Citibank: Launching the Credit Card

in Asia Pacific (A)

Case Study, BEP 430 Marketing

20030059 Dong-ock Kim1, 20030071 Min-geuk Kim2, 20040054 Keehyung Kim3,

20040535 Yohan Jo4, 20076006 Huang Qiuling5, 20076035 Dorjsuren Bayarmaa6

Marketing Team A1 2 3 4 5 6

erst_licht99@hotmail.com1, kmg0702@hanmail.net2, keehyoung@gmail.com3,

zukjimote@gmail.com4, sharlin_huangqiuling@hotmail.com5, gordok_88@yahoo.com6

Professor: Wonjoon Kim

Date submitted: May 18, 2007

TO: Rana Talwar, head of Citibank’s Asia Pacific Consumer Bank, Citibank
FROM: Dong-ock Kim, Min-geuk Kim, Keehyung Kim, Yohan Jo, Huang Qiuling,
Dorjsuren Bayarmaa
RE: Citibank: Launching the Credit Card in Asia Pacific (A)
DATE: May 18, 2007

As you know, rapid growth of Asia-Pacific economy was incredible in several

years. It could be a good chance for Citibank’s growth, so Citibank has started to

branch banking business since 1978. Actually, performance of Asia-Pacific branches is

not bad. In 1988, Citibank earned $69.7 million, but Citibank does not satisfy with its

performance. Citibank’s goal is $100 million until 1990. For this goal, Citibank

launched the most innovative service such as telephone banking service. And now,

Citibank is planning to launch a new product credit card.

Acquiring card customers means that Citibank has more opportunities to cross-

sell product line: Auto Loans, Ready Credit, Deposits, and Mortgage Power, Citibank’s

core products. But many of Citibank headquarters have doubts about the success of

credit card service in Asia-Pacific. Because there are many regulations that prevent

foreign companies with entering credit card service, and the market is undeveloped

yet. In addition, there are most people with little credit experience. However, through

our research, we are sure that Citibank’s credit card can succeed if they have good

strategies like ours.

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 We focus on the possibility of some countries that might be success. Based on this, we

are going to recommend some countries good for launching credit card service.

Segmentation

There are many countries in Asia Pacific region. Different people are living in

different countries, and each country has their own market characteristics compared

with other countries. Some countries have strict regulation of government; some

countries are still poor countries; some countries are similar with the western countries.

Therefore, some of them are desirable to start card service but others are not. They are

large enough and different each other. And then, we can assume some countries as a

segment.

Analyze each country (Targeting)

In the case of Australia, people want convenient services. And, Citibank has

some unique services that can make their customers manage their finance more

comfortable like telephone banking. It means that Citibank’s card service has

competitive power. Furthermore, average customers’ bank balance of Australian people

is $24,000 which is larger than $10,000. Therefore, a high deposit requirement to use

the services is not a big problem.

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 In the case of Malaysia, Malaysia regulates that only customers whose income

is more than $9,000 can have credit cards. People whose annual income is from $6,000

to $12,500 are 20% of the total population. We guess half of them earn $9,000 ~

$12,500 per year. Hence, 25% of Malaysian people have above $12,500 as an income.

Although competitors such as American Express exist already, Malaysian people have

open mind to credit cards. Furthermore, American Express, the top company which

serves the credit card, has only 15% of market share. Therefore, Citibank is enough

possible to get customers in Malaysia. In addition, the latest Malaysian growth rate is

8% higher than the average value of latest 5 years'. It means that Malaysia has a

wonderful future for the credit card service.

In the case of Thailand, we find out that 20% of Thai whose income is over

$6,000 earn over $23,200 a year. (Expected revenue is $686,977,500) The proportion is

higher than other countries. (Except Indonesia[43%] and Singapore[25%]) And the

proportion of owing cards of that group is just 12.5% of overall population. (India[10%]

and Malaysia[10%] are countries that have lower proportion than Thailand) Also the

literacy rate of Thailand is low 89%. (Australia[99%] and Taiwan[90%] have higher

rate) It means that Citibank can use the bind-ins that have lowest customer acquisition

cost. (Bind-ins[$56.25 per customer], Take-ones[$62.5] and Direct-mail[$112.5]) These

results show that Thailand is a good market for Citibank.

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Recommendation (Positioning)

There are 4 countries have high possibility to launch credit card service amon

g the 9 countries, which are Australia, Hong Kong, Malaysia, and Thailand. Each

country has different position, regulation and using of credit card, so it needs different

recommendation for each country.

In the case of Australia, the card market is already saturated. Naturally, if

Citibank starts Greenfield market development, there will be very intensive competition.

Therefore, acquiring other card service bank will be better. Furthermore, Australian

people have negative attitudes toward joining and annual membership fee. Therefore,

lower joining and annual fee than AMEX and Diners Club will be needed.

