Citibank’s Credit Card BusinessEssay Preview: Citibank’s Credit Card BusinessReport this essay[pic 1][pic 2][pic 3][pic 4]To: Harpeet GrewalFrom: Akshay MadhogariaRe: Citibank India CaseDate: 11/01/2015This purpose of this memo is to recommend a new strategy and a new market segment for Citibank’s credit card business.Citibank should start targeting a broader market segments in the major metropolitan cities, starting with the emerging affluent and then the mass market. Its current target market strategy aligns with its goal of profitability. However, if Citibank continues with the same strategy it will face the risk of being a small player in a rapidly growing market, potentially losing revenue. Citibank’s position in the super-affluent and affluent segment remains strong, but its decreasing market share combined with the growth of the emerging affluent and mass market suggests that Citi bank requires a change in its strategy.
Citibank is not alone in having to adjust their current approach. The top five Citi bank credit cards in use have seen declines in over half of their clients. Citibank has also taken a cautious approach. More than 20% of its existing customers are without a Citi account in the United States and, particularly, Canada. The lack of an account by now has meant that any savings that could justify a Citibank Citi card might not be enough to secure a Citi card. Moreover, Citi have failed to develop effective and attractive new cards and their customers see much less of the benefits because they are no longer the primary customer. With the new Citi plan that is being adopted in the United States, a majority of new customers will see little or no savings and this has made making a Citi card a major investment even more complicated and time consuming. To address this the bank is now trying to develop some new strategies, such as using a “citi-free” (a hybrid card that does not charge a fee) to attract new customers to the bank. Citi India, one of India’s leading credit card carriers with over 10,000 users, recently announced that it has been working with the Bank of India to create a new bank debit-free Citi Indian debit card. It looks like it will take some time for the Indian bank in touch with Citibank. Given the lack of clarity in the Indian banking system and lack of clarity at Citi India, many are considering Citibank as a potential replacement choice for non-citi cards that already offer significant discounts and which will serve as an added value solution for Citi customers. The following is a list of some of the best and most effective ways that Citibank can serve Citi more efficiently.
1. Call Customer Service 1. The next step can be to get the customer to call Citibank, for a special introductory price point, or to get the bank to provide a statement credit. Many customers are quite surprised that Citibank would just charge a fee when they have no current savings. If they get a card to pay for the new charge, they are also expected to be willing to provide their own statement of account, which Citibank will deliver to the same account. Citibank will then deliver the statement to the banker or bank. The statement will have an introductory price of 3,000 rupees or $12 for two days, at which point the bank will charge an introductory price of 1000 rupees or $6 (approximately $15 for two days), or in theory, an offer of $20 to get the card. Both ways of providing a statement will result in the customer not immediately being able to use the card, and the card being less valuable due to increased expense. 2. Call customer service is a relatively new and innovative sector in the credit card industry, yet the industry is largely dominated by big media companies such as Time Warner Cable and Time Warner Cable Express. With over three billion customer accounts in India and over 2 billion active account holders in Canada, it is obvious that they are underutilized in the banking industry. One of the most notable examples of these are Citibank’s Citibank Express, which now charges 100%, if you remember, 100% interest on Citi Express. The company may also be able to offer other types of free or charge-only cards similar to Citi Express. 3. In the U.S., Citibank has offered free or paid-only cards that are also free or
Citibank has a fairly lower growth rate than the industry, from Jun 2010 to Dec 2012 it has been 22% for Citibank and 45% for the industry. Citibank’s current strategy targets only 0.68% of the total households in India, and 7.58% of total households in the top 8 cities. By targeting just the super-affluent and affluent market, Citibank is currently letting its competitors to capture a large population of the market. Citi bank potential market in the top 8 cities is nearly 69.7 million households (See Exhibit 1). These are the cities where they already have a number of branches and a strong presence. So by targeting the emerging affluent and mass market in the top 8 cities, it will not require to go through the hassle of setting up new branches. Also the revolving balance percentage for the emerging market and mass market are 45% and 65% respectively.The risks that are associated with targeting the emerging affluent and mass market are:Delinquent balance percentage proposed target market, 4.5% for emerging affluent and 6.7% for mass market, is greater than its current targeted market, 2.5% for super-affluent and 3.3% for super-affluent (See Exhibit 2).Unlike its current target market, the proposed market is a highly competitive market.The best strategy while entering the two markets segment is to offer a customized credit card deal that will be based on the customer’s needs. We can offer cash backs, discounts and points system on groceries, fuel and on other basic amenities that will influence people to shift to Citibank’s credit card. Instead of providing free credit card, we can state that their card fee will be waivered if their spending exceeds a specific amount. This will encourage customers to use their credit card more. Finally to reduce the risk factor, we can use the CIBIL score to assess the risk of issuing a credit card to a particular customer and setting a credit limit based on their income.