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Citi has partnered with Southeast Asian ride-hailing company Grab to roll out a cobranded credit card, according to Reuters. The card will initially be launched in the Philippines, followed by Thailand later this year, before being rolled out in more Southeast Asian markets.
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This isn’t the first time the two companies have worked together: They teamed up in 2016 to allow customers to pay for Grab rides using their points from Citi credit cards, and Citi invested in the firm in November 2018 through its venture capital arm Citi Ventures.
Here’s what it means: Citi’s and Grab’s expertise in finance and the Southeast Asian market, respectively, set the new credit card up for future success.
- Southeast Asia (SEA) is a highly lucrative market for Citi to expand to with this new venture. The majority of SEA’s over 600 million consumers are un- or underbanked: 73% of consumers lack a bank account, according to KPMG, indicating that there’s a need for more accessible financial services. Additionally, Grab had already captured 65% of the ride-hailing market in Indonesia by August 2018, giving the credit card a large addressable market.
- This move is part of Citi’s aim to increase its presence in Asia via partnerships.Citi has 16 million customers in Asia and aims to increase its user base by 2 million — or 13% — in the region in the next few years via partnerships alone, according to Gonzalo Luchetti, Citi’s head of consumer banking for Asia Pacific, Europe, the Middle East, and Africa. This isn’t the first time Citi’s partnered with third parties for financial services ventures: It partnered with Paytm in May this year and Qantas in 2017 for similar ventures. This experience with partnerships will likely boost the likelihood of success for this latest venture.
- Grab has other financial service offerings, providing a good springboard for the credit card. Grab partnered with Mastercard in October 2018 to launch prepaid cards in SEA. Additionally, it announced in March that it’s working to roll out more financial services, including a pay later service and an insurance marketplace that sells services from a variety of providers through its mobile app.
- Details around the credit card remain unknown, but Grab is in a good position to make it a success.Not a lot of light has been shed on what features the credit card will include or how consumers can apply. However, with Grab already having massive amounts of data on its users, it seems likely that it’ll be able to use this information to make credit card decisions; this should help it include consumers who were previously excluded from the finance industry based on conventional methods for assessing credit in SEA.
The bigger picture: As competition in the finance industry rises, we’ll see more players like Citi seek out partnerships to remain relevant and diversify their revenue streams.
A number of other financial institutions (FIs) have partnered with tech companies, signaling a shift in how incumbents operate.Recently, we’ve seen Goldman Sachs partner with Apple to roll out a cobranded credit card, while Santander partnered with eBay to offer loans to SMBs selling on the e-commerce platform.
Such partnerships will likely become increasingly common as big tech firms move into the finance space and need to leverage the expertise and licensing of big incumbent FIs. Additionally, banks need to find new ways to remain relevant in the changing digital era. As tech firms and incumbent banks continue to partner, we’ll see a shift in the finance industry, with incumbents providing the underlying processes for financial services, while tech companies hold customer relations.
Here’s an industry opinion, as told to Business Insider Intelligence:
"Partnerships like this one will become a norm in the industry. The massive customer base of these companies that are building an entire ecosystem around their core products is the perfect match for banks that otherwise will have problems reaching so many millions of customers easily. The question is, will banks become just the underlying provider of financial services and big tech the main point of contact to the customers? Partnerships are the future." — David Jimenez Maireles, country head Spain at Raisin
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