The Hong Kong consumer banking market
has always been one of the more competitive markets in Asia-Pacific
and the territory’s credit cards industry is no exception. Citibank
Hong Kong gives Titien Ahmad its views on
competitive tactics and market prospects.

The Hong Kong consumer banking market has always been one of the
more competitive markets in Asia-Pacific and the territory’s credit
cards industry is no exception. As returns from the traditional
consumer banking stronghold of mortgage lending has been squeezed
by rate wars, banks have shifted to the more lucrative credit cards
market in Hong Kong. Citibank first entered the Hong Kong credit
card market in 1983.

In an interview with CI, Ivy Lun, cards business
director with Citibank in Hong Kong, said: “The situation in the
Hong Kong credit card market is getting tougher. Hong Kong has 3.5
million eligible adults and everyone has three to four credit cards
in the wallet. In the affluent consumer segment, Citigroup’s core
market, there are usually five or six cards in the wallet.”

Lun’s focus in Hong Kong is thus not to put “four more cards in
consumer wallets but to utilise lifestyle segmentation technology
to develop the most relevant offer”.

“We’re carrying out activities like database analysis, focus
groups, surveys and talk-to-customer programmes. We understand that
every customer has different lifestyles, needs and requirements.
They do not want to have a card that has a little bit of
everything; they want one that is the most relevant.”

Citibank Hong Kong has been actively working with co-branding
partners such as Shell (for car owners) and Cathay Pacific (for air
travellers) to build  targeted product offerings. Lun likens
the bank’s co-branding relationships to a marriage. She said: “If
we work with a co-brand partner it should be a leader in the
industry and has to have the same service belief as us. They should
also believe that innovation is key.”

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With the implementation of data sharing via a credit bureau, the
level of defaults has been steadily decreasing and there has been a
shift of credit card rollover balances to cheaper non-card loans.
Even though total card receivables have steadily increased, the
rollover amount has correspondingly decreased.

In 2000, defaulting customers in Hong Kong had acquired debts up
to 55 times monthly income; by 2002, this had decreased to 42 times
monthly income. Credit card write-off ratios were as high as 13.6
percent in December 2002. In the four years to 2002, Hong Kong had
growth in personal bankruptcy of 1,900 percent; 12 percent was
caused by credit card debt. Since then, the charge-off rates had
decreased to 2.91 percent by the last quarter of 2006.

Lun believes that there is still space for growth in what is
widely perceived as a saturated cards market. “In Hong Kong, people
use cards for only 20 percent to 25 percent of discretionary
spending. In other markets this figure can reach 30 or 40 percent.
Sectors such as such as insurance, health and beauty products still
provide plenty of scope to get people to spend money on their
cards,” she said.

An influx of Chinese tourists has also provided fresh business
for banks in the territory. According to Lun: “We are happy to cash
in on that opportunity and are looking more on the acquiring side.
Citibank is one of the major card acquirers in the market and we
are working with the merchants to do more promotions together.”

Looking forward, Lun says: “Citibank is able to tap into
internal expertise from the global and regional operations to help
deliver the Hong Kong market’s requirements.  It also helps
that the Citibank culture is really customer-centric. For example,
the launch of the instant-issue card was a customer-driven
initiative, so internal buy-in was easy.”

Launched in 2006, the instant-issue card allowed customers to
apply at a branch and to receive credit approval and a card within
an hour. “The response was very encouraging and actually exceeded
our target because the product responded to customers’ stated
needs,” said Lun.

The next step for Lun is to “launch differential pricing 
for customers based on bureau data and our internal records. Every
customer will have individual interest rates and customised loyalty
programmes. A majority of them – about 90 percent – will get a rate
reduction and some good customers may have their rates reduced by

Commenting on the market outlook in Hong Kong, Lun said: “The
Hong Kong non-performing loan charge-off ratio has improved
considerably. We are educating the customer in how to borrow wisely
and maintain a good credit bureau record.

“We are proactive in working with the Hong Kong Monetary
Authority to improve the industry together.  The economy in
Hong Kong is robust and we have a good future – with the industry
doing well, competition is going to be tough.”

Hong-Kong card lending 2001-2006

Hong Kong: Charge-off totals, 2001-2006