Citibank: Launching the

Credit Card in Asia Pacific

Erica Baumann
Paul Davis
Nathan Hahn
Rebecca Leeds
Lauren Lettieri
 Overview:
Geography of Asia Pacific

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

 Overview:
The Pacific Ocean’s Eleven

 Hong Kong (1902)  India (1902)

 Taiwan (1964)  Malaysia (1904)
 Australia (1965)  Indonesia (1918)
 The Philippines (1902)  Thailand (1967)
 Guam (1969)  Korea (1967)
 Singapore (1902)
 Overview:
Citibank’s Mission Statement
Citibank’s mission in the Asia Pacific
region was to be the most profitable
provider of a wide array of financial
services to an increasingly affluent and
middle-income market, and to reach
the rapidly growing middle-income
households in this region.
 Overview:
Citibank in Asia Pacific
1978-1989
1983: Citibank enters 1989: Talwar
1981: First foreign bank to the credit card market reintroduces the idea of
enter the local trade finance in Hong Kong a credit card launch in
market in Taiwan Asia-Pacific

1986: Begins a
1978: Citibank’s 1982: Acquired period of growth
Asia Pacific Diners Club in in Thailand and
Consumer Bank Thailand the Philippines
had established
its consumer 1989: Malaysia
business in Asia and Australia have
saturated credit
card market
 Overview:
Keys Questions in Asia Pacific

Should Citibank launch a credit card in

the Asia Pacific region, and in which
countries?

How should the particular card

launches be tailored to each specific
country?
 Business Problems
 Citibank wondered whether they could adopt a
mass-market positioning to acquire enough credit
card customers and still maintain its up-market
positioning with the current upscale branch banking
customers

 Pricing the card too low would conflict with

Citibank’s stated positioning however pricing it too
high might mean low customer acceptance

 Citibank’s management were concerned that

consumers’ attitudes and credit card usage patterns
differed by country
 SWOT Analysis:
Strengths
 Undisputed leader of the marketplace
 Australia: customers see the credit card as an “important
shopping tool”
 Hong Kong: people are used to credit cards- relatively
affluent population
 India: strong economic development in late 80’s
 Malaysia: large successful business population
 Singapore: “one of the world’s largest center of
traditional trade and services”
 Thailand: rapidly growing nation (foreign investment)
 SWOT Analysis:
Weaknesses

 India: consumers do not like to use revolving credit

 Indonesia: relatively poor country with small upper class;
not many qualified for membership
 Australia/Singapore: saturated market
 Taiwan: before 1989, laws restricted credit card business
 Taiwan: culturally not acceptable to owe people money
 Korea: financial problems in credit card business coupled
with stringent local restrictions
 SWOT Analysis:
Opportunities
 Australia: credit card in conjunction with their banking
services
 Hong Kong: want to target customers outside branch business
 India: credit card penetration is low
 Indonesia: upper class growing fast
 Malaysia: culturally acceptable to revolve credit
 Philippines: credit card penetration very low
 Singapore: society prides on innovation and technology and
see credit card as convenient
 Taiwan: most wealthy and best educated country in region
 Thailand: strong economy = consumer spending
 SWOT Analysis:
Threats
 Australia: AMEX and Diner’s Club seen as symbol of
status
 Malaysia: many other options to choose from in 1989
(MasterCard and Visa)
 Singapore: “high-tech mecca” has attracted many
multinational corporations
 Taiwan: restrictive laws prohibited thus industry is in
early stages
 Taiwan: AMEX and Diner’s Club worldwide respected
reputation
 Citibank’s undifferentiated view of one marketplace
Most Likely Case Scenario

 Citibank 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 products
 Market will accept new credit card
penetration (except for few countries)
 Targeting growing upper class market
Most Likely Case Scenario

Citibank’s credit cards as symbols of

status
Citibank’s customer base in Asia Pacific
region will increase and expand
Customers will use their cards for a
wide variety of purchases
Most Likely Case Scenario

 Australia: More services will be offered to

maximize financial management
 Hong Kong: Reach customers outside
business segment by cross selling
 India: Increase merchant acceptance
 Indonesia: Incentives and higher credit
limits opportunities
 Malaysia: Build up credit for future uses
Most Likely Case Scenario
 The Philippines: Market program geared
towards gaining acceptance
 Singapore: Highlight convenience’s of
Citibank
 Taiwan: Promote awareness of the emerging
credit card industry
 Thailand: Two card approach to attract all
customer bases
 Korea: Will not enter due to government
regulations
 Worst Case Scenario
 Established competition beats Citibank
 Population too poor to qualify (Indonesia)
 Government regulation and culture limits
acceptance
 Failure of customers to fulfill payments- large debt
 Different countries not accepting of consistent
multinational strategy
 Rejection due to national pride and culture (Taiwan)
 Saturated markets not accepting of another credit
card (Singapore)
 Best Case Scenario
 Citibank adjusts strategy for specific countries’
needs (including options)
 OR All countries accept Citibank’s multinational plan
 Become a penetration leader (Philippines)
 Utilize Singapore for latest technology
 Government law changes opens doors (Taiwan)
 Take advantage of some countries’ growing
economy and affluence
 Make money off of late payments and interest
 Strategy: Market Entry

Greenfield Market Development

Direct marketing program
– Direct mail
– Take-ones
– Direct sales force
– Bind-ins
 Strategy: Pricing

Low joining fee to induce more

customers
Higher annual fee to provide a steady
recurring revenue
Premium pricing for the Citigold card
to attract affluent cardholders
 Strategy: Options

$USD as standard currency for all

cards
Regional Card Center
– Lower costs because of economies of
scale
– Capability to do quick work product
launches in Asia Pacific
 Strategy: Business
Segments
 Non-Resident Indian Business (NRI)
– Special offering for Indian customers who
did not reside in India
 International Personal Banking (IPB)
– To service the growing group of affluent
Asian clients with global financial needs
 Strategy: Core Products

 Citi-One
 Mortgage Power
Auto loans
 Ready Credit
 Citigold
 CitiPhone
ATMs
 Go Decisions:
Taiwan, India, Indonesia, Malaysia, the
Philippines, Singapore and Thailand

 Reasons
– Countries growing along with infrastructure
– Rapidly growing upper and middle class

 Recommendations:
– Two card approach- middle class and upscale
customers targeted individually
– Create status for credit card
 Go Decisions:
Australia and Hong Kong
 Reasons:
– Most developed Westernized nations
– Strong credit card and financial infrastructure
– On average, 2 cards per person
– Wide variety of usages – shopping  travel

 Recommendations:
– Two card approach
 No Go Decision: Korea
 Reasons:
– Regulations do not allow banks to issue cards
with revolving credit
– Only local currency credit cards allowed
– Poor diplomatic relations
– Infrastructure and legislation are not conducive
to credit card usage

 Recommendations:
– To risky to enter the market
 Population Breakdown by
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 Pacific
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 by
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: Malaysia
Advertising Budget $ 2,500,000.00
Overhead $ 61,000,000.00
Direct Costs $ 22,500,000.00

TOTAL $ 86,000,000.00

# of Cards 900,000
Average Annual Fee $ 64.00
Average Joining Fee $ 34.00

Revenue $ 88,200,000.00
ANY QUESTIONS?