Citibank Malaysia has led the market in
terms of card issuance and spend for a number of years. The bank
sees the future battleground as increasing usee rather than
customer acquisition. Titien Ahmad looks at
Citibank Malaysia’s plans.

Citibank Malaysia has seen high rates of revenue growth since the
local government initiated market liberalisation moves about two
years ago. Earlier this year, its then chief executive officer,
Piyush Gupta, announced that the bank’s credit card spend growth
rates should match the industry’s projected rate of 15 percent per
annum for the next few years. In fact, Gupta saw potential for
future growth in credit card revenues, as credit card spend in
Malaysia accounts for about 16 percent of total spending; this
contrasts with neighbouring Singapore, where more than 20 percent
of total spend is card-based. The bank’s non-performing loan rate
was also less than half the industry average of 3.5 percent.

It has been a closely fought race for pole position in terms of
card issuance in Malaysia’s credit card market. The peninsula’s
largest bank, Maybank, has gone on an aggressive customer
acquisition drive; it now boasts the largest cardholder base at 1.4
million, and expects to increase its number of credit cardholders
by 20 percent in the next 12 months.

Maybank’s senior management expects the combined transaction value
of its credit, charge and debit cards to grow by 20 percent in its
current financial year. The bank reported more than MYR18 billion
($5.3 billion) in transaction value in the last financial year
ending 30 June 2007. Its acquisition of American Express’s charge
card business in 2006 also boosted its card count.

Increasing card use

However, Vipin Agrawal, cards business director of Citibank
Malaysia, refuses to be drawn into a comparison of card numbers. In
an interview with CI recently, he said: “For us it’s not just the
number of plastics but how much cards are used – the user share of
the industry. We are at number one in this respect with around 20
percent market share with the next player fairly far from us in the
early teens and below.

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“Holding leadership in market share is an enormous challenge as
customers are looking for the best value. There is not one single
competitor to single out but there are number of local banks that
are fairly aggressive. We are focusing on what we like to do and
how we can continue to differentiate ourselves. I may not be saying
anything new to you. That’s basically what we do but it is easier
said than done. We have to understand what consumers like, create
something that is compelling and make economic sense out of

Although Citibank typically targets the premium segment in most
markets in which it operates within the Asia-Pacific, Agrawal
believes in targeting a range of customers.

 “We do not believe that we should focus on one particular
segment. The minimum income limit for credit cards is MYR15,000 and
we operate from MYR15,000 to the high-end market. There’s the
platinum product for the high end and the Clear card [a transparent
product] for the youth segment,” he said.

“We are evolving from the classic silver, gold and platinum
segments to more specific needs for customers. We launched a
co-branded product with Celcom last year and a cashback product –
we have the largest product range in the Malaysian market. At the
same time we try to bring something new and different, such as the
Million Ringgit Match promotion, Stay for Sure [a hotel booking
service] and we are now doing Fly for Sure where you get guaranteed
flights. We try to create some excitement around the

Stay for Sure is one of the many programmes rolled out to encourage
customers to consolidate their purchases on their Citibank card.
The campaign gives away free hotel stays to cardholders who make a
minimum spend of MYR8,000 in three months.

 “People may carry several credit cards in their wallets. But
with Citibank’s focus on loyalty and usage, the incidence of use of
a Citibank credit card is certainly higher than that of others.
From an industry-wide perspective, Citibank also tends to give
higher credit lines to customers. With attractive usage promotions
and merchant offers, we will continue to make the Citibank credit
card the primary card in customer’s wallet,” Agrawal commented at
the launch of the programme.

With the success of Stay for Sure, Agrawal extended the programme
to Fly for Sure, guaranteeing free flights for a minimum spend of
MYR50 in a single transaction ten times a month for three
consecutive months. Cardholders get to fly on a budget airline to
popular holiday destinations nearby such as Langkawi and

Under the bank’s Everyone’s a Winner campaign, cardholders receive
rewards at 12 times the amount spent by charging a minimum of MYR50
in a single transaction eight times a month. Previously, the points
multiplier was eight times the amount spent. Depending on the
amount spent and frequency of use, cardholders can qualify for a
points multiplier of up to 75 times.

