The company's business model has long relied on low-margin hardware sales, and service is the key to achieving long-term profitability in the future. The company's second-quarter results released on Tuesday were disappointing, and its share price is currently only slightly higher than half of the 2018 IPO offering price.
Xiaomi hopes that it can use its own intelligence in IndiaMobile phoneThe market's first position has entered the country's lucrative but highly competitive financial services industry. However, as the public is increasingly worried about data privacy issues, technology giants such as Google and Facebook have had to change their way of doing business, so the Chinese company's road ahead may be bumpy.
In fact, among some people familiar with Xiaomi's international expansion plan, Xiaomi's approach to data collection and privacy protection has raised questions. According to documents seen by Reuters, the company is still a small company in the financial services sector in China.
In Asia, Xiaomi is also facing fierce competition from all sides, including banks, global technology giants, financial technology start-ups and so on. These companies are trying to gain a foothold in Asia's booming digital economy.
In another important market, Indonesia, Xiaomi’s financial sector was forced to close by the end of 2018 due to differences in licensing issues with regulators.
A source familiar with Xiaomi's Indian business said the company performed well in the Indian market. In March of this year, it launched the first financial services product in the local area: a payment application called Mi Pay.
The source said, "They seem to be followingappleAnd the two market leaders in Google, for the two giants, the smartphone will eventually be more than just a mobile phone, it will be more of a financial instrument. ”
Xiaomi plans to launch a new Mi Credit credit service in India, offering loans up to 100,000 rupees (about $1,451) with a starting interest rate of 1.8%. The service will be available in the coming weeks. The Xiaomi spokesperson told Reuters that Mi Credit is currently in the “test phase” but would not disclose details.
According to market research firm Counterpoint, India is the largest market outside of China, with 70 million mobile phones installed locally.
Xiaomi’s recent financial report showed that its financial technology business revenue increased by 62.7% year-on-year to reach 112 million euros (about 792 million yuan), mainly concentrated in “consumer loans and supply chain financing”.
According to documents seen by Reuters, Xiaomi uses data from users' mobile activities to collect information about the user's “identity, life stage, lifestyle, social relationships and brand loyalty” and then create credit files accordingly.
A bank executive told Reuters that this privacy issue has scared at least one potential bank partner in Indonesia because the latter is worried about excessive data collection. Indonesia is the second largest overseas market for Xiaomi, second only to India.
In India, consumers applying for the Xiaomi loan service need to sign a wide-ranging agreement and agree to share their various personal data with Xiaomi, including “professional andeducationBackground, "temporary information history", and information related to "the use of certain applications and websites."
The agreement also revealed that Xiaomi may “share personal information from Xiaomi affiliates or third-party service providers from time to time.”
The Indonesian banker said that a presentation he saw showed that as part of a credit assessment, Xiaomi would scan the private data of mobile phone users to find information about lifestyle changes, such as divorce or promotion.
Happar Gupta (Apar Gupta), executive director of (Internet Freedom Foundation), the Internet Freedom Foundation, said India lacks data privacy regulations, so user privacy is not well protected.
Gupta said, “Relevant risks, including information gathering, are beyond the reasonable consideration of the user. If they don’t pay enough attention to the information they are collecting, they cannot know what they are paying for in exchange for the loan.”
A spokesperson for Xiaomi told Reuters, "User privacy and data protection are critical to us." The company has reached a "strong data protection agreement" with its loan partners in India.
In addition, for Xiaomi's mobile phone users, privacy issues may not be their biggest concern, many of them are attracted by the relatively cheap hardware price of Xiaomi.
Aksher Pawar (Akshay Pawar), 29, from western India, is a Xiaomi mobile phone user. "Banks usually ask for a lot of pieces before agreeing to make loans," he said. If Xiaomi can lend me quickly and don't need to submit too many documents, then I wouldn't mind sharing my data with the company. 100, 000 rupees is a good amount, enough for me to buy a new motorcycle. "
The mobile phone data seems to be very effective in analyzing risks: According to documents seen by Reuters, Xiaomi’s non-performing loan ratio is less than 2%, which is very low in terms of consumer loans with an average amount of US$1,000.
Performance in the Chinese market
According to documents seen by Reuters, as of mid-2018, Xiaomi’s loan business in China’s loan business was $8 billion, and outstanding accounts were $2 billion. Xiaomi's Mi Pay has cooperated with China UnionPay to achieve a total transaction volume of US$12 billion per year in China with 20 million active users.
These data lag far behind Chinese competitors such as WeChat Pay and Alipay.
These Chinese market data of Xiaomi have not been announced yet. A spokesperson for Xiaomi said the data as of May 2018 was valid, but he declined to provide data for 2019.