Chinese smartphone giant Xiaomi has thrown its hat in the country's online banking sector by launching its own money market fund earlier this week. (Photo : Reuters)
Smartphone maker Xiaomi has launched an online money market fund in China, challenging similar products from Alibaba Group and Tencent in a bid to gain ground in the country’s increasingly lucrative finance industry.
The world's third-largest smartphone maker announced on Tuesday that it would team up with E Fund Management, an asset management firm, to sell its Huoqibao money-market fund via a finance app bundled with Xiaomi smartphones.
"We're aiming to build a smart platform to help financial partners find high-quality clients, while helping our users earn money and borrow money," said Hong Feng, Xiaomi's co-founder.
Huoqibao was initially available in beta for select users of Xiaomi Wallet, another Xiaomi app released in March this year and primarily used to manage virtual currency known as Mi coins. Chinese users could purchase Mi coins through participating banks or Alipay accounts, which they can then use to redeem virtual goods such as custom smartphone themes and e-books off the Xiaomi platform.
Xiaomi's announcement comes at the heels of Alibaba and Tencent's recent campaigns to persuade Chinese consumers in using their money market fund services. Earlier this February, both companies spent more than 4 billion yuan on gifts and promotions to persuade users to link their bank accounts to their respective mobile apps.
Alibaba's financial arm launched Yu'ebao in 2013 and has become the country's largest money market fund, reaching around 185 million investors and 712 billion yuan under management by the end of March.
Tencent followed in early 2014 with its own money market fund, Licaitong, which linked to its WeChat and QQ messaging apps.
While Huoqibao is expected to emulate the features that made Yu'ebao a success, including higher interest rates and providing cash on demand, industry observers foresee major challenges ahead of Xiaomi's money fund.
"Compared to China's other Internet giants, Xiaomi is slightly late to the money market game," said Josh Horwitz of Tech in Asia. "Alibaba already owns the biggest pool of money online in China thanks to Alipay, and Tencent owns the best mobile real estate thanks to WeChat, China's most popular messaging app."
But Xiaomi, which is known for selling robust, high-quality phones for a fraction of the price, does have the advantage of being in a extremely good position to benefit from the emergence of smart home devices.
"Since thousands of customers log on to Xiaomi's website to buy a smartphones every week, it can leverage that focused attention," Horwitz said. "Many of the hardware startups it invests in go on to list their items on the company's e-commerce platform."
According to data from the Wall Street Journal, Xiaomi made most of its revenue and profits from hardware sales. In 2014, the company claimed to have earned more than $1 billion in revenues from services, marking 6 percent of its total revenue.
