New credit cards on the block

In a bid to break the market dominance of the Big Four, Citibank and Virgin Money Group in Australia will create new credit cards, retail deposit accounts and mortgages.

The ten year profit-sharing contract will see Citibank the retail arm of global investment bank Citi provide funding, infrastructure and banking networks for the new joint venture.

Citibank beat NAB for Virgin deal

Virgin Money became a major player in Australia five years ago when it linked with Westpac for a low-cost credit card that attracted more than 750,000 accounts, which Westpac inherited when the contract ended a year ago.

According to the Australian Citibank beat the National Australia Bank, which has a larger credit card market share, for the new Virgin deal.

Credit Card market share in Australia

Ray Gori Citibank's chief executive has set a target of overtaking NAB in the next three years by increasing its stake in the credit card market from 8.6 per cent to above 14 per cent.

Commonwealth Bank and Westpac currently lead the credit card market with 17.4 per cent and 16.6 per cent respectively, while NAB has 11 per cent.

Mr. Gori stated that they wanted to break into the top four and take a market share of 13 - 14 per cent.

Citibank-Virgin credit card is set for July

The first Citibank-Virgin Credit Card is set for July next year and then online retail savings and deposit accounts will be rolled out. The accounts will be offered on the internet only or through Citibank's existing call centres, with no branch access.

The joint venture will also develop a Virgin Blue Credit Card linked to the budget airline with reward points that will compete directly with the Qantas associated credit cards.

Citibank is hoping to lure 500,000 customers to the new credit cards in the medium term. It also intends to develop Virgin-branded mortgages to compete with the Big Four banks, which dominates new home loans.

Published on September 9-nd, 2009 in Credit Cards
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.

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