Financial Express Online caught up with Global VP Xiaomi and MD Xiaomi India, Manu Kumar Jain and Xiaomi India Financial Services head Ashish Khandelwal to understand the nitty-gritties of the business and all that’s coming soon.
After cementing its position as number one smartphone and smart TV brand, Xiaomi wants to shake up India’s Fintech space. The company started offering ‘financial services’ in 2018, starting with a UPI-based product called Mi Pay. In 2019, it launched Mi Credit, a curated marketplace that would eventually go on to offer personal loans of up to 25 lakhs. And then, the pandemic happened.
Given the challenging times, and the relative ‘newness’ of the products, Xiaomi had little choice but to go back to the drawing board and make changes in order to grow the business. The result, that Xiaomi is rightfully calling financial services 2.0, is all about doubling down efforts and doing the full spectrum especially on the credit side, so there’s a product for every perceivable need. Basically, no one gets left behind.
Xiaomi is adding insurance, for one. Within lending, the company is adding many new products including SME loans, Credit Line Cards, and ‘100% secure’ gold loans ahead of the festive season. Financial Express Online caught up with Global VP Xiaomi and MD Xiaomi India, Manu Kumar Jain and Xiaomi India Financial Services head Ashish Khandelwal to understand the nitty-gritties of the business and all that’s coming soon.
FE: What’s the Xiaomi financial services story so far? Could you take us through the whole journey, the products and general response?
Manu: We launched this business about 2-3 years ago with a vision statement that everybody should be able to access our financial products. We launched Mi Pay in 2018 and by 2019-end, we already had 20 million people using the service regularly on a weekly-monthly basis. Then in December 2019, we launched Mi Credit and offered personal loans of up to 1 lakh. Its key USP being its seamless experience. It’s a relatively newer business for us amongst everything that we’ve been doing for the last seven years in India, but it’s a very significant and promising business. As many as 5 crore people are using Mi Pay today. People come and use it because they trust Xiaomi as a company and because it’s a very easy to use platform.
If you compare Q1 2021 versus Q4 last year, we’ve grown 95% quarter on quarter and if we compare with Q1 2020, then we’ve grown 35% (YoY). But key thing to note is that Q1 2020 was pre-COVID, and Q2 2020 is post-COVID, so from that perspective, it’s a significant achievement.
FE: What’s the whole intent behind switching gears this year?
Manu: When COVID-19 happened in March-end and the entire country went into lockdown, it was a very tough period for us, specifically with this business. It was an exceptional time when a lot of consumers wanted to take loan given the macroeconomic conditions, but a lot of our lending partners were apprehensive because given the circumstances they didn’t know whether people would be able to pay back with all the insecurities around jobs, pay cut etc. At this point in time, we went back to the drawing board and thought about how to grow and rebuild this business. The answer was it needed a full spectrum platform across multiple things. Therefore, we’re adding insurance that will join the existing payment and lending services. We are now migrating to a full spectrum lending platform on the Mi Credit side from being just personal loan. We’re now giving SME and gold loans and starting Credit Line Cards.
FE: Let’s just start with personal loans. What are the new developments on this side?
Manu: Given the kind of response we’ve seen, we’ve increased our limit from 1 lakh to 25 lakhs on the personal side. A person based on their transaction history will get a pre-approved message saying you’re now pre-approved for up to 25 lakhs. If they want, they can avail this loan. Till now, more than 1 lakh people have already availed loans through Mi Credit on the personal loan side. Today, we are servicing more than 22,000 PIN codes, which means almost all states and all union territories are covered under this. Almost 60% of our customers are salaried, 40% of them are self-employed. Going forward, because we’re launching the SME product, we’re planning to further diversify and provide 20% of the loans to MSMEs.
FE: Why should SMEs pick this product? Are there any incentives?
Ashish: We’ve been working to make sure this product meets the needs of the consumer. We strongly believe in creating the right product and let customers experience and speak about that. Given the kind of franchise we have and given the kind of customer interactions which we have seen, we are seeing a good amount of interest. Not everybody has a business license and that’s the whole disadvantage with business loans. That’s why we decided to also focus on the self-employed personal loan. We offer instant approval, very high approval rating as compared to what is available in the market and it’s a completely hassle-free process because everything is digital, everything is online, everything is on our app, so you don’t need to do anything.
