Citibank is back. After a lull induced by the credit crisis of 2008-09, the bank has returned with a sharply focussed strategy to expand in the retail banking space targeting the growing affluent middle class.
Driving the retail business in India is Anand Selvakesari , 44, Country Business Manager, Global Consumer Group, Citibank N.A.
The American bank, once synonymous with credit cards, is modelling its business as a one-stop financial services powerhouse that will offer services ranging from simple banking and credit cards to broking, insurance and wealth advisory services to every consumer segment.
“Our focus is to enhance the value proposition through the right products, services and channels,” says Selvakesari, an engineer from Coimbatore Institute of Technology and MBA from Thiagarajar School of Management, Madurai. He brings to the job rich international experience having spent the last two decades working with the bank in Singapore, Taiwan and China, where he was head of the consumer banking business.
Excerpts from an interview with Raghuvir Srinivasan at the bank's newly opened wealth advisory services branch in Chennai:
Citibank seems to be sharpening its focus on retail banking in recent months. What is the strategy?
Retail banking has always been an integral part of our India business. What you see now is that we are introducing new strategies for some of the segments. Our retail banking strategy now focuses on six key segments.
First, salaried accounts, which we call Suvidha, second is the one we launched recently for the emerging affluent called Citibanking, third is Citigold meant for the affluent segment, fourth is the high networth segment called Citigold Select, fifth is the retail commercial segment aimed at entrepreneurs and finally the NRI segment, something that we pioneered many years back.
Our focus is to enhance the value proposition for each of these segments. What we are trying to do is deliver value with the right products, the right channels and the right services. We had three major segments earlier- the salaried, affluent and high net worth customers. Now we have introduced the emerging affluent segment so that we cover the entire spectrum of clients. These are individuals with annual income of Rs.3 lakh to Rs.15 lakh. The size of this segment is estimated to be 16 million households and 20 million individuals. We have invested heavily in technology and are ensuring that the delivery channels are keeping pace. We are also changing our physical face in our branches.
The emerging affluent segment has varied needs such as housing, insurance and so on. How do you plan to address these?
This segment has five needs from our perspective. They have a transaction need which we satisfy through our transaction accounts and mobile and internet banking. Second is borrowing needs for which we offer unsecured personal and mortgage loans. We don't do auto loans. Third, insurance is also their need and we offer that too. Fourth, as they start investing their wealth, we offer wealth management services. As they grow in life, they get upgraded to the affluent or high net worth segments.
What are your plans for the credit cards business?
The cards business is a broader play. Our footprint covers 42 branches across 30 cities and our focus will be in these places where we have the infrastructure and our focus will obviously be on the emerging affluent segment. I think the big thing that has happened in the last 3-4 years is that the credit infrastructure has improved significantly. We have a very good credit bureau today. And we have a very good credit framework based on our past learning.
What prompted your return to a sharp focus on retail after a hiatus?
I wouldn't say it was a hiatus. To be honest, we were always in the retail business. If you look at the 2007-08 crisis, the challenges we faced were in the consumer financing business. The core retail business that we ran whether it is secured lending or wealth management, they were continued even during the financial crisis. If you look at the market statistics, for example, cards, we have 20 per cent market share in card spend and we have 30 per cent market share in e-commerce activity on credit cards.
Our card spends are double that of the industry average. So we have a great business on the cards stage. We took a pause during the financial crisis and are rebuilding that business again by acquiring new customers. If you look at the wealth management business, we have always been leaders. So we have continued on the same path except in the consumer financing business where we faced some challenges.
Your strategy pits you in direct competition with some aggressive players such as ICICI Bank and HDFC Bank. Why should consumers choose you over them?
We did extensive research before framing our strategy. There are some things that came out clearly. These are consumers who look for convenience, access and responsiveness. First, they wanted attention and they were not getting it elsewhere. About 85 per cent of them wanted financial advice. Typically, they don't get such personal advice elsewhere. Second, this is a globally mobile segment and, hence, they wanted global presence. For instance, they would like global ATM withdrawals, because research shows that they travel 3-4 times on leisure abroad in a year. Third, this group likes to bank digitally, they don't like going to the bank. We provide all these. For instance, our customers can withdraw up to $1000 from any of our ATMs worldwide in case of an emergency while travelling without any fees. Again, we address other specific needs such as opening a bank account in another country for those relocating from India for the short-term.
With just 42 branches across the country how do you ensure that you cover the target customers fully?
We operate in 30 cities and that restriction will remain till such time we get approvals for more branches. Within this, our research shows that we can operate with the physical format that we have today and complement that with our digital format, whether mobile or internet. Our customers are very digital— 60 per cent of the transactions that happen in our bank is through internet and mobile banking and over 63 per cent of our clients sign up for e-services. Yeah, more branches will be good but our research shows that these customers are happy with digital banking. Of course, there will always be a segment that will like brick and mortar banking. Over two years ago we embarked on our ATM expansion project. We had about 400 ATMs then; now we have 700. The only thing you cannot do over internet or phone is withdraw cash. We covered that too.
How's your position on NPAs?
In the consumer banking book we are very comfortable with the credit performance. In 2010-11 the gross NPA was 2.1 per cent compared to 4.5 per cent in 2008-09; net NPA fell from 2.6 per cent in 2008-09 to 1.2 per cent in 2010-11.
You've spent a lot of time in China. How does the Indian market compare with China's?
What stands out in China is the staggering scale. There are about 150-160 million credit cards in China compared to 17 million in India. The first card in China was issued 10 years ago, Indian cards have been around for 25 years. There are about 1.8 billion debit cards in China. The local banks have a large branch network, together the big five or six have 90,000 branches or so. Real consumer banking has been there only for the last five years but the financial markets are more mature in India where China still has some distance to cover.
How's the NPA scene there?
In the last 2-3 years the credit bureau has been coming up very strongly, just like India. NPAs were an issue some years ago but the robust credit bureau has changed the picture now. If you look at the credit cards business, the revolve rates are very low; credit is not a big driver in the country, its more spend. Culturally they are not there yet in terms of borrowing and spending. But they are big on mortgage. The secured lending part is large but unsecured loans are still evolving.
What is your take on interest rates now?
We believe that short term rates will remain as they are. Our one-year view was that rates would fall by about 75-100 basis points but now our economists have revised it to 50-75 basis points. The biggest factor is the fiscal deficit which at 5.1 per cent may be realistic compared to last year's but oil could still play spoilsport.
