Fireside Chat: Interview with Citi's Pam Habner

Transcription: 
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.

Chana Schoenberger (00:09):
Okay. So you run credit cards at Citi. How did you get where you are today?

Pam Habner (00:17):
Well, hi everyone and Hannah, thank you so much for having me. It is such a pleasure to be amongst such amazing women and men as well here today. So I've been in financial services for quite a long time. I started off my career after college in consulting. And while I absolutely loved the intellectual challenge and the smart people around me, delivering that presentation felt like the beginning and I wanted to take that strategy and own it end to end.

Chana Schoenberger (00:48):
Honored strategy, right? Your boss, Gene Frazier, is also a former consultant.

Pam Habner (00:52):
Yeah. There are a lot of recovering consultants running around financial services today. And in fact, the CEO of American Express, Ken Chenault at the time, had worked at Bain. So I ended up going to work at American Express. I started in strategy and then moved into every flavor of product, marketing, and analytics that you can dream of and had a great run. Left and did a dotcom detour back in 1999 to 2001. Went back to Amex and had a great experience there, but ultimately moved to JP Morgan Chase where I worked in the card business. And then I ran the retail branch banking and wealth management teams and then got recruited to come to Citi to what I believe is the culmination of lots of learnings along the way where I'm the general manager of branded cards and the lending business.

(01:47):
I've been at Citi for five years. I started in July of 2020, an unusual moment in the midst of the pandemic and on Zoom, of course.

Chana Schoenberger (01:58):
I started this job—I joined the company and I previously ran Financial Planning, which is our magazine about wealth management, for a year. And I started in December of 2020. And it was, I think, a full year before I met in person anybody that I worked with. It was probably about that long before I came into the office at all. There was no office.

Pam Habner (02:20):
It was interesting. I was obviously very nervous about meeting everybody, but there's something very intimate about meeting colleagues in their own homes in a more casual environment than walking into a large conference room. So it was so much better than I ever expected, and it's been a great five years.

Chana Schoenberger (02:37):
Awesome. Okay. So, Why credit cards? What do you like about credit cards?

Pam Habner (02:42):
It's so amazing. I'm sure many of you who are in a certain industry for a long time look back and say, "I never dreamed all these years later I would still be doing what I do." And I absolutely love the credit card industry for a number of reasons. But the one that I always share is that every day is different and leading a credit card business is part Vanity Fair and part Federal Reserve. I love that combination; it uses both sides of my brain. What do I mean by that? The Vanity Fair piece is that we are responsible for winning the hearts, minds, and wallets of consumers by delivering an extraordinary brand—a brand that customers pull out of their physical or virtual wallets many times a day and often feel a real kinship and loyalty to.

(03:37):
The Federal Reserve piece is that a credit card business is essentially offering unsecured loans to millions and millions of consumers. So my math degree in college comes into play here because you have to be very analytical and work with risk management to make sure that you are both underwriting and approving the right clients, but then managing them through their financial life over time. And that's the Federal Reserve part. I can be in a meeting with my branding agency launching our new ad for Strata Elite with Kristen Bell for an hour in the morning, and then have a deep conversation about loss trends or credit abuse in the afternoon with my finance and risk colleagues. I just love that combination and the industry, like most industries, never stands still. It's always moving, changing, evolving.

Chana Schoenberger (04:32):
So you guys were in the paper last week about Strata Elite, about some issues that customer service agents were having. What do you do when—obviously things go wrong in business all the time. We're all familiar with this. It doesn't always go right. How do you get something solved when it's a big public problem and it's got your name and brand all over it?

Pam Habner (04:52):
Yeah. So it's been the best of times and the worst of times over the past couple of months because Citi had been out of the premium card space for many years and we decided to reenter this space because there are lots of premium customers that we wanted to serve and to round out our portfolio. So we launched a whole new suite of products under the brand name Strata. We have Strata, Strata Premier, and Strata Elite, which is that high-end product that competes against the likes of the American Express Platinum card or the Chase Sapphire Reserve card, which I launched.

