Xiaomi has said that it will begin trials of its virtual bank Airstar, in a signal that the smartphone maker is looking to grow its presence in consumer finance and compete with other Chinese tech giants like Ant Financial and Tencent. 

Why this matters: While best known as the world’s fourth-largest smartphone brand, Xiaomi has made its fintech ambitions clear. The virtual bank is a JV with AMTD Group, Asia’s largest independent investment banking firm, and Xiaomi owns 90% of the shares.

  • Xiaomi’s ambitions to leverage its foothold in IoT—its platform is connected to 151 million active mobile devices, which it says is the largest in the world—and broaden its existing fintech offering in China and beyond.

Details: The pilot allows 2,000 employees from Airstar, Xiaomi, and AMTD Group and their friends and relatives to try out (in Chinese) virtual banking tools and give feedback.

  • Airstar presents itself as a zero service fee retail business. Hong Kong residents can create an account in five minutes with no minimum deposit required.
  • Airstar will start with two products. One offers an interest rate of up to 1% per annum for saving deposits of between HK$500,000 and HK$1 million. It protects deposits up to a maximum amount of HK$500,000.
  • Customers can also place savings in time deposits and choose their deposit maturity dates themselves, such as eight, 19, or 27-day time deposit. They can settle fixed term deposits at any time in advance without charge. 
  • Unsecured lending products will be available to customers with transparent pricing. Interest will accrue on a daily basis. The loan price is transparent and the interest rate compounded daily. Customers can repay in advance without paying any handling fees. 

Context: The Hong Kong Monetary Authority’s Fintech Supervisory Sandbox will oversee the pilot.

  • The HKMA issued eight virtual banking licenses to companies including Ant Financial, Tencent, JD.com and insurance giant Ping An. 
  • AMTD is planning an initial public offering of its digital assets for later this year. It wants to serve retail banking customers and small and medium enterprises in the wider Asia region, and is currently competing for licenses in other jurisdictions. 

Lavender covers regulation and its effects on people. She previously worked in a policy advisory analyzing China’s internal governance for foreign governments and multinationals. A History graduate from...