Citigroup Bets on Cards and AI as Consumer Spending Climbs 11%

Key Points

• Citi’s card business is growing: Third-quarter card spending rose 11% and loans increased 6%, with 86% of card customers having FICO scores of 660 or higher. The bank said customers are borrowing and spending in a disciplined way.
• Citi is investing in card products, customer acquisition and loyalty to pursue mid-single-digit revenue and loan growth; its U.S. card business serves 70 million consumers and is near its target of low-20s returns on tangible common equity through the cycle.
• AI is a growing focus: Citi is applying it to fraud detection, cybersecurity and marketing, while preparing conversational tools for tasks such as booking travel with rewards and working to keep AI-assisted card transactions secure.

Citigroup NYSE: C is investing in credit card products, customer acquisition and artificial intelligence as it targets growth in its U.S. card business, while seeing continued resilience among its largely prime customer base, an executive said at a fintech conference.

Pam Habner, head of U.S. Consumer Cards at Citi, said third-quarter card spending rose 11% and loans grew 6%. She cautioned that the bank’s customer base does not represent every segment of the U.S. consumer: 86% of its card customers have FICO scores of 660 or higher.

“The consumer is shopping, is borrowing, but in a very disciplined way,” Habner said. She said spending was higher among customers with stronger credit scores, though Citi was seeing growth across credit-score bands.

Habner said experts generally expected holiday spending growth of about 5%, while noting that the outcome remained to be seen. She also pointed to a gap between consumer sentiment and behavior, saying consumers have remained pessimistic even as they continue to spend.

Card Growth Strategy

Citi’s U.S. card business serves 70 million consumers and is operating largely at its target of a low-20s return on tangible common equity through the cycle, Habner said. The bank has a near-term commitment to mid-single-digit revenue and loan growth for the business.

Habner said Citi is increasing investment in products, customer acquisition and loyalty benefits while seeking efficiencies to fund growth. The business has an efficiency ratio of about 37%, she said. Acquiring card customers can take three to five years to pay back, making it a longer-term investment than some automation projects.

Citi recently converted the Barclays American co-branded card portfolio, bringing in more than 2 million customers, Habner said. The bank also introduced 18 new products from 2022 through 2025 and two more this year, with another set announced for next year.

The company is leaning further into general-purpose cards as private-label cards face structural pressure, Habner said. She cited industry estimates that general-purpose card customers spend about nine times as much and borrow four times as much as private-label customers, with similar patterns in Citi’s own portfolio.

Interest on card loans accounts for the vast majority of Citi’s card revenue, Habner said. The bank is also expanding its focus on annual-fee products, including its AAdvantage and Strata cards, and has announced a retail media offering intended to generate advertising revenue.

AI and Fintech Partnerships

Habner said Citi is working with large language model providers, payment networks and industry groups to help ensure card transactions remain secure as consumers use AI assistants to shop. The bank wants to maintain its direct relationship with customers, including when an assistant makes a purchase on their behalf.

Citi is also using AI to support cybersecurity and fraud detection, improve card marketing and develop more conversational customer experiences. Habner said a conversational experience for tasks such as booking travel with card rewards was on the business’s roadmap and described the timing as “imminent.”

Habner said buy now, pay later providers have not emerged as a major threat to Citi’s card business, in her view, but that their installment products helped inspire features such as Citi Flex Pay and Flex Loan. She also highlighted Citi’s announced intent to acquire offers-platform company Kard and its dining partnership with inKind as examples of using fintech capabilities to support customer loyalty.

About Citigroup (NYSE:C)

Citigroup Inc. is a global financial services company headquartered in New York City. Founded in 1812 as the City Bank of New York, it has grown into an international banking organization serving individuals, businesses, governments and institutions. The company provides consumer banking and wealth management services, including deposits, lending, credit cards and investment services. For corporate and institutional clients, Citi offers transaction banking, treasury and trade solutions, securities services, investment banking, and markets and financing services.

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