Citi has a storied history in retail banking, or personal finance, in the days before electronic banking. Whether the business head was James Rockefeller (whose cousin David ran Chase), Walter Wriston, John Reed, or the current Michael O’Neil, if you worked at the firm, you’d know what it feels to be at the top of the industry. There indeed were some bumps in the road, but they got plenty right along the way. Just don’t forget it was the War of 1812 that put the Citi on the map.
But, it can get confusing at times. And of all things, BNPL is at the forefront this time.
Citi Exits Australia
On July 14, 2021, Citi announced its Australian retail banking exit. Other consumer exits include China, India, Indonesia, Korea, Malaysia, Phillippines, Taiwan, Thailand, Russia, Poland, and Vietnam.
The firm’s press release stated: “In Australia, the sale of the consumer business will enable Citi to focus its investment and resources to its institutional business, which includes investment banking, capital markets, and advisory, markets and securities services, commercial banking, and treasury and trade solutions.” And continued with: “Citi Australia’s consumer business encompasses credit cards, loans, retail banking, wealth management for high net worth individuals, and mortgages. It operates a digital model, with more than 99% of clients coming to Citi via digital channels. The bank is also a credit card provider for some of Australia’s leading brands.”
The best bet on the possible buyer is National Australia Bank, as the Sidney Morning Herald reported in early July.
Well, Maybe Not Really
Citi is global, but it usually moves harmoniously, so today’s story in the Brisbane Times is confusing. Citi just announced their new BNPL product, called Spot, in the Aussie market.
- Citi says the rise of buy now, pay later (BNPL) products is one of the most important shifts in payments, as it prepares to use Australia as a testing ground for its move into the booming sector.
- While some banks, including ANZ, have played down their interest in BNPL, global giant Citi is gearing up to enter the sector later this year, and it says this week’s $39 billion takeover of Afterpay shows the payment method is not a “fad.”
After spending ten years of my life at Citi, at 575 Lex, across the street from the legendary 399 Park location, and later Atlanta, GA, I can say with confidence that the cards business head is not on some rogue mission, or is he out of step with the leadership team headed by Jane Fraser.
What is Spot?
According to Brisbane Times, “Citi’s brand name Spot is an acronym of “shop and pay over time” and also mirrors the Australian slang expression “to spot,” meaning to lend money.”
Hmm. Where could Citi take Spot? Anywhere consumers bank. As BNPL, it is a low-budget consumer credit option. The space is quickly filling up with the likes of Mastercard, Visa, PayPal, and now Square. Plus, there are hundreds of fintechs scrambling for space.
We’d bet there is a global spin to all this. Citi’s option could work anywhere they want it to do. In cards, where they claim to be the largest issuer in the world, there is a leverage point. And, their well-established markets, like LAC, where Citi generated $1 billion in 1Q21 revenue, is another. Asia is not an area of confidence now, as you can see from their recent exits..
As the Aussie Head of Cards noted: “Moreover, it’s a testament to the fact buy now, pay later is not a ‘fad’ but rather one of the most significant developments in payments in recent history.”
And, for now, we’ll leave it at that. Exciting move for Citi, but what is next? Maybe a Spot card?
Overview provided by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
