How Xiaomi Is Set to Leverage Mi Credit to Grow Further in India


Xiaomi has already had remarkable success in the smartphone market in India and disrupted the Internet of Things (IoT) segment with its affordable security cameras, connected air purifiers, and smart TVs. But on Tuesday, the company formally launched Mi Credit — its standalone app for online lending. The debut of the Mi Credit app took place in May last year on, what Xiaomi is now calling, a pilot basis. Based on its learning from the so-called pilot, Xiaomi on Tuesday re-launched the app with much fanfare and a host of new lending partners on board. The company at the launch event highlighted the growth potential for the Mi Credit app. But the goal behind the latest marketing move is to eventually give a boost to its financial services business that runs as Mi Finance.

Back in May last year, Xiaomi partnered with Bengaluru-based startup KrazyBee to utilise its instant personal loan platform called KreditBee. But the Beijing-headquartered company through the new launch has brought five new lending partners on board, namely Aditya Birla Finance Limited, Money View, EarlySalary, Zestmoney, and CreditVidya. This expansion has made Mi Credit a “curated marketplace for lending” instead of just being a platform for getting quick personal loans.

“We were running this pilot for a long period of time because we were experimenting and changing the product and the business model,” said Manu Kumar Jain, Xiaomi India Managing Director, at the sidelines of the Mi Credit launch in New Delhi.

“Now, we’re fairly confident [that] the current form in which we have a curated marketplace working with multiple partners in the background, running a very simple, clean interface in the front is the right way of working,” he added.

While Jain and his team initially started with KrazyBee, the extended list of lending partners for Mi Credit doesn’t include the name of the startup. However, the executive underlined that he is hoping to bring KrazyBee’s KreditBee to the platform as well.

Since May last year, Jain highlighted that Xiaomi did many pilots of Mi Credit in India. The initial testing helped the company find the appropriate model to offer online loans to the Indian youth.

“In the current form, we started the pilot in the last quarter, which is Q3,” he said. “And that’s when we came up with this whole new concept of curated marketplace with multiple partners.”

The presence of multiple partners on Mi Credit is aimed to help customers easily get loans at a comparable interest rate and with higher success rate. This isn’t similar to the original Mi Credit model that had only KreditBee as the lending partner. Additionally, the company has also expanded the list of supported banks and is aimed to provide the loan service to over 19,000 pin codes in the country by the end of financial year 2019.

Mi Credit has five lending partners initially 

“Over a period of time, a lot of things have happened because of which we can deliver a much better experience to the users,” said Vikram Singh, Lead, Xiaomi Financial Services, Xiaomi India.

Nevertheless, Mi Credit still has the limit of getting a maximum loan amount of Rs. 1,00,000 — depending upon your credit history and the discretion of the lending partners.

The initial list of lending partners is primarily limited to fintech startups and non-business financial companies (NBFCs). But nonetheless, Xiaomi does have plans to tap commercial banks to expand the lending partner portfolio of Mi Credit. The company is also bullish on getting an NBFC licence from the Reserve Bank of India (RBI).

“We are in the process of applying for an NBFC licence here,” said Hong Feng, Xiaomi co-founder as well as Chairman and CEO of Mi Finance.

“In this business, we are running a very large-scale partnership because basically in China, we have 120 million active users, [while] in India, we have more than 50 million users. So there’s no matter how good your product engineers [are], it’s impossible for you to identify the diversity of all those users.”

Jain, however, emphasised that despite the intent to get the NBFC licence in India, Xiaomi is set to continue its operations with the 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 as well as Amazon and Flipkart.

“So having our own NBFC licence allows us to also serve customers maybe who are not being served by other partners,” he stated. “It gives us a lot more leverage but does not mean that we will not work with partners.”

Jain during his presentation at the Mi Credit launch accentuated that the user data the platform would receive will be stored in an “encrypted format” in India. However, when asked about third-party access, he did acknowledge that the data captured through the Mi Credit app will be shared with lending partners for their internal analysis.

“Of course, they cannot sell this data. This would be illegal — they cannot sell this data to anybody. [But] can they use this data for their risk modelling? Of course, yes,” he noted.

The lending partners would be able to leverage the data through Mi Credit to determine loan defaulters. This would significantly help them reduce loan repayment burdens and limit their non-performing assets (NPAs).

Jain also assured that Xiaomi will not use the information obtained through Mi Credit for any kind of ad targeting. Similarly, he specified 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 towards Mi Credit.

“This [the user data from Mi Credit] is only for financial services and for finding out whether the customer is worthy of giving loan or not,” the executive claimed.

Major NBFCs and financial institutions in India are largely looking for transformation to retain their growth. According to a report by India Ratings, the retail loans segment that significantly fuels the overall banking sector in the country would continue to face a moderate year-over-year growth in the financial year 2020.

In such a scenario, Xiaomi’s move with the arrival of Mi Credit would help NBFCs and fintech startups persuade consumers to avail easy personal loans.

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