In the case of Hong Kong, there already have Citibank’s Classic and Gold

Visas that hold an 8.7% share of the credit card market, but it shows very small amount

of 462,840 customers from total customer 5,320,000. Credit Card customers use their

cards for a variety occasions from daily trips to the grocery store to business travel to

family vacations, so Citibank needs to concern more about these kinds of service’s cards.

Half of the population use telephone, so telephone banking service can be successful in

Hong Kong. Moreover, Citibank need to choose Greenfield market development,

because if Citibank enter the market by acquiring an already existing card portfolio, the

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bank could consider leveraging off an already developed operations infrastructure and

trained human resources in the acquired company to consolidate the market share.

In the case of Malaysia, most people live in rural areas and the most important

reasons for owning credit cards are convenience and extra credit (Exhibit 10). Because

there is 60% of the population living in rural areas, so Citibank needs to operate 3

branches and many ATMs continuously. Consumers usually use their credit card for

personal and family retail purchases, and with small group of corporate customers who

used the cards for business travel and entertainment. Therefore, the service needs to

focus on family and traveler mainly. In addition, advertising should be focused only in

rural areas. By competing with American Express, providing high limit for using card

is important.

In the case of Thailand, Citibank need to be concentrated on the structure of

Thailand industry. Most profit of Thailand comes from tourists, and Thai’s savings are

relatively and absolutely low. It might be a problem to launch credit card service. I think

that Citibank should focus on foreigners (tourists) and high-income customers (over

$23,000). In addition, US dollar should be the standard currency for these credit cards.

If they spend over a basis, for example $10,000 a year by using this card, Citibank can

provide them more convenient services like low loan interest rate and so forth. Moreove

r, it would be better to move their branches to somewhere near the international airport.

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Exhibit 1 SWOT analysis for Citibank

Favorable Unfavorable
Internal Strength Weakness

- Citibank pioneered telephone - Citibank imposed relatively high

banking in much of Asia, and it is deposit requirements of its
an attractive service for checking/saving customers.
customers.

- Citibank provides customers

some services that none of its
competitors could reproduce.

External Opportunities Threats

- The growth rate in Asia-pacific - Economics in Asia-pacific countries

countries is increasing higher and are not as developed as United States
higher recently. and Europe.

- There are very large population - Government’s regulations of some

potential customers in some countries make barriers for Citibank.
countries.
Appendix 1 PEST analysis for Citibank

Political
Some countries regulate using credit card.
Some countries have risk of political corruption.

Economical
Some countries are so poor that card is not profitable at all.
There are competitors that started card service faster than City bank

Social/Cultural
In some countries, card is used commonly but in some other countries, card is only for
high status people.
Each country has different standards for choosing credit cards.

Technological
Citibank has quite high technology that can make customers more comfortable.
Appendix 2 Analysis non-targeted countries

In the case of Philippines, this is not the time to launch credit card service. Because of
unstable political situation, they did not achieve high growth rate. In 1988, they got
6.8% growth rate. Therefore, Citibank need to watch the situation of Philippines.

In the case of Taiwan, it is not appropriate to launch credit card service. Even though
Taiwan government removed some regulation for credit card, there are still powerful
regulations. Taiwan people have to obtain the card in Hong Kong, and Citibank should
obtain authority from NCCC. Furthermore, Taiwan is cash-oriented country, so they
would not use card very often.

In the case of Singapore, it is not good for launching credit card. Their political and
economical situations are quite good. However, there are already many competitors like
AMEX, Hong Kong bank, many local banks, and etc. Furthermore, the card market of
Singapore is already saturated. Although Singaporean people earn much money and
regulation is not very high, it is too late to enter the market.

In the case of Hong Kong, the competitors of Citibank’s credit card are American
Express, Visas and MasterCards by local Hong Kong Bank and Standard Chartered
Bank. The population is 5.6 million and the average annual income is $8,158. Thus,
many people are qualified. In addition, Citibank's Classic and Gold Visas' had 140,000
users and held an 8.7% share of the credit card market and they remain many possible
customers for Citibank. The condition of Hong Kong is good for Citibank.

In the case of India, 80% of the Indians live in rural areas and the majority of the
country's wealth is concentrated among a small group of urban households. Credit cards
served as status symbols for Indian upper-middle-class consumers and consumers prefer
to pay on time and not use the card. Hence, credit card service is not attractive to Indian
people. Credit cards issued in India can be used only for local transactions in local
currency and not for foreign-exchange transactions. Merchant acceptance is generally
not as high in India as in other Asian countries. 70% of distributed cards were used by
lower-middle-class consumers whose annual income was from $2,000 to $6,000 and
that amount of people almost uses bank cards. Therefore, it makes harder for Citibank
to launch the credit card in India.
 In the case of Indonesia, 90% of people earn less than $2,000 annually, but 80% of
Indonesian live in rural areas. Because of low income levels, many people are not
qualified for membership, and it limits the size of the customer severely. Thus,
Indonesians perceive card ownership as a measure of high social standing. These all
make hard for Citibank to launch the credit card in Indonesia.