Xiaomi Set To Enter India’s Consumer Loan Industry With Mi Credit


The stakes are high for the world’s fourth largest mobile phone provider, whose business model is based on low-margin hardware sales with services as a key long-term profit center. The company reported disappointing second quarter results on Tuesday, and its shares are trading at just over half of their 2018 IPO price.

Xiaomi is betting it can leverage its number one position in the Indian smartphone market to tap into the country’s lucrative but crowded financial services sector. Yet growing public concern over data privacy, which has forced tech giants like Google and Facebook to change the way they do business, could make it a bumpy road for the Chinese company.

Indeed, Xiaomi’s approach to data collection and privacy has raised eyebrows some of those familiar with its international expansion plans. The company remains a small player in financial services in its home country, according to documents seen by Reuters.

Xiaomi faces fierce competition across Asia from banks, global tech giants, fintech startups and others scrambling to position themselves in the region’s burgeoning digital economy.

In Indonesia, another key market, Xiaomi’s financial unit had to close in late 2018 due to a disagreement with regulators over licensing.

A source familiar with Xiaomi’s efforts in India said the company is doing well there with its first offering, a payment app called Mi Pay launched in March.

“They appear to be following the market leaders, Apple and Google, where a smartphone will eventually become more than a phone and more of a financial game,” the source told Reuters.

Xiaomi’s new Mi Credit service in India, offering loans of up to 100,000 rupees ($ 1,451) with interest rates starting at 1.8%, is expected to debut in the coming weeks. The Xiaomi spokesperson told Reuters that Mi Credit is operating in “beta phase” but declined to share details.

India is Xiaomi’s largest market outside of China and has an installed base of some 70 million phones there, according to the Counterpoint market research.

Xiaomi’s fintech revenue grew 62.7 percent year-on-year to 112 million (RMB 792 million) in the second quarter, the company said on Tuesday, with a focus on “consumer loans and supply chain finance “.

Confidentiality issues

Xiaomi uses phone activity data to create credit profiles based on a customer’s “identity, stage of life, lifestyle, social relationships and brand loyalty”, according to documents viewed by Reuters.

The privacy issue has scared off at least one potential banking partner in Indonesia, Xiaomi’s second-largest overseas market after India, which backed out of a deal in part over concerns over data collection. invasive, a senior bank official told Reuters.

Consumers requesting the services in India sign broad agreements agreeing to share their personal data with Xiaomi, including everything from “professional and educational training” to “temporary message history” and “usage information”. certain applications and websites ”.

The agreement also includes a disclosure that Xiaomi may share “personal information from time to time with companies affiliated with Xiaomi … or third party service providers.”

The Indonesian banker told Reuters that a presentation he saw showed the company was scanning the private data of phone owners looking for mentions of lifestyle changes, such as a divorce or a promotion, as part of its approach to credit scoring.

Apar Gupta, executive director of the Internet Freedom Foundation advocacy group, said a lack of data privacy laws and regulations in India made users vulnerable.

“The risks include collecting information that goes beyond a user’s reasonable contemplation,” Gupta said. “If they are not sufficiently informed of the information gathered, they have no meaningful way of knowing what they are bartering for a loan.”

A spokesperson for Xiaomi told Reuters that “user privacy and data protection are of the utmost importance to us”, and that the company has entered into a “strong data protection agreement” with its lending partners in India.

Additionally, privacy concerns may not be a priority for Xiaomi phone owners, many of whom are drawn to the relatively cheap hardware prices.

“Banks usually ask for a lot of documents before giving a loan. If Xiaomi lends me money quickly and without too many documents, I won’t mind sharing my data with the company,” said Akshay Pawar, 29 years. phone owner in Aurangabad in western India. “100,000 rupees is a decent amount, good enough to buy a new motorcycle.”

And phone data seems to be good at analyzing risk: Xiaomi’s non-performing loan ratio is less than 2%, according to documents seen by Reuters, very low for consumer loans averaging $ 1,000 .

Results in China

In China, Xiaomi’s lending business had a loan portfolio of $ 8 billion, with $ 2 billion in outstanding balances, as of mid-2018, according to documents seen by Reuters. Mi Pay, operated in partnership with Chinese bank card provider UnionPay, achieved an annual gross merchandise volume of $ 12 billion for China, with 20 million active users, according to the documents.

This leaves it far behind its Chinese rivals such as WeChat Wallet and Alipay.

China’s figures have not been released before. A spokesperson for Xiaomi said the figures were valid as of May 2018, but declined to give the figures for 2019.

This story was posted from an agency feed with no text editing. Only the title has been changed.

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