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Citibank Final Paper

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November 3, 2007

Eleven years ago, Citibank began operations in the Asia Pacific market as a consumer bank. While we have positioned ourselves as a prestigious leader with good earnings, our challenge in this region is to expand our profit before taxes by an additional $30 million by 1990. Rana Talwar, head of Citibank's Asia Pacific Consumer Bank, believes credit cards could be the necessary vehicle to drive us towards that goal. Although several unanswered questions could impact the decision of going forth with Talwar's plan. Which of the eight eligible counties should we launch? How do we overcome internal anxiety towards credit cards in the Asia Pacific market? In terms of positioning, how should we market the credit card and how will that affect our existing leader status in the consumer business? How do we conquer the infrastructure related to the processing center needed to support credit cards? Ultimately, how are we going to achieve the 1990 $100 million target?

Asian governments have also imposed a number of strict regulations designed to limit the expansion of foreign banks. As a result, most of our competitors view the world as a segmented marketplace and have chosen not to pursue a global strategy for growth. We at Citibank have chosen to stick with our proven up-market branch banking strategy while continually being mindful of the opportunities a card product could offer. And, while we cannot rely only on breakthroughs in the regulatory environment to help us gain increased access to the local market, we are committed to offering the most innovative and high-quality products, services and technology in order to acquire and retain more customers.

Consumer Model and Expectations

In Australia, the ownership of a credit card is viewed as commonplace thus the prestige of carrying one no longer exists. Instead, the market has interest in all the different ways credit cards can extend banking services. Both MasterCard and Visa have already partnered with the major banks to offer several attractive features geared specifically towards the acquisition of new customers. Some of those features include cash withdrawals through ATMs, monthly bill pay linked to each customer's bank account, lost wallet protection and no annual fee which are highly desired by the Australian consumer.

Credit cards are a status symbol for the upper-middle class consumer in India. They enjoy the idea of not having to carry cash and prefer to pay balances off each month rather than utilizing revolving credit. Because 23% of the country's population live in rural areas (approximately 183 million people), few locations are equipped to handle credit card purchases. Charges are typically made for travel or entertainment where consumers desire credit cards with the most merchant acceptance, best bank/brand image, and the easiest application process.

The majority of the consumers in Indonesia do not meet the minimum qualifications for membership. As a result, wealthy domestic and Chinese businessmen serve as the target audience in this country. Like those in India, Indonesians feel that the ownership of a credit card elevates the holder to a higher social position. Although consumers think a credit card should have several necessary attributes like exceptional service, prestige, billing in local currency and additional membership incentives like prizes. Purchases are generally centered on travel, groceries and hospital expenses.

The Malaysian market offers two separate schools of thought with regards to credit card usage. Some hold cards in high regard while others have adopted a "you get what you pay" mentality. Revolving credit accounts for short term expenses and cards are mostly used by families and individuals for retail purchases. Modest corporate members also use the card for travel and entertainment purchases.

Credit card holders in the Philippines have been under local regulations on transactions, as a result consumers desire cards that can be widely accepted and used to pay for services on the spot. Interest rate, payment terms and credit limit are more important than the position of the issuing bank. Most purchases are for groceries, restaurants, clothing and gasoline.

In Singapore, credit card usage is common with members classifying them into three esteemed categories with each having wide acceptance. Members must be 21 years of age and earn at least $14,400 per year. Purchases would vary between high and low value goods like clothing, appliances, electronics, restaurants, entertainment and travel.

Prior to 1989, Taiwanese government regulations stunted the growth of the credit card industry by limiting the number of credit cards and imposing other restrictions. These regulations have kept many credit card companies out of Taiwan forcing consumers to go to neighboring Hong Kong. Since the majority of transactions take place at department stores, supermarkets, nightclubs, restaurants and travel, the Taiwanese consumers are divided into two distinct categories: the high-status upper-class and the lower-class.

Market Size and Trends

With more than 16 million in population and roughly 85% of its people living in urban areas, Australia is one of the most stable countries in the Asia Pacific. In fact, its highly industrialized society resembles that of nations to the west. Nearly two-thirds of the market carries at least two credit cards and most transactions are used for travel, entertainment or shopping. In comparison to Hong Kong, Australia's penetration rate is nearly double and its consumers carry credit cards as an alternative to cash.

The Hong Kong consumer is no stranger to the credit card and, therefore, presents very little economic risk because of its growth and rapid industrialization. By the late 1980s, nearly 35% of household with more than $12,500 in income were credit card consumers. Of its 5.6 million people, roughly 90% of the population live in the urban cites and are very knowledgeable and sophisticated about credit card usage. Purchases include everything from the occasional trip to the grocery store to business travel and family trips.

India is undoubtedly one of the largest populated countries in the Asia Pacific. Its 797 million people have an average per capita income of only $297, yet the income bracket of $2,000 to $6,000 maintains the largest population of credit card holders (approximately 70%). Since the 1980s, its economic development has stemmed from service sectors such as the textile, produce and pharmaceutical industries. Market research now indicates a great market for potential growth and



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