Why Xiaomi left India’s Fintech market – The Diplomat
In October 2022, Xiaomi, the Chinese designer and manufacturer of many consumer electronic devices, solidified its status as the world’s third largest smartphone vendor behind leaders Apple and Samsung. Xiaomi’s reputation as an affordable smartphone provider, combined with its entire ecosystem of products, services and software, has helped fill a relatively large gap in providing affordable access to digital services in many developing countries, including India.
Despite this success, in late October 2022, Xiaomi pulled the MiPay and MiCredit apps from the Indian market. This move is particularly curious given Xiaomi’s status as India’s top smartphone vendor, despite the sector’s decline at the end of 2022. The removal of these additional business services backed by Xiaomi highlights the growing desire for governments like India to control data and information more effectively domestically, as opposed to relying on externally sourced technologies that are vulnerable to influence from state actors.
Xiaomi publicly stated in January 2021 that its products are not “owned, controlled or affiliated with the Chinese military”, in response to being designated as a “communist Chinese military company” by the United States at the time. Although this designation was revoked a few months later in May 2021, there is no doubt that Xiaomi’s independent status can be coordinated by the Chinese government at any time. This is primarily due to legal mechanisms that can be used to force cooperation with Chinese authorities, such as China’s National Intelligence Law and National Security Law.
Xiaomi’s recent reduction of services in India demonstrates growing awareness of the potential of these mechanisms to enable the Chinese government’s access to sovereign individual and national data. India’s actions highlight a reduction in the tolerance that was typically given to companies because of the improvements that Chinese technological infrastructure can bring to citizens at low cost.
Xiaomi’s presence in India had previously encompassed most of its product offerings, with MiPay and MiCredit helping to expand the Xiaomi footprint in India. MiPay allowed users to transact on India’s Unified Payments Interface (UPI) payment network, while MiCredit served as a platform for personal loans at low interest rates.
MiPay, which was previously listed as number 15 on UPI’s approved third-party applications page, leveraged its link to UPI to compete with apps such as India’s BharatPe and PayTM, as well as internationally developed systems such as Google Pay. While BharatPe, PayTM and Google Pay dominate India’s UPI payments ecosystem, MiPay, whose 2019 debut marked Xiaomi’s first international release of a financial service, appeared to be positioned to gain significant market share. A January 2021 ruling limited the market share of each app to 30 percent of the total market; MiPay’s seamless integration via Xiaomi phones was expected to help it gain users in light of the upcoming enforcement of this ruling in January 2023.
MiCredit determined the creditworthiness of users using phone activity data, and scanned those records for transaction information and other details. This information will then be passed on to local partners such as start-up KreditBee to provide loans quickly to users.
India’s focus on protecting its consumers has affected Chinese companies such as Xiaomi in the past, leaving questions about the growth potential of international companies in India in the future. This is of particular concern to many users given Xiaomi’s affordable prices and large ecosystem.
In early October 2022, India’s federal agency for combating economic crimes, the Enforcement Directorate, seized funds from Xiaomi India due to “illegal remittances” to foreign entities. This followed an announcement a year before, in October 2021, in which the Indian government sent notices to Chinese-based smartphone manufacturers such as Xiaomi, Oppo and Vivo demanding information about data and components used in their respective smartphones. Additionally, in June 2020, India banned 59 Chinese apps, including Xiaomi’s MiCommunity and MiBrowser app, a social forum and browser developed by Xiaomi.
India’s tough regulatory crackdown on Chinese firms, to include Xiaomi, highlights the lengths India will go to ensure stronger domestic digital infrastructure protections for its population. The crackdown on Xiaomi-specific applications raises further questions about the potential reach of Chinese government-state actors in the digital domain.
India’s actions seem specifically intended to protect its population’s data from foreign access and influence. The removal of apps like MiPay and MiCredit, which provide unparalleled access and placement in critical data networks like UPI and into users’ individual devices, supports this idea of securing digital infrastructure sovereignty. While Xiaomi is currently perceived to have relatively few ties to the Chinese government compared to other companies such as Huawei and ZTE, India’s move to restrict access to critical data networks such as UPI and consumers’ mobile-specific data through MiPay and MiCredit shows the evolving need for countries to understand the importance of technology infrastructure sovereignty, especially in this era of strategic competition.
