Getting a line of credit is extremely difficult in India because of an economic slowdown and low customer trust. New-age startups like ZestMoney are trying to bridge the gap with technology, offering instant micro-loans, and now India’s number one smartphone and TV brand Xiaomi is making a dive for this space.

Xiaomi’s motivation is simple — it doesn’t make a lot of money on its hardware; its gadgets are vessels for services, it’s looking for its services to make it money. MIUI was the company’s first product which was basically an Android skin — now it scales to provide a comprehensive suite of services with the latest entrant being Mi Credit.

This new service makes Xiaomi unique from other tech giants, but also it is a logical step for the Chinese leviathan.

Mi Credit is the logical next step for Xiaomi in fin-tech

India’s fin-tech industry is at the cutting edge of technology which is why many tech companies are delving into space. Services like UPI have already proved their potential which Xiaomi also tasting a slice of it with the recently launched Mi Pay.

By Akshay Bhalla (@bhallanator)

Mi Pay is a direct competitor of Google Pay, PhonePe, and Paytm. For transactions, Xiaomi’s reach with its smartphones allows it to scale many tier 2 and tier 3 users despite the popularity of some of the other services because it comes preloaded on its phones. So logically Mi Credit is the next frontier in fin-tech.

A borrowing app with a difference

  1. Several startups like ZestMoney, Early Salary, LazyPay and more enable users to borrow money by completing KYC. Xiaomi, on the other hand, has built a marketplace where multiple lenders are listed and the user gets more options to choose from. 
  2. More lenders also mean that the rate of rejection is lower. With Mi Credit, Xiaomi can use its reach to connect lenders with borrowers. Users can avail loans ranging from Rs 1,000 to Rs 1 lakh. 
  3. Xiaomi will not be lending the credit amount to its users but will only facilitate the connection between a loan seeker and the service provider.
  4. The app scans text messages to understand your lifestyle and determine whether you’re eligible. Xiaomi launched Mi Credit in May, but it was just a pilot run and lacked the current scale of availability. 

Why is it important

  1. Only three out of 100 people have a credit card in India and banks are focused on bigger loans. 
  2. The app also handles customer onboarding, also known as KYC (Know Your Customer). Documents can be uploaded for verification and the complete process is online-only. 
  3. There’s also a free credit report service that is powered by Experian’s rating solution.
  4. Mi Credit is available to users in 10 states right now and more shall follow soon. According to a BCG report, online credit lending in India is estimated to touch Rs 70 lakh crore by 2023.

Xiaomi is following the footsteps of Apple and Samsung but with an edge

Xiaomi’s moves also mirror tech titans like Apple and Samsung which are looking at financial services as a new revenue source. This year Apple unveiled the Apple Card in partnership with Goldman Sachs which builds on top of Apple Pay which has been around since 2014.

Even Samsung is heavily invested in mobile payments with Samsung Pay. Their proprietary MST technology can turn any phone into a wireless card, making it compatible with almost any point of sale machine.

Xiaomi has an edge because it’s not just focused on payments. The company has already won a virtual bank license in Hong Kong and its global ambitions are slowly taking shape. With Mi Credit, it has crafted a niche for itself that cannot be easily matched by others.

Tapping India’s semi-urban or rural population is imperative right now. And, instead of spending on customer acquisition, Xiaomi can focus on the product and its operations. This population is swiftly progressing and with rising expenses, a line of credit becomes a necessity.

Manu Kumar Jain, Xiaomi Vice President, and India Managing Director told PTI that the company is looking at bringing more financial products in India but it would depend on factors like its current financial services business being stable, the ecosystem around being mature and finding the right partners.

Xiaomi is not alone. Even OnePlus has also announced its plans to launch a payment service soon. It’ll be using UPI in the background. But, the fact that every company wants to enter the payments market is proof that they see long-term growth prospects, irrespective of short-term market dynamics.


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