Citibank: Launching the Citibank: Launching the Credit Card in Asia Credit Card in Asia

PacificPacific

Erica Baumann Erica Baumann Paul Davis Paul Davis

Nathan HahnNathan Hahn Rebecca LeedsRebecca Leeds Lauren LettieriLauren Lettieri

Overview:Overview:Geography of Asia PacificGeography of Asia Pacific

The Nature Conservancy: http://nature.org/wherewework/asiapacific/

Overview:Overview:The Pacific Ocean’s ElevenThe Pacific Ocean’s Eleven

Hong Kong (1902)Hong Kong (1902) Taiwan (1964)Taiwan (1964) Australia (1965)Australia (1965) The Philippines The Philippines

(1902)(1902) Guam (1969)Guam (1969) Singapore (1902)Singapore (1902)

India (1902)India (1902) Malaysia (1904)Malaysia (1904) Indonesia (1918)Indonesia (1918) Thailand (1967)Thailand (1967) Korea (1967)Korea (1967)

Overview:Overview:Citibank’s Mission Citibank’s Mission

StatementStatement Citibank’s mission in the Asia Citibank’s mission in the Asia

Pacific region was to be the most Pacific region was to be the most profitable provider of a wide array profitable provider of a wide array of financial services to an of financial services to an increasingly affluent and middle-increasingly affluent and middle-income market, and to reach the income market, and to reach the rapidly growing middle-income rapidly growing middle-income households in this region.households in this region.

Overview:Overview:Citibank in Asia PacificCitibank in Asia Pacific

1978-19891978-1989

1986: Begins a period of growth in Thailand and the Philippines

1982: Acquired Diners Club in

Thailand

1978: Citibank’s Asia Pacific

Consumer Bank had established

its consumer business in Asia

1981: First foreign bank to enter the local trade finance

market in Taiwan

1983: Citibank enters the credit card market

in Hong Kong

1989: Malaysia and Australia

have saturated credit card market

1989: Talwar reintroduces the idea of a credit card launch in

Asia-Pacific

Overview:Overview:Keys Questions in Asia Keys Questions in Asia

PacificPacific

Should Citibank launch a credit Should Citibank launch a credit card in the Asia Pacific region, card in the Asia Pacific region, and in which countries?and in which countries?

How should the particular card How should the particular card launches be tailored to each launches be tailored to each specific country?specific country?

Business ProblemsBusiness Problems Citibank wondered whether they could adopt Citibank wondered whether they could adopt

a mass-market positioning to acquire enough a mass-market positioning to acquire enough credit card customers and still maintain its credit card customers and still maintain its up-market positioning with the current up-market positioning with the current upscale branch banking customersupscale branch banking customers

Pricing the card too low would conflict with Pricing the card too low would conflict with Citibank’s stated positioning however pricing Citibank’s stated positioning however pricing it too high might mean low customer it too high might mean low customer acceptanceacceptance

Citibank’s management were concerned that Citibank’s management were concerned that consumers’ attitudes and credit card usage consumers’ attitudes and credit card usage patterns differed by countrypatterns differed by country

SWOT Analysis: SWOT Analysis: StrengthsStrengths

Undisputed leader of the marketplaceUndisputed leader of the marketplace Australia: customers see the credit card as an Australia: customers see the credit card as an

“important shopping tool”“important shopping tool” Hong Kong: people are used to credit cards- Hong Kong: people are used to credit cards-

relatively affluent populationrelatively affluent population India: strong economic development in late 80’sIndia: strong economic development in late 80’s Malaysia: large successful business populationMalaysia: large successful business population Singapore: “one of the world’s largest center of Singapore: “one of the world’s largest center of

traditional trade and services”traditional trade and services” Thailand: rapidly growing nation (foreign Thailand: rapidly growing nation (foreign

investment)investment)

SWOT Analysis: SWOT Analysis: WeaknessesWeaknesses

India: consumers do not like to use revolving India: consumers do not like to use revolving creditcredit

Indonesia: relatively poor country with small Indonesia: relatively poor country with small upper class; not many qualified for membershipupper class; not many qualified for membership

Australia/Singapore: saturated marketAustralia/Singapore: saturated market Taiwan: before 1989, laws restricted credit card Taiwan: before 1989, laws restricted credit card

businessbusiness Taiwan: culturally not acceptable to owe people Taiwan: culturally not acceptable to owe people

moneymoney Korea: financial problems in credit card business Korea: financial problems in credit card business

coupled with stringent local restrictionscoupled with stringent local restrictions

SWOT Analysis: SWOT Analysis: OpportunitiesOpportunities

Australia: credit card in conjunction with their banking Australia: credit card in conjunction with their banking servicesservices

Hong Kong: want to target customers outside branch Hong Kong: want to target customers outside branch businessbusiness

