Xiaomi's entry into Internet finance came after it lost the crown as China's top smartphone vendor to Apple in the first quarter of 2015.

"Huoqi Bao is just the beginning. We will roll out more Internet finance services," said Hong, without elaborating.

Last Friday, classified advertising site 58.com unveiled a similar service "58 Qiangui" (58 Till), promising yield rate of up to nine percent. Loan services are also being tested.

58.com went public on the New York Stock Exchange in 2013 and ample capital inflow enabled it to acquire 14 companies since then.

"Financial services will be one of our priorities," said CEO Yao Jinbo.

Many big names in the IT sector, including Baidu, Alibaba and Tencent, are already operating Internet finance services, drawing money away from banks with higher yield rates. But in the last several months, the hot stock market prompted many investors to withdraw their money from these services and bet on equities.

Combined assets of MMFs dipped 9.8 percent in the first quarter to 1.36 trillion yuan ($222 billion) at the end of March.

However, many stock holders are seeking safer investment over concerns of rising market volatility. The benchmark Shanghai Composite Index plunged over eight percent last week and caused many people great losses.

"I think it will be a trend for Internet-related companies to engage in financial services in the future as they have much more user information than traditional institutions," Zhang Qiang, a Shanghai-based industry observer, said.

Chen Jinqiao, a senior engineer with the Chinese Ministry of Industry and Information Technology, said companies should make fully use of the rapidly developing mobile Internet and advance in Internet finance.