(05:38):
The launch is going better than we expected. The coverage has been great. The demand is exceeding our expectations by a significant margin. And then lo and behold, on Thursday, I wake up to read an article in the Wall Street Journal about a customer who claimed to have a bad experience. Now, I know that this is all on the record and I can't really explain to you all the nuances of what went on, but when you launch a new product and it's very public with very rich acquisition offers—we had an 80,000 offer publicly for all customers and 100,000 for consumers that went into our branches to give a nod to that relationship. Big points, not dollars, right? Thank you points—that's our rewards points. Things happen and folks apply for those cards in a variety of ways and we have to protect the bank and we have to protect other consumers.

(06:36):
And when those customers are treated in a certain way, they can be quite noisy and public about that. But here's what I can tell you: the product is doing well. We stand behind some of the actions we took to safeguard good customers and to stave off customers that had bad intent. And while there was one article in the Wall Street Journal, not one other major publication picked it up and we've moved on.

Chana Schoenberger (07:07):
That's great. That's business resilience.

Pam Habner (07:10):
And you know what? You have to be ready. I mean, that's one thing I've learned over time is that you have to be prepared for anything. And we're prepared for these types of moments. We came together. We feel like we have done the right thing for all of our good customers and we move on.

Chana Schoenberger (07:29):
Okay. So what is changing across the industry? What are you seeing regarding competitive shifts? This move towards premium cards, not just on the part of Citi, but there are a lot of... we were talking about this this morning, it's part of this general move in financial services towards trying to get more of the high-end customers.

Pam Habner (07:50):
Having been in the credit card industry for a long time, I would say it has always been highly competitive. And that's because we're in a mature industry. It's a large industry. I would say most eligible US consumers carry multiple cards. The average is 3.7 and the top six players garner more than 70% of the market. So there are a lot of very concentrated players, big banks and card issuers like American Express and Cap One, all vying for credit-eligible consumers. So in my view, it's always been competitive. And at various moments in time, certain segments of the market heat up.

(08:59):
There are three main segments. There's what we call the value segment for consumers who are either new to credit or not as interested in rewards and want payment flexibility; they could want a balance transfer or rates. There are those who are a little bit more rational in their thinking and prefer straight cash back. And then there are those who like rewards cards. They could be, like I just described, our Strata family of cards, or they could be co-branded cards like we have with American Airlines. They're all highly competitive, but I would say in the past year, the more premium end of the market has really heated up.

(09:58):
We launched Strata Elite and, call it serendipity or perhaps as things happen in the market, sometimes things happen all at once. We're not sure why, but it could have been strategies being leaked or a variety of things. But JPMorgan Chase announced a refresh of their product and then Platinum from American Express quickly announced a refresh. All those things created quite a bit of buzz in the market. But I always say competition makes us stronger and better. We're very proud of our value proposition. I know my colleagues at those firms are proud of theirs, but there's more conversation about these premium cards and that lifts the water for all of us. All boats rise, and it is generally a good thing.

(10:57):
What's interesting is when I was earlier in my career, there was a feeling that young people—Gen Zs and now millennials—would never be interested in credit cards. They only like debit and they would absolutely not be interested in fee-based cards, but that was a myth. And the truth is, if there's value, and particularly for those Gen Z, millennials, and boomers who are very travel-oriented, they love travel, dining, and entertainment. They're more than willing to pay a fee for premium cards that serve as a way to unlock unique experiences and benefits. So I think the market's getting a lot of buzz right now. We're really optimistic.

Chana Schoenberger (11:05):
Let's talk about consumer spending because that's an interesting macroeconomic thing that affects everybody's business, especially yours. What are you seeing in terms of how consumers are spending, borrowing, and using credit today?

Pam Habner (11:24):
The word that I would use to describe the US consumer right now is resilient. If you look at the real data, you will see that consumers are spending on their credit cards. In our second quarter, we reported that spend was up 5%. That's strong spend for a mature market. So consumers are spending and on the high end, the more premium customers are generating a disproportionate amount of that spend. More affluent consumers with higher FICO scores are driving say 60-plus percent of that spend growth.

(12:26):
And where are they spending? Post-pandemic, they're back to the things they love: travel, dining, entertainment, and essentials. We're seeing gas spend down, but that's because gas prices and commute prices are down. So consumers are out there and they're spending, but they're being smart and much more resilient in this era than maybe in prior eras. They're very careful about their spending and their borrowing behaviors. Losses in the industry are at a nice place. They're not at the all-time lows of the pandemic where people didn't spend because they couldn't, and many consumers were getting assistance from the government. That was a unique anomaly.