India: credit card penetration is lowIndia: credit card penetration is low Indonesia: upper class growing fastIndonesia: upper class growing fast Malaysia: culturally acceptable to revolve creditMalaysia: culturally acceptable to revolve credit Philippines: credit card penetration very lowPhilippines: credit card penetration very low Singapore: society prides on innovation and Singapore: society prides on innovation and

technology and see credit card as convenienttechnology and see credit card as convenient Taiwan: most wealthy and best educated country in Taiwan: most wealthy and best educated country in

regionregion Thailand: strong economy = consumer spendingThailand: strong economy = consumer spending

SWOT Analysis: SWOT Analysis: ThreatsThreats

Australia: AMEX and Diner’s Club seen as symbol of Australia: AMEX and Diner’s Club seen as symbol of statusstatus

Malaysia: many other options to choose from in Malaysia: many other options to choose from in 1989 (MasterCard and Visa)1989 (MasterCard and Visa)

Singapore: “high-tech mecca” has attracted many Singapore: “high-tech mecca” has attracted many multinational corporationsmultinational corporations

Taiwan: restrictive laws prohibited thus industry is Taiwan: restrictive laws prohibited thus industry is in early stagesin early stages

Taiwan: AMEX and Diner’s Club worldwide Taiwan: AMEX and Diner’s Club worldwide respected reputationrespected reputation

Citibank’s undifferentiated view of one marketplaceCitibank’s undifferentiated view of one marketplace

Most Likely Case Most Likely Case ScenarioScenario

Citibank will enter the marketCitibank will enter the market– ''Sometimes, when an economy is under

the most stress, you get presented with the biggest opportunities,'' says Citigroup Vice-Chairman William R. Rhodes

Cross selling productsCross selling products Market will accept new credit card Market will accept new credit card

penetration (except for few countries)penetration (except for few countries) Targeting growing upper class marketTargeting growing upper class market

Most Likely Case Most Likely Case ScenarioScenario

Citibank’s credit cards as symbols Citibank’s credit cards as symbols of statusof status

Citibank’s customer base in Asia Citibank’s customer base in Asia Pacific region will increase and Pacific region will increase and expandexpand

Customers will use their cards for Customers will use their cards for a wide variety of purchases a wide variety of purchases

Most Likely Case Most Likely Case ScenarioScenario

Australia: More services will be offered Australia: More services will be offered to maximize financial managementto maximize financial management

Hong Kong: Reach customers outside Hong Kong: Reach customers outside business segment by cross sellingbusiness segment by cross selling

India: Increase merchant acceptanceIndia: Increase merchant acceptance Indonesia: Incentives and higher credit Indonesia: Incentives and higher credit

limits opportunitieslimits opportunities Malaysia: Build up credit for future uses Malaysia: Build up credit for future uses

Most Likely Case Most Likely Case ScenarioScenario

The Philippines: Market program The Philippines: Market program geared towards gaining acceptancegeared towards gaining acceptance

Singapore: Highlight convenience’s of Singapore: Highlight convenience’s of CitibankCitibank

Taiwan: Promote awareness of the Taiwan: Promote awareness of the emerging credit card industryemerging credit card industry

Thailand: Two card approach to attract Thailand: Two card approach to attract all customer basesall customer bases

Korea: Will not enter due to Korea: Will not enter due to government regulationsgovernment regulations

Worst Case ScenarioWorst Case Scenario

Established competition beats CitibankEstablished competition beats Citibank Population too poor to qualify (Indonesia)Population too poor to qualify (Indonesia) Government regulation and culture limits Government regulation and culture limits

acceptanceacceptance Failure of customers to fulfill payments- large Failure of customers to fulfill payments- large

debtdebt Different countries not accepting of consistent Different countries not accepting of consistent

multinational strategymultinational strategy Rejection due to national pride and culture Rejection due to national pride and culture

(Taiwan)(Taiwan) Saturated markets not accepting of another Saturated markets not accepting of another

credit card (Singapore)credit card (Singapore)

Best Case ScenarioBest Case Scenario

Citibank adjusts strategy for specific countries’ Citibank adjusts strategy for specific countries’ needs (including options)needs (including options)

OR All countries accept Citibank’s multinational OR All countries accept Citibank’s multinational planplan

Become a penetration leader (Philippines)Become a penetration leader (Philippines) Utilize Singapore for latest technologyUtilize Singapore for latest technology Government law changes opens doors (Taiwan)Government law changes opens doors (Taiwan) Take advantage of some countries’ growing Take advantage of some countries’ growing

economy and affluenceeconomy and affluence Make money off of late payments and interestMake money off of late payments and interest

Strategy: Market EntryStrategy: Market Entry

Greenfield Market DevelopmentGreenfield Market Development Direct marketing programDirect marketing program

