to drive on this digital highway and, like it or not, it’s a Chinese licence.
That poses a trade dilemma. Do we back Western block chain applications that may be incompatible with the standards applied to the more advanced China implementation? The answer is the difference between efficient trade clearances and product sales, and ships waiting at the end of the line to unload. The answer is the difference between software applications that are compatible with the standards of our major northern trading partners, and software applications that are built on an incompatible blockchain structure.
The digital divide is already here. I use a Chinese technical trading program with features simply unavailable in its Western counterparts. Unfortunately, I have to run it on a separate computer with Windows configured to Chinese system protocols. The market for this software is limited by its incompatibility with Western operating systems. The danger is that our software applications will be incompatible with the developing Chinese digital highway standards.
Putting aside infrastructure, the Belt and Road Initiative has three areas of development, each with its own implications for the Northern Territory.
The first is trade infrastructure. This includes the regulatory environment, payment systems and protocols and the application of block chain certification to everything from logistics chains to digital currencies. The Northern Territory gains an advantage with early adoption and licence to use this digital highway.
The second is soft infrastructure, which includes trade settlement and banking outside of the dollar-based system. It includes blockchain, 5G and AI development standards. It includes construction standards that will impact on project bidders. An informed approach will deliver advantages to Northern Territory business because they can cruise this digital highway and build compatible software applications.
The third is capital infrastructure investment. The opening of Chinese capital, bond and derivative markets is part of this. It includes changes to investment and foreign investment regulations, which deliver business growth opportunities. Recognising these changes means that events such as the Territory Government-sponsored Reaching South in Shenzhen can target those most likely to invest and do business in the Northern Territory.
Those who acknowledge and adopt these digital standards can keep smiling and money will come. TQ