Xiaomi has already seen remarkable success in the smartphone market in India and has shaken up the Internet of Things (IoT) segment with its affordable security cameras, connected air purifiers and smart TVs. But on Tuesday, the company officially launched Mi Credit, its standalone app for online lending. The debut of the Mi Credit app took place in May of last year, what Xiaomi now calls a pilot base. Based on its learning of the so-called pilot, Xiaomi relaunched the app on Tuesday with great fanfare and a host of new loan partners on board. The company at the launch event highlighted the growth potential of the Mi Credit app. But the goal behind the latest marketing initiative is to give a boost to its financial services business called Mi Finance.
In May of last year, Xiaomi in partnership with the KrazyBee startup based in Bengaluru to use its instant personal loan platform called KreditBee. But the Beijing-based company through the New launch integrated five new lending partners, namely Aditya Birla Finance Limited, Money View, EarlySalary, Zestmoney and CreditVidya. This extension made Mi credit an “organized market for loans” rather than just a platform for quick personal loans.
“We have been running this pilot for a long time because we were experimenting and modifying the product and the business model,” said Manu Kumar Jain, Managing Director of Xiaomi India, on the sidelines of the Mi credit launch in New Delhi.
“Now we are pretty confident [that] the current form in which we have an organized market working with multiple partners in the background, a very simple and clean interface up front is the right way to work, ”he added.
While Jain and his team initially started with KrazyBee, Mi Credit’s extended list of loan partners does not include the name of the startup. However, the executive stressed that they also hoped to bring KrazyBee’s KreditBee to the platform.
“In the current form, we started the pilot in the last quarter, which is the third quarter,” he said. “And that’s when we came up with this brand new concept of a market organized with several partners. “
The presence of several partners on Mi Credit aims to help clients easily obtain loans at a comparable interest rate and with a higher success rate. It is not similar to the original Mi Credit model which only had KreditBee as a loan partner. In addition, the company has also expanded the list of supported banks and aims to provide lending service to over 19,000 PINs in the country by the end of fiscal 2019.
“Over time, a lot of things have happened that we can provide a much better user experience,” said Vikram Singh, Xiaomi Financial Services Manager, Xiaomi India.
Nevertheless, Mi Credit still has the limit of obtaining a maximum loan amount of Rs. 1,000,000 – depending on your credit history and the discretion of the lending partners.
The initial list of lending partners is mostly limited to fintech startups and non-commercial financial companies (NBFCs). Nevertheless, Xiaomi is considering using commercial banks to expand Mi Credit’s portfolio of loan partners. The company is also optimistic about obtaining an NBFC license from the Reserve Bank of India (RBI).
“We are in the process of applying for an NBFC license here,” said Hong Feng, co-founder of Xiaomi and CEO of Mi Finance.
“In this business, we are leading a very large-scale partnership because mainly in China, we have 120 million active users, [while] in India we have over 50 million users. So no matter how good your product engineers are [are], it is impossible for you to identify the diversity of all these users.
Jain, however, pointed out that despite the intention to obtain the NBFC license in India, Xiaomi is poised to continue operations with existing partners. The model would ultimately be similar to how the company currently operates its e-commerce business in the country where it sells its devices through Mi.com as good as Amazon and Flipkart.
“So having our own NBFC license allows us to also serve customers who may not be served by other partners,” he said. “It gives us a lot more leverage, but it doesn’t mean we won’t work with partners. “
Jain during his presentation at the launch of Mi Credit pointed out that user data that the platform receives will be stored in an “encrypted format” in India. However, when asked about third-party access, he acknowledged that data captured through the Mi Credit app will be shared with lending partners for their internal analysis.
“Of course, they can’t sell this data. It would be illegal – they cannot sell this data to anyone. [But] can they use this data for their risk modeling? Of course, yes, ”he noted.
Lending partners would be able to use data through Mi Credit to determine defaults. This would significantly help them reduce loan repayment charges and limit their non-performing assets (NPAs).
Jain also assured that Xiaomi will not use the information obtained through Mi Credit for any type of ad targeting. Likewise, he clarified that the company will not use the user information it receives from MIUI-based phones to target customers for a loan or to push traffic to Mi Credit.
“This [the user data from Mi Credit] is only for financial services and whether the client is worthy of granting a loan or not, ”the executive said.
Major NBFCs and financial institutions in India are largely looking for transformation to maintain their growth. According to a report By India Ratings, the retail lending segment that significantly powers the country’s entire banking sector would continue to experience moderate year-over-year growth in FY2020.
In such a scenario, Xiaomi’s move with the arrival of Mi Credit would help NBFCs and fintech startups persuade consumers to take advantage of easy personal loans.