Xiaomi has introduced a new wrinkle on the mobile wallet: A portable account that bears interest.
Xiaomi President Bin Lin offered details of the new beta program Tuesday, during a Connector Event presentation in Beijing sponsored by Tencent and Re/code. Phone users in China can earn an interest rate of 3.058 percent on money transferred from their bank accounts to their mobile wallets.
A handful of financial institutions have partnered with Xiaomi on its test of an interest-bearing, money-market-like fund — though Lin said the phone maker has no desire to get into the banking business. Rather, he described the mobile wallet as a service to its customers.
Xiaomi marketing executive Tony Wei said the product is similar to an online money-market fund offered by Chinese e-commerce giant Alibaba Group. Yu’e Bao is China’s biggest money-market fund in terms of assets under management, according to Reuters. It launched in 2013 through a partnership between fund manager Tianhong and Alibaba’s online payments platform, Alipay.
Yu’e Bao requires no minimum deposit, eliminates all transaction fees and promises a healthier return than state banks provide. But critics have raised concerns, saying Yu’e Bao amounts to banking outside of federal regulations — with its capital requirements and deposit insurance.
For the moment at least, Lin said his fast-growing Beijing company doesn’t plan to offer a mobile payments program, similar to ApplePay.
“In China, it isn’t consumer behavior to pay with a phone-swiping yet,” Lin said.
Lin’s remarks were part of a wide-ranging conversation with Re/code co-founder Walt Mossberg, in which Lin discussed the strategy that has propelled the young company to the top of the Chinese smartphone market and earned it a market valuation of $46 billion, making it the world’s most valuable technology startup.
Lin said Xiaomi focused initially on building quality phones with comparatively slender margins, in the hope of capturing a dominant share of China’s vast market. It eschews splashy ad campaigns that add to overhead cost, favoring direct communications with users via social networks.
“We would love to make money,” Lin said. “But right now, our goal, our objective is market share. It means everything to us.”
The company began investing in technologies that build upon its expanding mobile platform, introducing a colorful $12 fitness band that tracks the user’s steps and unlocks his or her smartphone without entering a password. Xiaomi also is investing in the connected home, offering a 49-inch television set and a media hub that streams movies, games and contains enough storage (one terabyte) to keep family photos and videos. It even sells an air purifier.
Under repeated questioning, Lin handicapped the company’s chief market rivals. He predicted Samsung, which has been losing market share, “will be in a very dangerous situation in China” if it doesn’t change its business model. Meanwhile, he sought to differentiate Xiaomi from the company it is most often compared to, Apple.
“Apple has a very big loyal fans — I really like the device,” said Lin of the iPhone. But Xiaomi’s looks to reap its profits through services offered after the sale of its smartphones, whereas Apple claims its margin up front, through its devices.
Lin predicted that the first breakthrough Chinese product would reach America within three to five years. After prodding from an audience member to name the device, he waived Xiaomi’s latest big-screen smartphone, the Mi Note, in the air and proclaimed, “This one.”
Xiaomi, though, won’t be headed to the U.S. anytime soon; it lacks the call-center support infrastructure needed to assist customers who purchase its devices online