What Role Will Biometrics Play in the Cyber Cold War? We’re About to Find Out

ID Tech for June 16, 2022

After a previous ID Tech column laid out the challenging funding landscape that private biometrics companies will face now that the tech bubble has burst, last week’s feature pivoted to the brighter-looking prospects of the facial recognition segment in particular. Yes, the entire biometrics industry will have to compete more aggressively – or at least more effectively – to win over hesitant venture capitalists; and yes, a number of vendors that don’t have their act together are going to falter and fail; but the facial recognition segment in particular is already far past its VC funding peak in 2018, and it’s an area in which technology has evolved quickly along with an industrial ecosystem that now features third-party regulatory and testing regimes that can help the best vendors to demonstrate the effectiveness of their solutions.

That was the gist of the argument. But there’s another important factor that could serve to protect the facial recognition sector, and indeed the biometrics industry in general, amid what looks to be a bear market: geopolitics – or, given the extent to which international relations are now playing out in the digital sphere, perhaps we should say something like ‘cyberpolitics’.

To be clear, the world-political situation is not bullish across the board, and the political factors that we’ll consider probably will not benefit industry players in certain regions. China, for example, could be a problematic one.

Unpredictable Interventions

On the one hand, government authorities in China have been enthusiastic proponents of biometric technology, and face-based surveillance in particular – often to the horror of privacy and rights advocates in the West. And in academia, Chinese research on facial recognition and related computer vision technologies has been vastly over-represented globally, revealing the country to be a powerhouse of scientific study.

On the other hand, China’s tech sector has suffered from the same bubble collapse that has drawn down the stocks of the likes of Apple, Microsoft, and Tesla, and its suffering has been compounded by unpredictable government interventions. A sudden regulatory crackdown on the tech sector routed the Chinese public markets last year, and this year the government’s severe COVID-19 restrictions, under President Xi Xinping’s ‘Zero COVID’ policy, have helped to further depress the market.

As a result, a growing number of Chinese tech startups are finding themselves pushed into so-called ‘blood listings’, in which they make their public market debuts at valuations below those of their earlier, private funding rounds. Among those looking to list is Megvii, a prominent facial recognition company that had first tried to go public in 2019, but encountered difficulties after the Trump Administration placed it on a blacklist due to its reported involvement in oppressive state surveillance in Xinjiang.

Friend or Foe?

So is the Chinese government a friend or foe to its biometrics sector? The answer isn’t clear. It’s also a murky question in the United States, where lawmakers have sought to introduce various bans on facial recognition technology at different levels of government, including federally. The Biden Administration, meanwhile, recently issued an Executive Order mandating the National Research Council to produce a report on the use of facial recognition technology within about six months, and demanding a separate report, due in 18 months, on how law enforcement agencies should use the technology, to be jointly drafted by the Director of the White House Office of Science and Technology Policy, the Secretary of Homeland Security, and the US Attorney General.

This is where the government’s attention to the biometrics industry could actually prove beneficial. The reports may eventually result in national regulations for biometric technologies – but many within the industry have themselves called for such regulations, especially where facial recognition is concerned. Effective regulation can help to clarify the rules for vendors and their clients, and thereby help to formalize important aspects of the industry.

The IBIA, representing commercial interests in biometrics, is already trying to involve itself in this policymaking, and further lobbying from some of the vendors that already do business with the government is surely in the works.

Their success will depend to some extent on how effectively they are able to align the biometrics and facial recognition industries with what the Biden Administration understands to be America’s Artificial Intelligence advantage.

Geopolitics Goes Digital

The Administration announced the National Artificial Intelligence Research Resource Task Force last year, framing it as an effort to ensure that America can compete with rivals like China on the cutting edge of AI technology. Last week, the Task Force came through with recommendations to help ensure that American businesses and academic institutions will have the resources they need to fuel their innovation efforts. Having seen a summary of the report, Fortune reports that the recommendations are aimed at helping companies “to adopt A.I. technologies while also ensuring that they do so in a way that protects people’s privacy and doesn’t weaken cybersecurity”.

Broadly speaking, that sounds like an effort in which biometric technologies could play an important role.

Meanwhile, some members of Congress are starting to escalate their rhetoric about ensuring that the US can keep pace with China on a cyber-defense level. Speaking recently to The Washington Post, Rep. Elissa Slotkin (D-Mich.) was emphatic: “There’s a lot of tools left in the toolbox, but it means the United States doing something that we don’t do a lot — or we don’t like to do — which is mixing our military policy with our economic policy, making sure…we have consequences and built-in deterrence on cyber threats,” she said.

This perception of a need to economically support parts of the private sector that can help the US to fight on the cyber front could ultimately help to secure important funding for the biometrics sector, especially if the White House determines that biometric technologies are part of its strategic AI interests in the competition with China.

A similar confluence of interests may be taking shape among American allies in Europe. In a policy brief for the European Council on Foreign Relations published last month, Visiting Fellow Julian Ringhof and ECFR Madrid Head José Ignacio Torreblanca argued that the European Union needs to pursue a more muscular role in “the new ‘Great Game'” of digital technologies, a strategic necessity to “counter Chinese and Russian influence in the technology realm”. What’s more, the authors argue that “the EU should build digital alliances with like-minded countries” like the US.

The lengthy brief doesn’t mention biometric technologies in particular, save for one suggestion that Western allies work to limit biometric surveillance; but the fact is that biometrics already factor heavily into the EU’s domestic tech strategy. According to data compiled by Crunchbase, the third most active investor in private biometrics companies in the world is EASME, the European Commission’s Executive Agency for Small and Medium-sized Enterprises. And it’s third from the top by a narrow margin, having participated in seven investment rounds, compared to the eight undertaken by Clearstone Ventures and MassChallenge, each.

In facial recognition in particular, EASME is the single most active investor, with five rounds to its name.

What this data illustrates is that the EU has already been quietly investing significant sums in biometrics and especially facial recognition. The question going forward is whether policymakers will see this economic support as part of a larger geopolitical effort to keep pace with China and Russia – a question that echoes in the White House’s strategic AI efforts and its scrutiny of biometric tech. If they do, a number of vendors in the biometrics industry could be assured of ongoing material support in the years to come, regardless of venture capitalists’ cold feet.

Sources: Fortune, The Washington Post, Crunchbase, ECFR, South China Morning Post, Reuters

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June 16, 2022 – by Alex Perala