FINANCE: Wanda, Xiaomi Eye Financial Services
Bottom line: Xiaomi’s and Wanda’s moves into financial services look logical but a bit late, and could struggle to compete with earlier initiatives from the likes of Alibaba, Tencent and Baidu.
With just about all the major Internet players moving into financial services, it’s been somewhat surprising that smartphone sensation Xiaomi hasn’t joined the trend yet. The same can be said for Wanda Group, which is moving beyond its traditional strength in real estate with plans for a major e-commerce venture and plays in the entertainment space.
That looks set to change soon, however, with separate reports saying both Xiaomi and Wanda are planning moves into China’s financial sector that is being opened to private money after years of domination by big state-owned companies. Xiaomi’s move comes in an announcement from an obscure company called Hebang Corp (Shanghai: 603077), which says the pair are part of a group that plans to open a privately funded bank. Meantime, Wanda’s plan comes in a report citing company chief Wang Jianlin saying he is planning to make some major purchases in the financial services arena.
Both Xioami and Wanda are relative latecomers in this recent rush into financial services, as Beijing opens up the sector to private investment to make it more dynamic and globally competitive. E-commerce giant Alibaba (NYSE: BABA) has been leading the charge into the space, including its recent launch of MYbank, one of a handful of private banks under a pilot plan by Beijing. Internet rival Tencent (HKEx: 700) has also launched its own WeBank under the same pilot program.
Let’s begin with the Xiaomi plan, which is somewhat surprising as the news didn’t come from the talkative Xiaomi itself but rather from Hebang, one of its partners in the proposed bank. The new bank would have 4 or more partners and 3 billion yuan ($480 million) in registered capital, with Hebang holding a 20-25 percent stake, according to Hebang’s statement. (Chinese article)
Unusual Silence
Xiaomi was uncharacteristically mum about this particular plan, simply giving a “no comment” to a reporter who inquired about the announcement. But a report on the development notes that Xiaomi officially set up its own financial services unit in May, with an initial focus on investment products for individuals.
I’m not extremely surprised that Xiaomi is keeping a low profile in this particular announcement, as it has recently hit a rough patch due to technical problems and slowing sales for its core smartphone business. What’s more, this new move has all the markings of a “copycat”, since Xiaomi is hardly the first into this area. That’s the kind of label that Xiaomi has been trying to avoid, amid accusations that its products borrow heavily from other companies, including role model Apple (Nasdaq: AAPL).
Next there’s Wanda, which began as a real estate developer but has more recently extended into entertainment and is also eying Internet products and services. According to the latest reports, the company is planning to make at least 3 acquisitions in the financial services space, with an eye on companies engaged in traditional banking, securities and insurance. (English article)
The plan was discussed by Wanda founder Wang Jianlin in a post on the company’s website, and says Wanda also plans to set up a financial unit by the end of this year. The same document mentions 6 potential deals, half of them domestic and half overseas, but wasn’t more specific.
I personally have a lot of confidence in Wang, and applaud him on his latest efforts to broaden Wanda’s scope beyond its initial real estate focus. But we’ll have to see more details on his financial services plan before we can comment on its chances for success, or whether it could flop due to its late arrival and similarity to existing ventures from other companies.
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