Hongda sees big demand for biometric ID systems

Surging appetite for online payments means tech firm has sights firmly set on larger rivals

China's growing appetite for e-commerce and mobile payments is offering an expansion opportunity to Hongda Hi-tech Group Co Ltd, one of the largest domestic firms that develop biometric verification technologies.

Hongda, the No 1 maker of identification card recognition equipment in China, is focusing on iris and voice recognition technologies to cement its position as global tech giants such as Alibaba Group Holding Ltd and Apple Inc which are also rolling out identification technologies.

"The demand for bio verification services is set to soar because the exploding virtual economy needs background checks to stay valid," said Wang Xin, chairman of the Changchun, Jilin-based firm.

"Quickly increasing market demand gives us an unprecedented opportunity to grow."

Wang, a soft-spoken engineering-teacher-turned-entrepreneur, said his flagship product, a population data management system widely used by the Ministry of Public Security, took 60 to 70 percent of the market share. Hongda said the company also provides more than 60 percent of the fingerprint scanning machines used in Chinese embassies around the world.

Hongda is competing with an array of Chinese companies, including Beijing-based Techshino Technology Co and Miaxis Biometrics Co Ltd for government-funded bio-identification projects.

Because Hongda helps the government manage residents' ID information, it gets access to an ID pool that covers the entire Chinese population of more than 1.3 billion. The statistics are stored in a government data center, but the company is allowed to pair the ID information with its customers who only have the individuals' online ID.

The comparison work helps banks and internet companies to pinpoint the exact individual offline so they are able to evaluate financial risks before providing services to that person.

"The services we are offering help clients prove the individual with what he/she claims to be on the web," said Wang.

Chinese buyers spent 3.8 trillion yuan ($587.2 billion) on online shopping last year, a 21 percent increase year-on-year, according to iResearch Consulting Group, a Beijing-based industry research firm.

China's bio-identification sector has been experiencing a surge in demand for its services from 2014, when market turnover exceeded 8 billion yuan, according to a report from industry consultancy Bosi Data Research Center. It estimated the turnover in 2015 hit 10 billion yuan.

"The expansion rate will last for years as demand for information safety products increase among government, corporate and individual customers," said the report.

Zhu Jinsong, head of the information security control arm of Tencent Holdings Ltd, said telecom fraud and malicious apps are threatening Chinese shoppers' financial safety.

"The government is partnering with private companies to upgrade counter-hacking technologies. A more sophisticated verification process is expected to give customers better protection over data safety," according to Zhu.

Although Chinese internet companies and global hardware vendors such as Apple, are providing personal information safety services such as fingerprint verification, it is difficult for them to identify the user in the real world because they cannot access China's ID card databases.

Wang said Hongda will invest more in the internet sector and partner with key service providers on mobile verification systems.

"The internet is set to change our business," he said.

Wang refused to disclose the revenues for Hongda, which is a privately held company. But he said the company gets at least 20 percent revenue growth each year, thanks to growing business in the country.

Hongda is also targeting overseas market for growth amid a government-backed initiative to bring its technologies to neighboring countries. It has completed a project in Laos that develops digitalized population management system.

"China's Belt and Road Initiative will fuel the overseas expansion of Hongda," said Wang. The initiative, announced in 2013, is an attempt to expand trade with countries in Asia, the Middle East, Europe and Eastern Africa. Technologies used to build nuclear power stations, high-speed trains as well as IT products are among items getting a boost under the program.

Wang sees no difference between his company's technology and those of international competitors and that helps when bidding for overseas projects.

"Residents' ID management is a very sensitive matter for every government. As a Chinese bidder, Hongda could get the deal because (the foreign authorities) trust China ... it was hardly a case before China's economic surge over the past decade," said Wang.