(13:28):
So they're back to more traditional spending, but they are being very smart and disciplined about borrowing. We're seeing losses normalize. But what I would say is that consumer sentiment is not matching the data. There's a disconnect. Consumer confidence is low. In September, we hit a real low, the lowest point since April, and that's because there's great uncertainty in the market. We work very closely with MasterCard and Visa and many other economists who have something called an uncertainty index, and that's off the charts—higher even than in the height of the pandemic.

(14:25):
And that's because there are so many things that are uncertain in the world around us. Will tariffs hold? Will they impact what consumers can buy and the prices? What's going on in the general economy? Are rates coming down? What's happening in the macro geopolitical environment? There's just a general sense of uncertainty. And so that's weighing on consumers, and we're very carefully watching the trends. While consumers are very anxious, their actual behavior is quite resilient.

Chana Schoenberger (14:25):
Yeah. I mean, so I just visited my first high-end airline lounge and amusingly, it was a lounge operated by one of your competitors, but I got it from you guys because I have one of your cards and your card comes with a Priority Pass card. I thought that I would just use this perk and it's great. You can see why people want to pay extra for it. And it's so interesting that people are thinking about their spending in terms of experiences.

(15:15):
We did an interesting session earlier this year about experience-based spending. The funny thing about it is it's basically just spending the way people always have, but convincing people that what you're doing is having an experience. So it's not "I'm buying a concert ticket," it's "I'm going to a Taylor Swift concert with my friends or with my kids, and we're all going to have this fun time together." What I'm buying is 10 hours of awesomeness and friendship bracelets, not a concert ticket and a flight and a hotel.

Pam Habner (15:44):
We're absolutely seeing that. I always say there's a hierarchy of needs—Maslow's hierarchy of needs. In the consumer world, for customers that are rewards-oriented, the bottom of that pyramid is "earn." You have to have strong earning potential. The next is "burn"—the ability to redeem for things that you really care about. And the peak of that pyramid is "yearn." Earn, burn, and yearn.

(16:51):
As rewards have become ubiquitous—80% of credit cards issued today have some form of reward—more premium customers' needs are moving more towards that "yearn." They want the card that they carry to serve as a key to unlock unique experiences. You just mentioned concerts. We have a partnership with Live Nation at Citi and our customers get early access to tickets for the Lady Gaga tour or the Cowboy Carter tour. So by having a credit card with Citi, you get early access.

(17:48):
But if you have a premium card, you can go to the Strada lounge and get away from the masses behind that velvet rope. Now go to dining: it's getting access to those very difficult-to-reserve seats at the top restaurants or a demonstration by one of the top chefs. It could be a sporting event; we had lounges at the Ryder Cup. Part of the fun part of my job is working with folks across dining, entertainment, and travel to curate these experiences that create real brand love.

Chana Schoenberger (17:48):
In terms of the generations, millennials are getting to the point where they have become grownups and they now need to take on debt for things like mortgages and they are spending on credit cards. What are the different demographics and what you're seeing across the spectrum?

Pam Habner (18:08):
I've pondered this question for many, many years. Are each generation fundamentally different or do they each just grow up and then have similar needs over time? What data would say is that typically people grow up and there's a natural progression of what they're looking for as they mature. So I would say it's less about generation and it's more about life stage.

(19:09):
But it is true, of course, that Gen Z are digital natives. Their expectation of the customer experience is probably the highest of any generation. They want to apply for cards in seconds, they want instant access to their account, and they want everything to work instantaneously and mobile-first. They're going to be on the cutting edge of adopting things like agentic commerce. These new generations keep us on our toes. But if I was a betting woman, I would believe that these Gen Z customers, when they grow up and have kids, are going to have similar financial needs as the millennials of today.

Chana Schoenberger (19:43):
It's also interesting because they are super digital. When I look at my kids, I see that they don't care about privacy at all; they care about convenience. They don't understand why grownups are so stressed about personalization. From their perspective, personalization means that something is giving you what you want when you want it. They're not stressed about the trade-offs in terms of giving up personal info. When I hear financial institutions talk about the personalization wave, I think that's only going to get more as that generation grows up.

