China’s Xiaomi caught in the recent wave of P2P lending defaults

2 min read

Several Xiaomi phones users recently have found many of the financial products they invested in have been having problems paying off the investors. These investors first accessed these products via their ads on Xiaomi, accusing Xiaomi of pushing fraudulent ads and lacking moderation.

Based on screenshots provided by some of the users, the ads of the peer-to-peer(P2P) lending platforms were shown in Xiaomi VIP System Tasks and Xiaomi Sports.

Screenshot of Xiaomi’s P2P promotion. (Source: CBD.com)

Some of the platforms promised thousands of RMB cash back for RMB 30 or 50 thousand investment, which were very tempting for investors. However, many of them have proven to be scams, where operators of some of the platforms have fled with investors’ money and some having troubling returning the money to investors.

Xiaomi VIP is a built-in section in Xiaomi’s mobile operating system MIUI, where users can receive various bonuses, ranging from phone calling credits to membership discounts from Tencent video after accomplishing tasks such as downloading a video game from the phone’s game center. And somehow, Xiaomi developers have included registering at some P2P lending platforms in these tasks.  Xiaomi Sports is another built-in app that tracks users daily fitness data and the in-app P2P lending ads were promoting registration with free gifts. The ads of the defaulted platforms have been pulled off Xiaomi.

There aren’t any stats on the specific percentage of default platforms that Xiaomi promoted yet, but people inside Xiaomi who are familiar with the matter told NetEase that they have received users’ complaints since June. There have been 429 users who have filed a complaint and the total amount of money involved was up to about RMB 40 million. According to the source, some of the money has been retrieved.

According to local media reports, Xiaomi increased marketing these P2P platforms in July 2017. Xiaomi’s first quarter financial reports showed that ad promotion has achieved a revenue of RMB 1.9 billion, 9.4% of Xiaomi’s total revenues. Xiaomi hasn’t issued an official announcement on whether it will be responsible for the ads and how it will be responsible.

This isn’t the first time that tech companies have been involved in financial fraud. E-commerce giant JD.com found itself in similar situations last week. Feixun, a brand sold on JD, lured consumers with the promise of free routers to invest in a P2P lending platform, Lianbi Electronic Technology,  which later defaulted. The managing board of Lianbi had fled before police started an investigation.