“Feedback from our customers based on the previous campaign
indicated that a large number of them would participate in a
campaign that offers guaranteed rewards instead of contests,” said
Agrawal. “With this programme, we are not only encouraging
customers to consolidate all their purchases on Citibank credit
cards but we are also rewarding existing loyal customers.”

Cashback schemes

Another programme to encourage card spend targets cardholders who
prefer cash to rewards. The Cash Back Gold credit card offers up to
3.88 percent cashback on total spending; the cash is automatically
credited into their account on a monthly basis. Cardholders will
receive 0.5 percent cashback for a carried forward balance of less
than MYR5,000, 2 percent for balance between MYR5,001 and MYR10,000
and 3.88 percent for amounts above MYR10,000.

According to Agrawal: “The challenge is around how you can continue
to differentiate and be relevant to the customer. You can read
thousands of marketing books but that is the reality. Everyone is
trying to play all kinds of games in pricing and being the dominant
player – we neither want to nor can afford to. Price wars are
detrimental to the franchise and the industry.”

Interest war

Smaller players in Malaysia have cut credit card interest rates in
a bid to gain market share. Affin Bank, Malaysia’s second-smallest
bank, slashed its interest rate on cards from 18 percent to 9.99
percent recently for users who make the minimum payment on their
outstanding balance before the due date. Although Bank Negara,
Malaysia’s central bank, has introduced a three-tier interest rate
cap to reward low-risk cardholders, Affin’s offer was
unprecedented. Larger issuers, however, have dismissed such efforts
as mere gimmicks and have steadfastly refused to be drawn into a
price war.

Agrawal offers differentiated pricing to meet the new rate caps
introduced by the central bank. “There is a default pricing and
special pricing for specific customers. Even with the default 18
percent cap from the central bank, there was a recent announcement
that those who pay regularly can enjoy a rate as low as 15 percent.
So we are categorising our customers into three segments – people
who pay on time every single time, those who pay every single time
over ten to 12 months, and everybody else. We are basically
rewarding the good payers but price differentiation is below the
line for specific customers,” he said.

He asserts that risk management needs to be at the core of the
cards business. “There is a concern in the Malaysian market
regarding future credit quality. At our end we are quite selective
as to who we issue our cards to,” Agrawal said.

 “For the consumer business, given the large credit card
portfolio worldwide, risk management is our core competence. We are
fairly analytical in our approach and use a number of techniques to
mitigate risks and assign a credit line that the customer can

“In Malaysia, we use the credit bureau extensively but the cost is
fairly high and we are trying to convince the central bank to
reduce costs. We use the bureau pretty extensively to manage the
entire process for new customers and existing customers. The
quality of the credit bureau in Malaysia is pretty good – credit
goes to the central bank and that helps us.

 “Clearly it is quite important to the central bank that the
country does not get into an adverse cycle. We believe that, at
this stage, the central bank is doing the right thing. For example,
the credit bureau has good-quality data – being the leader in
credit cards, we are the largest user of the bureau. On our side,
we are quite robust in our processes of selecting customers to give
credit to.”

Looking ahead, Agrawal sees differentiation to be the key challenge
for card issuers in the Malaysian market.

“The challenge – and opportunity – is around differentiation,” he
said. “This applies to customer experience and customer service and
is an ongoing process. We try to bring in something new almost
every six months and on the user side we have an innovative
proposition almost every quarter.”

At this stage, Citibank remains firmly a credit card player even as
its peers pursue expansion in other products such as debit and
prepaid. Agrawal commented on future expansion into other card
product areas: “We are clearly in the credit space today. As part
of the marketing process, we are evaluating the needs of customers
and the need for debit products and prepaid products as we are not
in those categories. There are number of challenges in these areas
that one has to address such as acceptance and a significant
customer need. ”

Poaching staff

With the intense competition still playing out in the cards space,
Citibank’s staff remain the key target for other card issuers
looking for a slice of bank’s action. Agrawal sees that as a cost
of business. He contends: “The banking industry is growing in
Malaysia. Our well-trained staff would inevitably be the target of
other banks when they want to grow their business. We believe in
continuing to develop talent. We have exchange programmes with
other markets and there is a large pool of local talent that we
continue to focus on. It is a combination of good work environment
and training.

“At the end of the day the talent has to be local. The central bank
is getting a lot more liberal to get foreigners to work here. Even
if a country has no restrictions on the employment of foreigners,
it is local talent that should be running the company.”