Pam Habner (20:24):
Personalization is absolutely what they expect and what we'll have to deliver. However, we do bear responsibility to educate consumers of all ages about the risks of sharing information too broadly. The thing that keeps me up at night more than anything else is the threat of cyberattacks, credit abuse, and fraud. These things are very real and innocent consumers who think they are just being open-minded can fall prey to a lot of these attacks. The US is the most attacked country and the fraud attack rates are higher than they have ever been.

(21:33):
It really is a balancing act. What scares us sometimes as financial institutions is our consumers may want to participate in a financial services app that asks them for permission to gather all of their financial data from multiple banks. Some are very strong apps and can be trusted, others less so. But when a consumer allows Citi data to be shared somewhere else and things go wrong, they're going to want Citi to help them and expect Citi to help them, and in some cases, we're not able to do so. So personalization, yes, but as an industry, it is our job to educate consumers. I'm not sure we're doing enough of that. I have been the chair for the past five years of the Card Policy Council of the ABA, and we are just now convening a committee to do a better job on consumer education about fraud.

Chana Schoenberger (22:19):
Well, this is the question with embedded finance, right? Because as you take the components of finance and embed them in other apps, people don't even realize they're dealing with a bank. So they're not going to give you credit for it, but they will blame you when it goes wrong.

Pam Habner (22:34):
Our job is to always protect our customers and always educate them, but the world is evolving very quickly and consumers need to be astute with the information about themselves and how they're disseminating that.

Chana Schoenberger (22:49):
There's so much AI-enabled fraud. How quickly is AI-enabled anti-fraud working?

Pam Habner (22:57):
I don't think I'm well-versed enough to answer that question, but I will say that AI is evolving very quickly. There's so much to be excited about, but the level of fraud that this tool enables can be a bit terrifying. We hear all the time about fraud tactics where your voice or identity is being replicated. Just as there are dozens of people sitting down at our offices dreaming up great ways to deliver customer value, there are offices with thousands of people around the world dreaming up ways to infiltrate financial services.

(23:57):
We have something called a cyber and fraud fusion center that takes up nearly a whole floor at our headquarters and we are tracking every activity that we can on a global basis and sharing information. It's a huge area of investment and focus.

Chana Schoenberger (24:18):
Yeah, that's very scary. Okay. So I think the theme of 2025 so far has been uncertainty. What are you guys doing in terms of helping customers with economic uncertainty?

Pam Habner (24:53):
One, I think that we're doing our best to give customers a range of products that they can benefit from. A lot of the benefits that we have are designed for travel and entertainment, but also for everyday spend. Whether it's our Costco product with 5% back on gas—that's a great one, by the way—we try to give customers products that have everyday value so that if the economy does take a turn, their credit card is there to help them. Obviously, we are a broad-based financial institution, so we have banking, mortgage, small business, and wealth management products. We advise customers to invest and save to be resilient through any economic cycle.

(25:54):
But as a bank, we also have a group of people whose job is to focus on business resiliency through any situation. Whether that's a natural disaster or a government shutdown, we are there to support our clients. We have a playbook to activate when situations like a government shutdown arise. They can call us on the back of their card or go to city.com and we will help them through that crisis.

Chana Schoenberger (26:32):
Great. Wonderful. Okay. We have time for one question from the audience.

Audience Member 1 (26:51):
You mentioned that when you launched your recent card, you offered a higher reward for those who went into the branches. Can you speak to the connectivity between branch and lending that we don't often see?

Chana Schoenberger (27:05):
It's a good question.

Pam Habner (27:06):
We like to think about our consumers holistically and Citi wants to serve their needs. We often offer relation-based benefits, and that's true between banking and wealth, between card and banking, and card and wealth. We have a broad view of our customers and we want to reward them for a broad relationship. In this case, offering extra points for an acquisition offer to customers in a branch who have a retail banking relationship with us is one way to do that. It's not necessarily unique to Citi; you can see similar programs at B of A and other companies.

(28:04):
Really, that's just our intent—to offer extra value for people who have broader, deeper relationships with us.

Chana Schoenberger (28:14):
Very interesting. Okay. We are out of time, so I want to thank you so much for joining me up here.