Citi preparing 'interesting response' in credit card market

Singapore

CITIBANK Singapore may have retained its pole position in the credit card market, but it is defending itself against keen competition.

For one thing, it will have an "interesting response" to the trend of tying credit card spending to the interest rates earned on bank savings, a top executive said at a briefing on Monday.

Credit card sales have always provided a wealth of data to banks on consumption patterns - even as the data could be more fragmented here as shrewd users jump from one card to another to leverage the best deals. Singaporeans hold an average of six credit cards.

Today, banks are dabbling in alchemy, turning that data into gold to sell more investment products.

And to build loyalty in a competitive consumer banking market, banks are now linking interest rates earned on savings in bank accounts, to credit card spending. All three Singapore banks have such savings products.

"You'll see we have an interesting response to that," said John Denhof, head of cards and personal loans at Citibank Singapore, referring to this trend. He declined to reveal more details, but noted that the bank is monitoring this closely.

For a few years now, Citigroup has been aligning its product suite globally, such that a credit card issued here would generally be allowed to tap rewards and perks available in other markets that Citigroup operates in.

Citibank Singapore has also been speeding up the redemption process for perks tied to its credit cards, and is looking at real-time air miles redemption, said Mr Denhof.

This comes as fresh data provided by the bank showed its credit card sales in Singapore have grown at least 20 per cent faster than the industry over the last five years.

The bank still holds the largest consumer credit card portfolio in Singapore, though it did not say if its market share has eroded over the years.

Data provided by the bank showed that last year, Citibank's credit card sales grew slightly below 10 per cent, which is stronger than the growth of about 7 per cent for the industry.

Mr Denhof said that Citibank would continue to compete in all income segments for credit cards, but sees the affluent segment growing in tandem with rising wealth in this region.

Cards for the affluent - including by-invitation-only plastics - make up less than 20 per cent of Citibank's portfolio. But the spending is proportionately more significant. As one example, the rich spend about three times more on dining on their Citibank cards.

This growth is also significant for banks as the credit rating on the rich tends to be much better, said Mr Denhof. "It's fair to say that the higher you go, the lower the losses."