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The fourth-largest mobile phone vendor plans to launch a consumer-lending business, dubbed Mi Credit, in India in the next few weeks, according to Reuters. It will offer loans of up to 100,000 rupees ($1,451), with interest rates starting at 1.8%.
Xiaomi is positioned as a leading smartphone manufacturer in India, with 70 million mobile phones in use throughout the country. It already launched its payment app, dubbed Mi Pay, in the country in March, which is reportedly "doing well," per Reuters. For context, in China, Xiaomi's lending business shows a loan book worth $8 billion.
Here's what it means: Xiaomi's alternative credit scoring model may attract India's underserved population, but concerns about its finance business in other countries may also plague this market.
- Xiaomi will rely on alternative phone data to build users' credit profiles. It will use data from phone activity to create credit profiles on loan applicants, including information such as social relationships, brand loyalty, and life stage, per documents seen by Reuters. Xiaomi will scan phone data to search for mentions of lifestyle changes, such as a divorce or promotion, for example. This method has proven to be a successful way to determine creditworthiness, and Xiaomi's nonperforming loan ratio is below 2%. Users sign agreements allowing Xiaomi to access their professional and educational backgrounds, temporary messages history, and information related to some apps and websites. Xiaomi will also be able to share personal information with third parties, per the agreement.
- Xiaomi has faced troubles previously with its finance business. It had to shut down its finance unit in Indonesia — one of its key markets — last year, after disagreements with regulators over licensing. Additionally, an undisclosed potential banking partner in Indonesia shied away from a deal with Xiaomi after privacy concerns regarding invasive data collection.
The bigger picture: With consumers in emerging markets remaining underserved by conventional financial services companies, demand for fintech solutions is high — and an increasing number of tech firms are getting in on the trend.
India boasts the highest fintech adoption rate in the world, making demand for Mi Credit more likely. Eighty-seven percent of consumers in India have adopted fintech solutions, compared with the global average of only 64%, per EY.
Additionally, there are 190 million consumers without a bank account in the country, making it the second-largest unbanked population after China. As such, Mi Credit has a large base of consumers potentially open to considering its services and a long runway for growth in the country. But, Xiaomi would be wise to address any privacy concerns before the launch and ensure that users are fully aware of what data they're sharing with the company to avoid hiccups along the way.
The anticipated launch is part of a broader trend of tech companies, including ride-hailing firm Grab, rolling out financial solutions in emerging markets to grasp large unbanked populations.