Investing in Card Unit, Alliances on Citi's Agenda

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The head of Citigroup Inc.'s U.S. retail banking business said Wednesday that the company is considering ways to deal with competitive and economic pressures in its cards and payments business that could lead to more partnerships and a larger investment in its credit cards unit.

In response to a question from the audience at the Lehman Brothers Financial Services Conference, Steven J. Freiberg, the chairman and chief executive of Citi's North American consumer business, said competition from nonbanking companies that are developing online and mobile payments could prompt the $2.2 trillion-asset Citi into a partnership, though it is torn about whether to consider companies as potential partners or foes.

"They're competitors on one hand, but they're also our partners and our allies," Mr. Freiberg said. "We're always concerned about new competitors, competitors that have the potential to shift paradigms."

The unidentified questioner asked whether Citi felt threatened by companies, including Google Inc., Inc., and eBay Inc., that are creating either online or mobile payment systems. Google filed a patent application this summer to protect its online payments technology, which it has yet to roll out. Citi introduced a mobile payments system in April and was among the first to enter the growing market.

"We're working with a number of providers to see, basically, who is going to own the value chain," Mr. Freiberg said.

"Every retailer said they would be a bank. In the past, the telecoms said they would be a bank. I would say that the truthfulness of that, relatively speaking, has been mild at best," he said.

"I would make a bet still on the financial institutions to prevail," he said, "although I think there will be a lot better integration of" banking and nonbanking companies. Though Citi feels "vulnerable," he said, it also prevents the others from feeling "arrogant" about their hold on the market. …