CITIBANK:Launching Credit

Card in Asia Pacific (A)

PRESENTED BY

ABHISHEK GUPTA (SMBA12040)

CHANDRA KISHORE BHARTI (SMBA12049)

MEGHNA GAHLOT (SMBA12058)

SHRADDHA KOTHARI (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

UAE

Bahrain

Oman

Malaysia

Indonesia

Thailand

Pakistan

Korea

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.

Cardholder

Credit Card

Issuer

Merchant BankMercha

nt

Interchange Network

Makes Purchase

Submits transaction

Reimburses with less merchant service charge

Submits transaction

($100)

($98.50)

($100)

($100)

($97)

Bills for total of transactions made in month

Makes full or partial payment

($98.50)

TRANSACTION CYCLE (FLOW CHART)

($100)

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

Strength Weakness Opportunity Threat

• Well established brand • Pioneered in

telephone banking in Asia

• Political Corruption• Consumer

attitudes and usage varies across countries

• Penetration in new markets• Mass market

positioning

• Fraud and defaults• Laws and

regulations• Competitors offer

discounts• Inadequate legal

infrastructure

SWOT analysis

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?

Thailand – Target Market is large Asia’s 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

  Thailand Malaysia

Population 55.0M 16.9M

Urban Population (%) 20% 38%

Urban Population 11.0M 6.4M

     

Target Population (%) 25% 35%

Target Population 13.8M 5.9M

     

Growth 10.8 % 8.1 %

Inflation 3.8 % 2.0 %Avg. Customer Bank Balance $5000 $23000Avg. Annual Customer Income $15000 $14000

     

Politics (Grades) B B

Competition Low Medium

WHICH COUNTRIES TO AVOID?

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

 Indonesi

a Singapore India

Population 167.7.0M 2.7M 797.0M

Urban Population (%) 25% 100% 23%

Urban Population 41.9M 2.7M 183.3M

       

Target Population (%) 7% 20% 5%

Target Population 11.7M 0.5M 39.9M

       

Growth 4.8 % 11.0 % 9.7 %

Inflation 8.0 % 1.5 % 9.8 %Avg. Customer Bank Balance $9000 $13000 $3500Avg. Annual Customer Income $24000 $20000 $10000

       

Politics (Grades) C B C

Competition Medium High Medium

FUTURE OPPORTUNITIES

Australia – Strong Financial &

Credit Card Infrastructure

Large Market Avg. customer bank

balance is greater than $10000

  Australia

Population 16.5M

Urban Population (%) 85%

Urban Population 14.0M

   

Target Population (%) 80%

Target Population 13.2M

   

Growth 4.0 %

Inflation 7.6 %Avg. Customer Bank Balance $24000Avg. Annual Customer Income $60000

   

Politics (Grades) A

Competition High

CREDIT CARD LAUNCH

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.

POSITIONING

ATTAINING $100 MILLION TARGET (Without Launching Credit Card)

$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