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 Oceans Eleven
Hong Kong (1902)
Taiwan (1964)
Australia (1965)
The Philippines (1902)
Guam (1969)
Singapore (1902)

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

Overview:
Citibanks Mission Statement
Citibanks 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
1986: Begins a
period of growth
in Thailand and
the Philippines
1982: Acquired
Diners Club in
Thailand
1978: Citibanks
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:
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
Citibanks stated positioning however pricing it too
high might mean low customer acceptance

Citibanks 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 80s
Malaysia: large successful business population
Singapore: one of the worlds 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 Diners 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 Diners Club worldwide respected
reputation
Citibanks 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
Citibanks credit cards as symbols of
status
Citibanks 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 conveniences 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 Citibanks 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
# 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?