credit card asia pacific

8/10/2019 credit card asia pacific

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Citibank: Launching the

Credit Card in Asia PacificErica Baumann

Paul Davis

Nathan HahnRebecca LeedsLauren Lettieri


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Overview:

Geography of Asia Pacific

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


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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)


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Overview:Citibanks Mission Statement

Citibanks mission in the Asia Pacific

region was to be the most profitable

provider of a wide array of financialservices to an increasingly affluent andmiddle-income market, and to reach

the rapidly growing middle-incomehouseholds in this region.


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Overview:Citibank in Asia Pacific

1978-1989

1986: Begins aperiod 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


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Overview:

Keys Questions in Asia Pacific

Should Citibank launch a credit card in

the Asia Pacific region, and in whichcountries?

How should the particular cardlaunches be tailored to each specificcountry?


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Business Problems Citibank wondered whether they could adopt a

mass-market positioning to acquire enough creditcard customers and still maintain its up-marketpositioning with the current upscale branch banking

customers

Pricing the card too low would conflict withCitibanks stated positioning however pricing it too

high might mean low customer acceptance

Citibanks management were concerned thatconsumers attitudes and credit card usage patterns

differed by country


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SWOT Analysis:Strengths

Undisputed leader of the marketplace

Australia: customers see the credit card as an importantshopping tool

Hong Kong: people are used to credit cards- relativelyaffluent population

India: strong economic development in late 80s

Malaysia: large successful business population

Singapore: one of the worlds largest center oftraditional trade and services

Thailand: rapidly growing nation (foreign investment)


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SWOT Analysis:Weaknesses

India: consumers do not like to use revolving credit

Indonesia: relatively poor country with small upper class;

not many qualified for membershipAustralia/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 coupledwith stringent local restrictions


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SWOT Analysis:Opportunities

Australia: credit card in conjunction with their bankingservices

Hong Kong: want to target customers outside branchbusiness

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 andsee credit card as convenient

Taiwan: most wealthy and best educated country in region

Thailand: strong economy = consumer spending


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SWOT Analysis:Threats

Australia: AMEX and Diners Club seen as symbol ofstatus

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

Singapore: high-tech mecca has attracted manymultinational corporations

Taiwan: restrictive laws prohibited thus industry is inearly stages

Taiwan: AMEX and Diners Club worldwide respectedreputation

Citibanks undifferentiated view of one marketplace


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Most Likely Case Scenario

Citibank will enter the market

''Sometimes, when an economy is under the

most stress, you get presented with the biggestopportunities,'' says Citigroup Vice-ChairmanWilliam R. Rhodes

Cross selling products

Market will accept new credit cardpenetration (except for few countries)

Targeting growing upper class market


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Australia: More services will be offered tomaximize financial management

Hong Kong: Reach customers outsidebusiness segment by cross selling

India: Increase merchant acceptance

Indonesia: Incentives and higher creditlimits opportunities

Malaysia: Build up credit for future uses


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The Philippines: Market program gearedtowards 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


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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 consistentmultinational strategy

Rejection due to national pride and culture(Taiwan)

Saturated markets not accepting of another creditcard (Singapore)


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Best Case Scenario

Citibank adjusts strategy for specific countriesneeds (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


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Strategy: Market Entry

Greenfield Market Development

Direct marketing program

Direct mail

Take-ones

Direct sales force

Bind-ins


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Strategy: Pricing

Low joining fee to induce morecustomers

Higher annual fee to provide a steadyrecurring revenue

Premium pricing for the Citigold card

to attract affluent cardholders


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Strategy: Options

$USD as standard currency for allcards

Regional Card Center Lower costs because of economies of

scale

Capability to do quick work productlaunches in Asia Pacific


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Strategy: Business

SegmentsNon-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


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Strategy: Core Products

Citi-One

Mortgage Power

Auto loans

Ready Credit

Citigold

CitiPhone

ATMs


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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 upscalecustomers targeted individually

Create status for credit card


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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 usagesshopping travel

Recommendations:

Two card approach


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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 conduciveto credit card usage

Recommendations: To risky to enter the market


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Population Breakdown by

Income: Asia PacificCountries 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


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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$


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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


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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$


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ANY QUESTIONS?

credit card asia pacific

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