In keeping with Xiaomi’s rather broad product mix, its new financial services menu is overwhelming.
Airstar Bank, a Hong Kong-based virtual bank, officially started operation on June 11, 2020. The bank, formerly known as ‘Insight Fintech,’ is jointly established by Xiaomi Corporation (01810:HKEX) and AMTD Group, a local asset management institution. This is one of Xiaomi’s recent attempts (in Chinese) to expand its scope outside of the company’s traditional area – consumer electronics.
A virtual bank is defined as a bank that primarily delivers retail banking services through the Internet or other forms of electronic channels instead of physical branches. The introduction of virtual banks is a key pillar supporting entry into the smart banking era.
There are three major services currently provided by Airstar Bank: current deposit, time deposit and personal loans. For a savings account, the first HKD 20,000 in savings enjoy a 3.6% interest rate during the promotion period, which starts from 11 June 2020 to until further notice. Other preferential policies include zero extra fees for early uplift of time deposit and 24x7 FPS (Faster Payment System) instant transfer. Personal loans with APR (Annualized Percentage Rate) 2.99% are fast borrowings at a bank rate. The various currency accounts, namely the HKD, USD and CNY accounts available proved Xiaomi’s financial services are targeting on a global scale.
Xiaomi has shown ambition in its financial service segment. Except for banking services, the company also covers consumer finance, supply chain finance, mobile payments and online insurance. In the consumer finance area, for instance, the app, ‘Xiaomi Finance,’ provides to-consumer financial services such as micro loans, personal wealth management and health insurance.
Unlike Alipay, Xiaomi has a value chain that connected with the supply, production, e-commerce platform and retail distributors of its smartphones and other electronic devices. Along that stream, the company has many chances to develop the supply chain finance for more efficient capital flow. In October 2019, Huatai Securities underwrote Xiaomi’s first supply chain asset-backed securities (ABS), marking a successful trial in the integrated financial product area.
Though thoroughly planned, Xiaomi in financial service is a latecomer. How to attract users from Alipay and other well-established consumer finance service provider remains ambiguous. Besides, the low-profit margin questioned Xiaomi Finance’s risk tolerance and the user’s asset security might be a concern.