Mi Credit and Samsung Finance: It Fits If It Profits?

  • Mi has started connecting loan vendors and consumers for personal finances ranging between Rs 1,000 to Rs one Lakh
  • Samsung had recently announced the launch of Samsung finance+ in India
  • Financial institutions usually levy file charges while disbursing loan amounts
  • The number of consumers availing EMI services on ACE products is on a sharp rise

Whether it is tying up with content streaming apps like Netflix or Amazon Prime, or launching online wallets, consumer electronics organisations have started going beyond the usual hardware and software verticals. Xiaomi launching Mi credit service and Samsung launching finance services, are the most recent examples.

“Brands understand that staying at the top now requires to go beyond the conventional methods of doing business. Be it a brand from China, India, Japan or Korea, consumers now prefer ones that value their experience. This battle of value-added services is going to get stiffer in the future. Moreover, we might see more brands following Xiaomi and Samsung suite in 2020,”stated Himanshu Jain, senior analyst, International Data Corporation (IDC), India.

It fits if it profits

The number of consumers taking small sized loans in order to own a consumer electronics that they cannot pay upfront for, is on the rise. During the last round of Diwali sales, one of India’s major e-commerce players had shared that the number of consumers opting for EMI options while buying consumer electronics, was 50 per cent of total consumers that bought consumer electronics.

“Budgets did not get in the way of shopping as number of customers shopping using EMIs were 1.5X of Great Indian Festival 2018. New-to-credit customers shopping during Great Indian Festival grew 2x over the event last year. Three out of four customers that availed financing options came from Tier II and III cities. One out two customers who used financing were availing it for the first time,” had read Amazon India’s official statement right after Diwali.

Moreover, almost every major consumer electronics retail shop in the offline channel, now has professionals sitting from different finance firms to enable easy buying for consumers. It is also worth mentioning here that value added services like finance and EMI on credit cards is also leading to an increase in the average ticket sizes.

An offline retailer that we spoke to recently, said, “Finance options like Bajaj help us pitch bigger products to consumers. Consumers looking for smaller TVs agree to invest in bigger TVs as they are given the facility to pay the difference in EMIs. Sometimes, there are questions about file charges, but in the end everyone benefits.”

“50 to 60 per cent of our consumers now buy bigger smartphones and smart TVs because of easy finance schemes and credit cards,” added the retailer located in Gurugram, Delhi NCR, India.

More consumers, more services, more ways of making money

It is a known fact that a lot of these finance firms levy file charges for disbursing loans. These are usually charged as a percentage of the loan amount, and in some cases are fixed as well. However, in both cases, these are paid by the consumer.

“Xiaomi said that it has already disbursed about Rs 28 crore (280 million) in the pilot phase of launch of Mi credit. Taking average loan size as Rs 50,000 and average processing or file fee as Rs 600, the total amounts figures up to something that a new brand does business for a complete year,” noted Faisal Kawoosa, founder and lead analyst, Techarc.

“It is yet to be made sure whether Xiaomi’s finance partners are giving a share of this processing fee to Mi or not,”he added.

In fact, going by the calculations, Rs 28 crore loans in ticket size of Rs 40,000 each translate to 7000 loan files. If even Rs 600 was charged as the file fee on every loan, the amount totals to Rs 42 lakh. Please remember that this was just the pilot phase that Xiaomi ran!

Making products roll via finance

While Amazon’s 50 per cent consumers opted for EMI option gives some clarification to rising scene of getting smartphones and expensive consumer electronics financed, the situation in the offline channel seems to be quite similar. As mentioned earlier, it is now easy to find finance professionals sitting inside almost every big consumer electronics showroom now.

“The financing facility gives brands an opportunity to sell high-value products. Xiaomi, which was earlier known as a player in the affordable smartphones segment recently announced the arrival of its first offering in the premium smartphone segment. Now consumers who are loyal to Xiaomi might take these financing options to upgrade to bigger Xiaomi phones,” noted Himanshu Jain.

“Additionally, Xiaomi has forayed into many more consumer electronics verticals. If you look at its portfolio now, it even has smart 4K TVs in above Rs 45,000 bracket. This is where consumers may find using Mi Credit services helpful. Consider you are at a store buying a Xiaomi TV and you get the loan approval in under five minutes time,” added Himanshu.

Launch, re-launch and the difference

The fact worth mentioning here revolves around Xiaomi launching similar services last year and then stopping them for a while. However, this year the brand has launched almost similar services but in collaboration with many more. Few of the names include Aditya Birla Finance Limited, Money View, Early Salary, Credit Vidya and Zest Money.

Similarly, Samsung had also introduced finance services earlier this year. The company has informed that these finance services were aimed towards helping consumers get their favourite Samsung smartphone financed at over 5,000 stores in 30 cities located across the country.

The difference between the two – while loans sourced from Mi Credit can be used to do anything, Samsung Finance+ is only allowing EMI facilities on Samsung smartphones!

Author – Mukul Yudhveer Singh.
An avid reader, Mukul finds peace in books and technology. He’s as passionate about writing as he is about cricket and Playstation. If not writing or reading, you will most likely find him drawing tattoo designs or analyzing political campaigns.