Xiaomi Rolls Out Consumer Lending Offer in India

FACTS

  • Mi Credit by the Chinese smartphone maker Xiaomi was presented in May 2018 and will soon be made operational in India.
  • A Beta pilot phase is underway: the official launch would be planned in the coming weeks.
  • This offer is designed for active young workers with a Xiaomi smartphone. They may be lent from 1,000 to 100,000 rupees (€1,300); with interest rates starting at 1.8%.
  • The scoring process will rely on data provided by their users as well as on information regarding their phone activity. The point is to assess credit profiles based on the users’ identity, life stage, lifestyle, social relationships, and loyalty to the brand.

CHALLENGES

  • Making the most of a leading position on the Indian mobile market to enter the highly competitive digital lending industry, alongside other players such as Tala, PayU, Paytm Money, Capital Float, Kissht, LendingKart and Faircent.
  • Highlighting an alternative scoring tool to potentially attract nearly 190 million underbanked customers. Based on their customers’ personal data, especially in China, Xiaomi managed to cut down default payment rates to less than 2%. Their Chinese customers must agree to share their data and have it analysed (social media and other instant messaging interactions, browsing activity on third-party websites).
  • This massive data exploitation does, however, involve risks for Xiaomi and some of their partners chose to back away (in Indonesia, for instance) due to concerns over privacy protection and invasive data collection.
  • Diversifying their revenue sources. The world’s fourth-largest mobile phone vendor opted for a business model based on selling low-margin hardware. In this context, services are their key long-term profit centre.

MARKET PERSPECTIVE

  • India is Xiaomi’s second-largest market after China. In March 2019, they launched their payment app Mi Pay, which –just like Google Pay– relies on the Indian Unified Payments Interface (UPI).
  • In China, their lending business boosted a loan book of $8 billion, including $2 billion in outstanding balances mid-2018. Their payment app Mi Pay launched in 2016 in this country and is operated in partnership with the card scheme China UnionPay. They already claim 20 million active users for this service and annual transaction volume of $12 billion.

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