CITIBANK: Launching Credit Card in Asia Pacific (A)

PRESENTED BY ABHISHEK GUPTA CHANDRA KISHORE BHARTI MEGHNA GAHLOT SHRADDHA KOTHARI (SMBA12040) (SMBA12049) (SMBA12058) (SMBA12069)

INTRODUCTION
US based bank founded in 1812
Banking transactions, Insurance, Credit cards, investment products 89 countries overseas Premier to introduce

ATM Automatic Teller Machine, 1970 Credit Card The Everything card, 1960 Online transaction

ASIA PACIFIC & MIDDLE EAST (SEGMENTING)

Hong Kong
Taiwan Australia The Philippines Guam Singapore India

Malaysia
Indonesia Thailand Pakistan Korea

UAE
Bahrain Oman

CORE PRODUCTS

Citi-One Account:
Consolidated statement, Tele banking, Automatic checking overdraft facility, linked saving and checking accounts to earn interest, designated customer service officer

Mortgage power Auto loans

Ready Credit for mid level professional

Citigold for high net worth segment CitiPhone banking transactions via phone

ATM

ASIA PACIFIC BUSINESS SEGMENTS

Non-Resident Indian Business (NRI):

Relations with the Indian govt. helps the central bank to acquire foreign currencies Branches in major financial centre all over world

International Personal Banking (IPB):

Serve growing group of Asian offshore clients with global financial needs with product like International University Plan

ADVANTAGES OF CARD BUSINESS

Overcome distribution limitations by

Gaining card members Targeting customers outside its branch Cross-selling other self products.

Worldwide communication flow Credit card transaction Online transaction Faster Transaction

BASICS OF CARD BUSINESS

Banks issue Visa or Master Card which are the franchise

which decrease the transaction process.

Follow common set of practices across the globe; like

Gold cards to be in gold color, providing travel accident

insurance, 24-hour customer care for cardholders

Visa/MasterCard common standards for card-logo

design and operating rules.

Individual banks can decide: pricing, branding, positioning and customer acquisition tactics.

TRANSACTION CYCLE (FLOW CHART)

Makes Purchase
Submits transaction

($100) Merchant Merchant Bank

Cardholder
($100)

Bills for total of transactions made in month

Reimburses with less merchant service charge Makes full or partial payment

($97)

Submits transaction

($100)

($98.50)

($98.50) Credit Card Issuer ($100) Interchange Network

ABOUT THE CASE

This case is about Citibank launching credit cards and we will discuss the following

Whether to Launch the credit card or not? Segmentation, Targeting, Positioning If you chose not to introduce the card, what would you do to achieve the $100 million earnings target by 1990? What kind of branch banking products should the bank offer?

LAUNCH APPROACH
There are three options to enter the market:

Adapting existing card portfolio of other companies facilitates quick entry into the market, leveraging off an already developed infrastructure and human resources

Greenfield market development requires to invest in direct marketing, consists of direct mail, take-ones, direct sales force and bind-ins.

Combination of both

SWOT analysis
Strength

Weakness

Opportunity

Threat

Well established Political brand Corruption Pioneered in Consumer telephone banking attitudes and in Asia usage varies across countries

Penetration in new markets Mass market positioning

Fraud and defaults Laws and regulations Competitors offer discounts Inadequate legal infrastructure

LAUNCH OR NOT TO LAUNCH

CITIBANK SHOULD LAUNCH

High profits in long run
Still a lot of countries are developing Market potential is high Citibank can avoid regions where markets are saturated

CREDIT CARD LAUNCH TARGETING

WHICH COUNTRIES TO ENTER FIRST?

Population Urban Population (%) Urban Population Target Population (%) Target Population Growth Inflation Avg. Customer Bank Balance Avg. Annual Customer Income Politics (Grades) Competition Thailand 55.0M 20% 11.0M 25% 13.8M 10.8 % 3.8 % $5000 $15000 B Low Malaysia 16.9M 38% 6.4M 35% 5.9M 8.1 % 2.0 % $23000 $14000 B Medium

Thailand Target Market is large Asias most rapidly developing nation Low literacy rate. Citibank can use bind ins (Lowest Customer Acquisition cost) Less Risky Political status Less Competition Malaysia Growth Rate is comparatively high compared to inflation Stable Political Status

WHICH COUNTRIES TO AVOID?

Indonesia Singapore Population Urban Population (%) Urban Population Target Population (%) Target Population Growth Inflation Avg. Customer Bank Balance Avg. Annual Customer Income 167.7.0M 25% 41.9M 7% 11.7M 4.8 % 8.0 % $9000 $24000 2.7M 100% 2.7M 20% 0.5M 11.0 % 1.5 % $13000 $20000

India 797.0M 23% 183.3M 5% 39.9M 9.7 % 9.8 % $3500 $10000

Indonesia Poor customer payment on installment debt High level of fraud Legal Infrastructure inadequate Speculation on new political leadership Singapore Target Market is very less Already saturated card market India Very Large country Less Citibank Infrastructure Legal Infrastructure inadequate Political Corruption

Politics (Grades)
Competition

C
Medium

B
High

C
Medium

FUTURE OPPORTUNITIES
Australia Population Urban Population (%) Urban Population 16.5M 85% 14.0M

Australia
Strong Financial & Credit Card Infrastructure Large Market Avg. customer bank balance is greater than $10000

Target Population (%)

Target Population Growth Inflation Avg. Customer Bank Balance Avg. Annual Customer Income Politics (Grades) Competition

80%
13.2M 4.0 % 7.6 % $24000 $60000 A High

CREDIT CARD LAUNCH POSITIONING

POSITIONING

In Thailand;

As Thailand is a popular tourist destination, Citibank must focus on

Foreigners & High income group customers

US Dollar should be considered as a standard currency for these credit cards Increase customers by providing them more convenient services like low interest rate loans etc.

POSITIONING

In Malaysia;

People prefer credit card for their convenience and extra credit and around 62% people live in rural areas. So Citibank must focus on:

Services more inclined towards family and travelers

Advertisements must be emphasizing only on the rural areas

As compared to American Express, Citibank must provide higher credit cards limits and lower joining & annual fees Citibank can also provide an option of revolving credit.

(Without Launching Credit Card)

ATTAINING $100 MILLION TARGET

$100 MILLION TARGET

From Exhibit 1

Net Revenue from Fund (NRFF) = $209.0 Million Net EBT = $69.7 Million

We need to bring this EBT to $100 Million For This

Keeping all the expenses constant For $1Million EBT, we require NRFF = $2.99 Million Thus, for $100 Million EBT, we require NRFF = $299 Million

We have to earn $90 Million more NRFF in order to achieve $100 million EBT target

$100 MILLION TARGET

Market Development

Improve and target mass market for Citibank products

Market Penetration

Advertise more so as to enhance clienteles

Diversification & Product Development

Internet Banking Insurances

QUESTION & ANSWER

THANK YOU