China's largest domestic smartphone manufacturer Xiaomi is looking beyond just peddling hardware, with competition hotting up in the domestic smartphone market. According to latest reports emanating out of China, the company is reportedly in the process of setting up an online loan financing company in Chongqing. The latest venture from Xiaomi is reportedly backed by a $50 million loan from one of the offshore subsidiaries of the company. Xiaomi had already launched its financial services in March, offering retail loans and asset management services, and the proposed online loan services will also stick to the same policy and offer its services only to individual customers according to Mr. Hong Feng, co-founder and VP of Xiaomi's MIUI division.
According to the report first published in Beijing Business Today, consumers will be able to apply for loans online up to 30,000 Yuan ($4,830) via smartphones. However, it wasn't immediately clear as to whether the newly announced service will be limited to users of Xiaomi phones only, or if it will be universal. The report further states that Xiaomi believes it can disburse upwards of 2 billion Yuan ($322 million) in loans this year alone, and by 2017, the company expects the number to be in the region of 75 billion Yuan ($12 billion). The company itself is said to be valued at around $45 billion, during an appraisal after a round of financing it received in December last year.
The online financial services sector in China could very well be seeing a 21st century gold rush, and every internet company worth its name has been jumping onto the bandwagon over the past several months. With the country's central bank legalizing consumer loans only recently in what is still technically a Communist country, the online financial services sector is seeing a rush from prominent tech-companies to establish preeminence in what analysts believe will be a lucrative sector going forward. Among the well-known names to have already thrown their hats in the ring are Alipay's Huabei and Jingdong Mall's JD Baitiao. With a lion's share of Xiaomi's profits coming from its services rather than hardware sales, analysts believe the current strategy is a good way for the phone maker to develop online financing services through the substantial user base it already has. The services will also give Xiaomi an opportunity to further develop and strengthen its relationships with its already loyal customers.