Early last week, Citi confirmed NAB had come out on top, announcing a deal worth $1.2 billion, pending regulatory approval. As long as all goes to plan, the deal will mean NAB takes ownership of $7.9 billion in residential mortgages, $4.3 billion in unsecured lending, and $9 billion in bank deposits, while also taking 800 Citigroup employees under its wing.

Talking to investors after the announcement, NAB stated its acquisition focus during the deal-making process had been Citi’s unsecured lending category. But why?

Taking on Citi’s credit card business – which is currently the fifth largest in Australia – NAB will effectively double the size of its own credit card operation, allowing it to compete not just with Australia’s number one card provider CommBank, but disruptors within the buy now pay later space such as Afterpay.

The ACCC’s Response

While the acquisition is expected to be finalised by March, the deal must first be approved by the Australian Competition and Consumer Commission (ACCC).

If the deal proceeds as planned, NAB will add one million credit cards to its books, making it the second largest credit card provider in Australia. As a result, 90% of the nation’s credit cards will be in the hands of our Big Four banks, which some worry will further reduce competition in the industry.

In April, ACCC Chairman Rod Sims said the regulator would look with “extremely close interest” at any bid for the Citigroup sale made by any Big Four bank.

Following the announcement last Monday, Mr Sims reiterated the fact that the deal proposed with NAB would be closely scrutinised.

“Competition between the Big Four banks is muted at best,” he said. “We have seen them accommodating each other rather than competing aggressively on products and pricing.” (1)

Meanwhile, NAB chief executive Ross McEwan remained confident the transaction would not be blocked by the competition regulator, arguing the bank’s buyout of Citi’s credit card business would not substantially lessen competition due to a healthy competitive environment within the sector.

“There are still a lot of players in the credit card business,” Mr McEwan said. “We don’t believe it significantly changes the dynamics of the market from a competition point of view.” (2)

What Will it Mean for Citi Cardholders?

If the sale goes ahead, ripples will no doubt be felt throughout Australia’s credit card market, as providers adjust to having less to compete with following Citi’s exit. But what about in the more immediate term? How will the sale affect Citi’s one million credit card customers?

Citi was quick to allay doubts, announcing in a statement that there would be “no immediate change” to the way it serves its consumer banking and wealth customers. The provider also noted that customers would be “contacted in the coming months with more details”. (3)

In other words, both Citi and NAB will wait for approval on the sale before either provider makes any changes. So, for Citi credit cardholders it should be business as usual until the deal is finalised, which should be in March, unless the regulatory process holds things up.

And after the sale has been approved? Anyone with a mortgage, loan, credit card or deposit with Citi will then be transferred to NAB.

A similar transfer process will likely apply to the white label products Citi operated. In terms of credit cards, Citi issued cards through a white label agreement with a number of Australian brands, including Coles, Kogan, Qantas, Suncorp, Bank of Queensland, PayPal and Virgin Money.

Citi’s head of cards and loans, Choong Yu Lum, said, “Typically, in transactions like these, products will migrate to the new owner once the sale has been completed”. (4)

In support of this, Mr McEwan said NAB was keen to maintain Citi’s white label credit card business.

Changes on the Horizon

Okay, so Citi cardholders might not see any changes for a while, but what will happen after the sale has been finalised?

☛ Platform

Written within the terms of the sale is a 30-month deal that will allow NAB to utilise Citi’s technology until Citi’s customers can be migrated onto NAB’s own platforms.

NAB has stated it will spend $165 million on building an unsecured lending platform that will replace its old systems.

What will this mean for Citi cardholders? That is yet to be seen, but with a total of $375 million being spent on acquisition and integration, you’d expect the new platform to be pretty darned impressive.

☛ Brand

It’s not unusual for banks to run multiple brands, allowing each brand to keep its own identity, while operating under one large umbrella. NAB already runs UBank under its own brand, just as CommBank runs Bankwest, and Westpac runs St.George, Bank of Melbourne and BankSA.

So, given the fact that Citi is a globally recognised brand with a premium customer base, it’s unlikely NAB would choose to rebrand Citi credit cards as NAB cards.

The bank would also not be keen on creating direct competition within its own range. It wouldn’t make sense to add rebranded Citi cards, that may potentially draw attention away from its already sizable line-up.

☛ Perks and Rewards

What about the cards themselves? Will Citi credit cards still offer the same perks and rewards once NAB takes over?

As the new owner, it will be up to NAB to determine whether any changes are made to the cards within Citi’s current line-up. However, it will be interesting to see what happens to the various perks Citi credit cards are known for.

What will happen to Citi Rewards is also as yet unknown. Neither Citi nor NAB have released information regarding how Citi’s rewards program will operate following the sale. That means there is no details of any prospective change in value to Citi Reward Points, or any changes on the horizon with regards to Citi Rewards frequent flyer and retail partners.

