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Alibaba Group Holding Ltd's (BABA.N) finance arm and smartphone maker Xiaomi Inc [XTC.UL] said on Thursday they will jointly develop mobile payment systems using wearable technology, a first for China's major tech firms.

Xiaomi and Ant Financial, an Alibaba affiliate which includes China's most popular online payment service Alipay, will enable the Alipay Wallet mobile app to link with Xiaomi's Mi Band smart fitness bracelet. That will let users smooth the process of making payments, bypassing the need for passwords.

Although a small step for an emergent technology tipped to eventually replace wallets, the partnership marks a milestone in China where the function has thus far been more pipedream than reality.

The Alipay-Mi Band link will be made available on the current version of Alipay Wallet forGoogle Inc's (GOOGL.O) Android mobile operating system, which runs on handsets including those of Xiaomi. The next version will be compatible with Apple Inc's (AAPL.O) iOS.

The encrypted link will avoid potential security pitfalls of near-field communications (NFC) wireless technology, which has been criticized for potential vulnerability to theft and cyber attacks. Apple will use NFC to allow users to make payments on its Apple Watch, to be released this month, rather than on a phone.