– Direct mailDirect mail– Take-onesTake-ones– Direct sales forceDirect sales force– Bind-insBind-ins

Strategy: PricingStrategy: Pricing

Low joining fee to induce more Low joining fee to induce more customerscustomers

Higher annual fee to provide a Higher annual fee to provide a steady recurring revenuesteady recurring revenue

Premium pricing for the Premium pricing for the Citigold Citigold card to attract affluent card to attract affluent cardholderscardholders

Strategy: Options Strategy: Options

$USD as standard currency for all $USD as standard currency for all cardscards

Regional Card CenterRegional Card Center– Lower costs because of economies Lower costs because of economies

of scaleof scale– Capability to do quick work product Capability to do quick work product

launches in Asia Pacificlaunches in Asia Pacific

Strategy: Business Strategy: Business SegmentsSegments

Non-Resident Indian Business (NRI)Non-Resident Indian Business (NRI)– Special offering for Indian customers Special offering for Indian customers

who did not reside in Indiawho did not reside in India International Personal Banking International Personal Banking

(IPB)(IPB)– To service the growing group of To service the growing group of

affluent Asian clients with global affluent Asian clients with global financial needs financial needs

Strategy: Core Strategy: Core ProductsProducts

Citi-One Citi-One Mortgage PowerMortgage Power Auto loans Auto loans Ready CreditReady Credit CitigoldCitigold CitiPhoneCitiPhone ATMsATMs

Go Decisions: Go Decisions: Taiwan, India, Indonesia, Malaysia, Taiwan, India, Indonesia, Malaysia,

the Philippines, Singapore and the Philippines, Singapore and ThailandThailand

ReasonsReasons– Countries growing along with Countries growing along with

infrastructureinfrastructure– Rapidly growing upper and middle classRapidly growing upper and middle class

Recommendations:Recommendations:– Two card approach- middle class and Two card approach- middle class and

upscale customers targeted individuallyupscale customers targeted individually– Create status for credit cardCreate status for credit card

Go Decisions: Go Decisions: Australia and Hong Australia and Hong

KongKong Reasons:Reasons:

– Most developed Westernized nationsMost developed Westernized nations– Strong credit card and financial Strong credit card and financial

infrastructure infrastructure – On average, 2 cards per person On average, 2 cards per person – Wide variety of usages – shopping Wide variety of usages – shopping travel travel

Recommendations:Recommendations:– Two card approach Two card approach

No Go Decision: KoreaNo Go Decision: Korea

Reasons:Reasons:– Regulations do not allow banks to issue Regulations do not allow banks to issue

cards with revolving credit cards with revolving credit – Only local currency credit cards allowedOnly local currency credit cards allowed– Poor diplomatic relationsPoor diplomatic relations– Infrastructure and legislation are not Infrastructure and legislation are not

conducive to credit card usageconducive to credit card usage

Recommendations:Recommendations:– To risky to enter the marketTo risky to enter the market

Population Breakdown Population Breakdown by Income: Asia Pacificby Income: Asia Pacific

Countries Above 25000 12500-25000 6000-12500 2000-6000 < 2000

% of Population 2% 4% 5% 8% 81%

% of Cards 27% 35% 31% 7% 0%

# of People 23,757,500 42,145,000 58,157,500 88,000,000 933,240,000

# of Cards 3,929,250 5,011,250 4,498,000 1,021,500 0

Cards Per Capita 0.165 0.119 0.077 0.012 0.000

Population 1,145,300,000# of Cards 14,460,000

Break Even: Asia Break Even: Asia PacificPacific

Advertising Budget 2,500,000.00$

Overhead 61,000,000.00$

Direct Costs 22,500,000.00$

TOTAL COSTS 86,000,000.00$

# of Cards 900,000

Average Annual Fee 56.13$

Average Joining Fee 39.75$

Revenue 86,292,000.00$

Population Breakdown Population Breakdown by Income: Malaysiaby Income: Malaysia

Malaysia Above 25000 12500-25000 6000-12500 2000-6000 < 2000

% of Population 5% 10% 20% 45% 20%

% of Cards 10% 45% 45% 0% 0%

# of People 850,000 1,700,000 3,400,000 7,650,000 3,400,000

# of Cards 38,000 171,000 171,000 0 0

Cards Per Capita 0.045 0.101 0.050 0.000 0.000

Population 17,000,000

# of Credit Cards 380,000

Break Even: MalaysiaBreak Even: Malaysia

# of Cards 900,000

Average Annual Fee 64.00$

Average Joining Fee 34.00$

Revenue 88,200,000.00$

Advertising Budget 2,500,000.00$

Overhead 61,000,000.00$

Direct Costs 22,500,000.00$

TOTAL 86,000,000.00$

ANY QUESTIONS?ANY QUESTIONS?