Most people know Xiaomi as an upstart smartphone sensation that elbows its way through a stiff market to become the world’s largest startup. But like other Chinese tech giants, Xiaomi is fast expanding into industries outside of hardware, now making new strides in finance.
Xiaomi has just launched a money-market fund Huoqibao inside its homegrown mobile app Xiaomi Finance. After registering with one’s national ID, Xiaomi users who are 18-years old or above will be able to purchase financial products managed by E Fund Management, a third-party financial institution in China.
The fund also supports debit cards of 12 national banks, including, Industrial and Commercial Bank of China, Bank of China and China Construction Bank.
Xiaomi is slightly late to the monetary fund battlefield compared with other domestic Internet companies. Alibaba’s mutual fund Yuebao became an instant hit when it was first launched in 2013. As of the end of 2014, Yuebao has managed RMB578 billion (US$93 billion) funds for over 185 million users. A number of big Chinese companies like Tencent, Baidu, Sina, and 58.com all followed the trend to roll out similar services. Xiaomi’s Huoqibao is no exception with the adoption of a similar model — offering the fund service in cooperation with traditional financial institutions.
However Xiaomi’s timing raises doubts. The initial peak in adoption for similar products is dropping, and the annualized yield of other popular funds fell from record high of over 7% to around 4%. Huoqibao currently offers 7-day annualized return rate of 4.95%, slightly higher than Yuebao’s, however, it is difficult to say whether they’ll be able to keep it up.
The company said in a statement that Xiaomi Finance is also planning to construct a mobile data platform and develop a user data-based credit scoring system. By leveraging the user data from MIUI and various smart devices, Xiaomi’s platform hoping to construct a reliable data source, but the real challenge lies on how to protect the private data collected from users, and how to analyze them.
Despite all the data supports, Xiaomi’s obstacle in constructing a credit scoring system is the fact that it hasn’t got a license for this operation. Alibaba’s Ant Financial Services Group and Tencent are the only two Internet companies that have been granted licenses by China’s central bank for running credit services.
At the beginning of this year, Ant Financial rolled out Sesame Credit to give credit scores based on the online behavior of customers and small businesses on Alibaba’s e-commerce marketplaces. Tencent opened its in-house credit rating system for testing among QQ members, which will be released soon.
This is not Xiaomi’s first move in exploring the online finance industry. In 2014, the company led a round of investment in Chinese lending site Jimubox. They also registered a payment company last year.
According to the latest report from IDC, China’s smartphone shipment dropped 4.3% YOY in the first quarter this year, marking the first YOY slump in the past six years. This is going to pose a challenge for Xiaomi, which still makes the majority of its revenue from hardware sales.
Given these circumstances, an online financial platform may give Xiaomi new momentum for pushing smart device sales with the integration of installment, credit loans, financial products and third-party payment options.