Chinese smartphone maker Xiaomi is venturing into mobile financial services. It is beta testing a mobile wallet app which allows users to buy money market funds offering higher interest than banking saving accounts.
Xiaomi has not announced the official launch time of the service.
Rival with Alibaba and Tencent
The new service brings Xiaomi into direct competition with two other major online fund management platforms: Alibaba’s Yu’ebao launched in June 2013 and reported 149 million users by October 2014; and Tencent’s Licaitong integrated into its messaging app WeChat which has over 500 million monthly active users. Other players include search engine Baidu and e-commerce sites JD.com and Suning.com.
In February 2015, China’s central bank cut the one-year deposit rate to 2.5%. Currently the seven-day annualised yield for Xiaomi’s fund stands at 6.4%, which is higher than what’s offered by Yu’ebao’s 4.5% (as of 18th March). With banks offering a lower interest rate, consumers are likely to look for better places to invest their money and Xiaomi is offering one with a more attractive rate than others in the market.
Continued expansion of Xiaomi’s product portfolio and mobile ecosystem
This is a natural and important step for Xiaomi to continue to expand its mobile ecosystem. It gained success by offering high-end smartphones at relatively low prices with additional monetisation through mobile content and service sales. In 2014, Xiaomi sold more than 61 million smartphones and achieved revenues of RMB74.3 billion ($12bn). With over 100 million MIUI users already part of the Xiaomi ecosystem by the end of January 2015, the new money market fund service could become another revenue source for Xiaomi and further tie users into its ecosystem.
Meanwhile, it paves the way for Xiaomi to build a platform offering more comprehensive products and services to customers. Beyond smartphones, Xiaomi’s product portfolio extends to include TVs, set-top boxes, smartbands, tablets, and routers. It has also recently launched an action camera as well as invested in connected home products and smart shoes.
Chinese e-commerce companies, social network providers and mobile device makers have been battling each other to dominate the mobile internet. Financial services are becoming the latest battlefield as China approved the set-up of five privately owned banks in 2014, including Alibaba and the online-only WeBank from Tencent, which launched in January 2015.
Xiaomi’s series of recent investments illustrate its ambition for success in the financial services.
With Xiaomi adding mobile financial services to its wide portfolio of content and devices, IHS expects more innovative services from local players in 2015 to further heat up competition in China’s mobile internet space.
However, Xiaomi doesn’t have the commerce background as Alibaba does with its over 300 million AliPay accounts, with which customers shop on its online market place Taobao. Users can easily transfer money to the funds in Yu’ebao from debit cards associated AliPay. It means Xiaomi will have a much smaller user base for its official launch.
And compared to WeChat Wallet and AliPay, which also could be used to split bills among friends, shop online, buy flight tickets and hail taxis, Xiaomi Wallet’s offering is very limited at the moment. To be competitive, it needs to offer more diversified service around payments and identify a proper use case.