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Citi's plan for its fastest-growing region: Fewer branches, more online

Yen Nee Lee
  • U.S. banking group Citi has started to "digitize" the way it runs its credit cards business, with many initiatives being rolled out in Asia.
  • Using digital channels and data analytics allows the bank to target the right customers more efficiently and keep them around for longer, said Sergio Zanatti, Citibank’s head of cards and personal loans for Asia.
  • Citi grew its consumer banking business in Asia even though it has reduced the number of physical branches.

Citibank C is closing down branches in its fastest-growing region — but the American banking group said that'll actually help it do better than ever.

The lender's consumer business in Asia, its largest outside North America, registered its seventh consecutive quarter of growth in the first three months of 2018. Underpinning that momentum is the growth in Citi's cards business, which the company said was largely a result of its decision about three years ago to "digitize" the way it operates.

That means spending more of its advertising budget on digital ads, forming partnerships with e-commerce players and social media platforms, and building systems that allow people to apply for cards online, said Sergio Zanatti, Citibank’s head of cards and personal loans for Asia.

"In the past, customers need to come to the bank, what we’re trying to do is flip that completely: We want to be accessible to you as a customer in the place and in the way you prefer to interact. We want to be present in the place or ecosystem that you play and live," Zanatti told CNBC in an interview last week.

That’s a move away from waiting for customers to show up at physical branches and relying on large sales forces to get people to sign up for credit cards, he added. Instead, greater use of data analytics and digital channels allows the bank to target the right customers more efficiently and keep them around for longer, he explained.

Among the initiatives the lender has taken is launching banking services on social media applications such as Line, WeChat and Facebook Messenger in some markets in Asia — allowing customers to access information such as account balances, credit card transactions and even pay for certain bills.

Citi is not the only one to make such changes to its consumer banking operations. Singapore's DBS DBSM-SG , for example, launched retail banking services entirely on mobile in India and Indonesia — deepening its presence in those two countries without having to increase physical branches.

Such digital initiatives by Citi and DBS are coming at a time when many banks in the region still require credit card applicants to fill out physical forms and queue up at branches to open an account, even as consumers in Asia increasingly prefer going online for such tasks.

Asia taking the lead

Many of the digital initiatives that Citi has rolled out in recent years started in Asia, where it caters to its largest consumer banking business outside of North America.

In the first three months of 2018, the region saw revenue increasing 11 percent year-over-year to $1.93 billion and net income jumping 50 percent to $373 million over the same period.

Citi's growth — which was sustained even as physical branches have been reduced — was in line with the improvements that banks have seen in the consumer segment. But the American lender's profitability still grew more than some of its peers in Asia.

HSBC HSBA-GB , Europe's largest bank with a large retail presence in Asia, reported a 20.8 percent year-over-year increase in first quarter pre-tax profit to $1.76 billion in its retail banking and wealth management business in the region. DBS, Southeast Asia's largest lender, saw the segment grew 17.4 percent to 627 million Singapore dollars ($458.6 million) in pre-tax profit over the same period.

Zanatti said he expects Citi's digital efforts to drive more business for the group. As of March 31, the lender had more than 16 million card accounts in Asia, delivering a 10 percent year-over-year increase in revenue for its cards business in the region in the first quarter.

“When we started this journey probably three years ago, building the capabilities, building the technology, probably one out of 10 cards was digitally sourced. Now, it’s three out of 10 and hopefully soon four out of 10 will be sourced digitally,” he said.

“The transformation into a digital cards business clearly is the future. The cards business will become less paper, will become more digital, will become less plastic and will continue to evolve in that direction,” he added.



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