Facial recognition firm puts SoftBank between China and the United States

The logo of SoftBank Group Corp is displayed at the SoftBank World 2017 conference in Tokyo, Japan July 20, 2017. REUTERS/Issei Kato

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TOKYO, July 8 (Reuters) – A SoftBank-owned company is thriving by offering facial recognition technology powered by a blacklisted Chinese company to companies like Mastercard and Visa, an opportunity for the Japanese conglomerate fraught with geopolitical risk and privacy.

Japan Computer Vision Corp (JCV), owned by the wireless unit of SoftBank Group Corp (9984.T), has reached payments agreements in recent months, a potential breakthrough for the dream of SoftBank founder Masayoshi Son, generate new business through a partnership between its technology investments.

If JCV continues to expand, it could become a standout example of SoftBank creating synergies with holding companies — a key part of Son’s sales pitch to the tech industry.

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But the rise comes with risks because the facial scanning system it offers to US heavyweights Mastercard Inc (MA.N) and Visa Inc (VN) uses technology from SenseTime Group (0020.HK), a Chinese company blacklisted by the United States for humans. rights concerns.

The JCV-SenseTime partnership highlights SoftBank’s difficult balancing act as Son attempts to position his conglomerate as a neutral player even as tensions mount between two key markets, the United States and China.

The billionaire said last month that SoftBank was taking a cautious approach to China due to a regulatory crackdown that has rattled his portfolio.

JCV said it was keeping SenseTime and the credit card companies at arm’s length – the Chinese company is a technology partner that does not have access to Mastercard and Visa’s systems or data.

Mastercard said all of its biometric payment program partners must adhere to European Union data protection standards. Visa said it is working to define the use of biometrics in payments and believes such technology can help ensure a secure system.

JCV’s rapid expansion is also facing privacy concerns from regulators and consumers as facial recognition technology becomes more widespread. Shares of SenseTime plunged 50% last week as a lock-up period ended after its IPO.

SenseTime told Reuters it aims to strengthen the partnership with JCV, which it says will benefit businesses, and that the company has set up an ethics council to ensure standards.

JCV said its technology is audited by a third party, Israeli cybersecurity startup CYE, to check for risk of data leakage and the company asks users to sign up for pay-per-face systems and allows them to opt out.

“Offering the consumer these controls is really what is needed to make this a very mainstream technology,” said Andrew Schwabecher, CEO of JCV. SoftBank declined to comment.

A MILLION FACES A DAY

SenseTime, of which SoftBank is the biggest investor, was blacklisted in 2019, preventing American companies from exporting technology to the Chinese firm. A further blacklisting in December prevents US investment in SenseTime.

Washington accuses the Hong Kong-listed company of developing facial recognition technology that can be used to identify ethnic Uighurs.

Although there is no suggestion that JCV violates the restrictions, the use of SenseTime technology reflects the limits of the US blacklist to hinder the expansion of Chinese technology.

JCV also sells body temperature scanners using the technology to retailers such as Fast Retailing Co’s fashion chain Uniqlo (9983.T) and mall operator Aeon Co (8267.T). It has shipped over 20,000 devices to Japan that scan over 1 million faces per day.

“SenseTime’s algorithm is absolutely the best, we’ve rated almost everyone,” JCV’s Schwabecher told Reuters, citing its ability to identify customers even when the face is partially obscured by a mask or hand.

Fast Retailing said its temperature scanners do not store or transmit any of the information they capture. Aeon declined to comment.

JCV has built a software platform to run the SenseTime algorithm, which it says ranks high in the US government’s own tests for its low error rate. JCV operates the system from Japan.

SenseTime’s algorithm analyzes over 200 facial locations and the distance between them to create a digital key. JCV uploads single sign-on to the cloud, allowing users to authenticate payments using their face.

Schwabecher said other companies will likely catch up with SenseTime, and JCV plans to offer alternatives on its platform in the future. “In two to three years, the vendor’s algorithm you use probably won’t matter as much as it does now.”

The adoption of facial scanning technology would enable greater personalization of services, from targeted advertisements to offering customers their favorite burger in a gourmet restaurant or suggesting a destination while riding in a taxi.

But consumer concerns about data privacy pose a threat to wider adoption, even as proponents say the technology is safer and more convenient.

Regulators have taken action against facial recognition companies, with New York-based startup Clearview AI fined in Britain and Italy for scraping images online to train its facial recognition tool.

In Australia, a major consumer group referred three retail chains to regulators last month for their use of “intrusive” facial recognition technology. Read more

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Reporting by Sam Nussey; Editing by Miyoung Kim

Our standards: The Thomson Reuters Trust Principles.

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