Xiaomi to become second-biggest stakeholder in new Sichuan bank geared towards young, internet savvy users
The announcement follows Xiaomi tie-up with China UnionPay in April
Chinese smartphone maker Xiaomi will become a minority partner in a bank in central western China geared towards younger, internet-savvy users and small companies, reflecting its second foray into mainland finance and the latest in a number of deals by major tech companies seeking to diversify into banking.
The bank, which received government approval on Monday, will provisionally be called “Sichuan Hope Bank”, as an English name has not been finalised, according to a statement filed by Chengdu Hongqi Chain to the Shenzhen Stock Exchange on Monday.
Xiaomi will be the second-largest investor with a 29.5 per cent stake, while Chinese conglomerate New Hope Group will own a 30 per cent stake and Chengdu Hongqi Chain will own a 15 per cent, according to the filing.
The new bank has a registered capital of 3 billion yuan (HK$3.5 billion).
“The Sichuan Hope Bank will become the first mobile internet bank in central western China,” said a spokesman for the bank in a statement. “It will focus on the needs of the younger demographic and small enterprises.”
The move comes as Xiaomi faces slower smartphone sales growth in China as the market reaches saturation. Once the fifth largest global smartphone supplier in the world, Xiaomi has been overtaken by domestic rivals OPPO and vivo in the first quarter this year, according to research firm IDC.
The deal is the latest in a number of recent agreements by major tech companies seeking to diversify into mainland financing.
Last April, Xiaomi partnered with China UnionPay, the only banking card association on the mainland, to roll out its own mobile payment service to tap users of its smartphones.
“Xiaomi wants to make more profit from various internet services instead of just selling cheap mobile phones and the new bank can be very helpful in that direction,” said Lin Renxiang, an analyst from Chinese research firm HCR.
Internet banks have an advantage over traditional banks in terms of the frequency of customer engagement, according to Jan Bellens, global emerging markets leader of the global banking and capital markets practice of consulting firm EY.
“Banks are becoming less relevant for customer...for the future if you want to create opportunity for selling or servicing, a bank is going to have difficulty,” he said.
MYbank, backed by e-commerce giant Alibaba Group, began operations in China last June. It has a registered capital of 4 billion yuan and Alibaba’s affiliate Ant Financial Services owns a 30 per cent share.
Rivalry internet company Tencent, which operates WeiXin, also known by its international version WeChat, owns 30 per cent of WeBank, a Chinese online-only bank.
Xiaomi’s advantage is the vast amount of potential users it can bring to the bank and the broad user data it has gathered from the smartphones it sells, according to Lin.
“Xiaomi has to make sure it does not lose its users when they upgrade their phones,” Lin added.
Alibaba owns the South China Morning Post.