FE: What is the response like and what are the kind of SMEs signing up for this?
Ashish: We launched this product in mid-July. We’re seeing significant interest from the sole proprietorship. Our target segment is not the private limited companies or the public limited companies obviously. So, 90% of our customers who come on our platform are the sole proprietors and at best, our partners.
FE: What’s the idea behind launching Credit Line Cards? What are some of their advantages?
Ashish: This is a unique proposition that combines personal loan with a transaction product. This means, once a customer gets a line, they can choose to withdraw money into their account, withdraw the cash but since it’s also network – Visa – enabled, you can also use this to transact over online and offline. In the earlier avatar, you had to apply for the personal loan first and the money got transferred into your account and then you made the payment. It was a hassle. We’re just cutting that off completely. This product currently comes with a cap of 5 lakhs, but we would be happy to revise this upwards depending on adoption. We’ve launched it in a controlled (testing) manner recently in partnership with Stashfin. We’re hoping to go live more extensively in the coming weeks.
FE: And you’re also getting into gold loans just ahead of the festive season…
Manu: Gold loan is a fairly important product right now because if we look at the last one year, a lot of people have been wanting to take loans given the macroeconomic circumstances but a lot of companies, our partners, have had concerns. But if you have a secure loan like a gold loan, and this is a very popular product for the last many, many decades in India, then there’s a very high degree of comfort from a company’s perspective to give out a loan. Chances of default are very low, rate of interests are very low, so this is a brand-new product that we are launching now on the Mi Credit platform. This will hopefully go live in a few weeks from now. In phase one, we would be accepting only physical gold as security but later, as we see consumer adoption, we would also be extending this to include digital gold.
FE: What’s unique about your insurance product? Does it cover COVID-19?
Ashish: First thing, we have absolutely no room rent capping. Most of the health insurance products, even corporate insurance generally comes with a capping depending on the coverage which you have taken. During the pandemic, we realised that suddenly the room rents went up, and we want to ensure that nobody is deprived of good healthcare services. Most products also cap pre-existing diseases to four years which means for four years these pre-existing diseases are not covered. Our product comes with 2-year PD. Lastly, the entire process takes less than 3 minutes. We’ve partnered with ICICI Lombard for this.
We’re simultaneously also launching cyber insurance, again in partnership with ICICI Lombard, at sachet rates that you can claim ‘n’ number of times until you exhaust the whole coverage amount.
FE: How many partners have you on-boarded so far? What’s the revenue share like?
Ashish: Given the kind of consumer experience which we want to deliver, we are very careful about the entities with whom we partner. If you see, there’s a great jump in terms of the number of partners or the kind of partners which we had earlier when we started versus now. Axis Bank is an addition. Stashfin is an addition. IDFC Bank is another large name that we’ve added. There are a couple of other names which are going live as we speak. The total number of partnerships which we had earlier was around 7 or 8 which have gone up to 15. It’s just that those are still in the integration phase. We will be cautious in terms of whom we partner with in order to deliver the right product. In fact, outcome of this is, today, on our platform you get a loan for as low interest rate as 10.5%.
Every partnership has a different construct altogether. We enable end-to-end journey for the consumer. Certain percentage of dispersal is what we earn as a fee, but the construct differs from partner to partner.
FE: Where do you stand on privacy considering a lot of personal data movement is going back and forth in all this?
Ashish: We are paranoid about data privacy. Even though we fundamentally cover length and breadth of the services, all customer information remains very private and to the particular use case. We comply with all the regulations. All the information which we collect from the customers in order to evaluate the possibility of the credit, gets explicitly mentioned to them, gets stored in encrypted form inside the country on AWS servers. Also, the end-to-end partnership which we have with all the lenders ensures that we have enough and more checks and balances available in the system. Our focus has always been to make sure we use technology in a manner where it gives seamless experience to the consumer, it doesn’t mean that we need to have more information.