Again, it is expected cardholders will be updated of any changes as and when they might occur.

☛ Balance Transfers

Balance transfer offers are designed to attract new customers. As such, providers offering balance transfer deals typically only offer them to new customers, not to customers who hold a card issued by the same provider.

As an example, you can’t transfer a balance to a Coles credit card to take advantage of an introductory offer if that balance is coming from another card issued by Citigroup. For that reason, it may be the case that NAB won’t allow balance transfers from Citi issued cards and vice versa.

With that being said, Westpac allows balance transfers from St.George, BankSA and Bank of Melbourne, just as CommBank allows balance transfers from Bankwest.

What Will it Mean for NAB?

As we’ve covered as much as we know about what the deal will mean for Citi cardholders, let’s look now to what it might mean for NAB.

☛ Credit Cards

As we previously mentioned, taking on Citi’s one million credit cards will double the size of NAB’s credit card business, making it the second largest credit card provider in Australia. This will place the bank in direct competition with Australia’s number one provider, CommBank.

Recent APRA data suggests CommBank’s credit card book sits at around $8.1 billion, while NAB holds $3.9 billion in credit cards. Meanwhile, Citi holds $4.3 billion in unsecured lending, with the majority debt held on credit cards.

While the ACCC may be concerned about the consequences this deal will have on competition within the credit card market, it may be interesting to see what CommBank and NAB bring to the world of credit cards as they duke it out for top spot.

☛ BNPL

And then there’s BNPL. As BNPL continues to surge in popularity, big banks are starting to get in on the act. Last year, both CommBank and NAB launched ‘no interest’ credit cards to compete within the BNPL space.

Launched in September 2020, NAB’s StraightUp Card seems to be competing pretty well, with bank figures revealing StraightUp now accounts for one out of every three credit card applications at the bank. Not only that, it also seems to be attracting a new market, with 75% of StraightUp cardholders new to the world of credit cards.

Going one step further, both banks will soon be dipping even deeper into the BNPL pool. CommBank is set to launch its BNPL offering StepPay later this month, while NAB will likely take on Citi’s newly announced BNPL contender, Spot, once their deal is finalised.

Want to know more about Spot? Here goes.

Expected to launch in October, Spot will keep to the traditional BNPL framework, allowing users to make purchases up to $1,000, which they then repay in four equal fortnightly instalments. For larger purchases over $200, Spot will offer users the option to extend their repayment period to eight instalments for a flat fee of $10.

As with other BNPL platforms such as Afterpay, Spot will not charge interest, however, there will be a $10 fee for late repayments on purchases of more than $100. In terms of where it can be used, Spot users can download a Spot digital card, to allow them to utilise the service anywhere Mastercard is accepted in Australia and overseas, both online and instore.

And the name? Spot is apparently an acronym of Shop and Pay Over Time, but it could also be said to mirror the slang expression “to spot”, or lend money.

Lastly, who can apply? Once launched, Spot will be available to Australians aged 18 or over who register on the platform. Australia is being used as a testing ground for Spot, with Aussies getting first access to the platform. If it is deemed a success, a worldwide rollout may follow.

Registrations are now open to those who want to get in early. Anyone who registers by 22 September 2021 and is approved to set up an account by 15 January 2022 will receive a $25 e-Gift Card, after making a purchase of $50 or more within the first 30 days.

To sweeten the deal, these early registrants will also go into a draw to win one of 10 $1,000 shopping vouchers (terms and conditions apply).

What Happens Next?

While it can be frustrating not knowing what’s on the horizon, right now, all we can do is hold tight and see what happens. If, for whatever reason, the ACCC chooses not to let the deal go ahead, Citi will have to look elsewhere for a buyer, in which case, Citi cardholders will continue to be ‘business as usual’ until a new deal is finalised.

If the sale to NAB does go ahead, the deal should be finalised by March 2022. In the months leading up to that time – and in the months that follow – both Citi and NAB will keep cardholders advised of any changes that may affect the way they use their cards. This will allow them to choose whether they want to keep their cards, or perhaps go in a different direction with another provider.

Which, of course, is where CreditCard.com.au comes in. Whether you’re a current Citi cardholder wanting to find out what else is out there, or you are interested in applying for a new Citi card should Citi or NAB change direction in its offering, CreditCard.com.au is the place to compare your options and apply for the card that best suits your needs.

1. https://www.abc.net.au/news/2021-08-09/west-gate-transburban-asx-200-costs-nab-citigroup/100361312
2. https://www.afr.com/companies/financial-services/nab-to-acquire-citi-s-consumer-business-for-1-2-billion-20210809-p58gzn
3. https://www.citigroup.com/australia/news/2021/210808a.htm
4. https://www.savings.com.au/news/nab-citi-acquisition

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