The digitalisation trend is “much more evident [in China] than anywhere else,” said Christine Lam Yuk-wah, chief executive officer of Citigroup China and president of Citibank China in an interview.

Lam said the US bank closed “several” physical outlets in the mainland last year and the scale back might continue this year as they redeploy resources.

“The focus of our investment in China has been and will continue to be more in the digital space,” she said.

Since its local incorporation in the mainland 10 years ago, which allows it to make yuan-denominated loans and take all types of deposits from Chinese consumers, Citibank China has yet to profit from its retail banking business, even though the franchise as a whole is making money.

The US bank has profited from selling a 20 per cent stake in China Guangfa Bank for 19.7 billion yuan to China Life Insurance in 2016, and disposing of a 2.7 per cent stake in Shanghai Pudong Development Bank for US$668 million in 2012 .

“It makes sense for Citi and its peers to cut costs and improve profitability by going digital and trimming the physical network in China,” said Yang Yue, a banking analyst at China Zheshang Bank. “Going from offline to online is an inevitable move for banks in China amid the internet boom and the changing consumer preferences. Yet, foreign banks do not seem to have a clear competitive edge in the digital battle, given that the development of internet finance in China is way ahead of the US.”

Yang said wealth management products from foreign banks did not always sit well with local consumers as the product structures are sometimes more complicated and often linked to derivatives.

What is more, consumers have no lack of choice from fintech firms and domestic banks, he added.

“I am happy with some services from foreign banks as they are good at maintaining customer relationship – such as sending bouquets of flowers to me when I shifted my business to a new location,” said Annie Fan, a business owner in Shanghai who banks with Standard Chartered and Societe Generale. “Their online banking is lagging behind Chinese banks. It’s not only for foreign banks in China but overseas as well. When I am in Japan and Singapore, I get better online banking services from Chinese banks at home.”

Zhang Hong, a senior market researcher at market research firm Kantar TNS, said banks in China are building up their digital capabilities as digital is expected to become a major channel for banks to reach out to clients, especially with the rise of the tech-savvy younger generation thanks to China’s internet boom.

To stay relevant, Citibank China has partnered with Alipay and Wechat Pay, two of the nation’s biggest digital payment channels.

At present, over 70 per cent of payment transactions for the bank’s credit cards – launched in 2012 - are settled via digital channels like Alipay, a service from Ant Financial. Ant Financial is an affiliate of the Alibaba Group, which owns the South China Morning Post.

These transactions are expected to rise further in the next few years. The volume of mobile payment via third-party payment services is forecast to top 128.8 trillion yuan this year, a 63.6 per cent rise from 78.7 trillion yuan in 2016, according to iResearch.

Citi’s physical downsizing is not exclusive to China. Across the world, the US bank has exited 31 markets for retail banking, with a remaining presence in 19 markets including 12 in Asia.

On institutional banking, Citibank is also expanding its “China Desk,” a business service that rides on China’s outbound investment boom. Experienced bankers from its mainland operations are dispatched overseas to serve Chinese clients going abroad.

A new desk to further cover the markets under Association of Southeast Asian Nations is in the pipeline this year.

Launched in 2010, Citi now has nine desks in Hong Kong, Singapore, London, New York, Dubai, Johannesburg, Sao Paulo, Kazakhstan and Kenya.

The bank said multinational companies (MNCs) still account for the bulk of its client base, but it is pinning on more growth from Chinese companies expanding abroad.

“Multinationals have always been and will remain a core part of our target market in our strategy,” said Lam. “Equally important, we are in China to provide banking service to local companies with global aspirations and leaders in their respective industries.”

Multinationals accounted for 70 per cent of its institutional banking client base in terms of the number of clients, while the remaining is from Chinese companies, whose revenue contribution could be higher than the breakdown.

For Citibank China, the digital battle is only just shaping up, and winning may be a long way off.

But Lam is unfazed.

“It [retail banking] is a long-term investment and part of the Citi presence in China, which is a very strategic market for us,” she said.