CitiBank Online

1. CitiBank Online Emlyn Jacoby 12 Dec 2008 A.Gauvin

2. Why Online Banking ??? • Replaces the cost of handling paper checks an walk up retail services with that of low cost computer based services • Online banking touts no fees and charges higher interest rates on accounts • Convenient an efficient • Immense opportunity for top line growth amongst affluent professionals and exploiting the potential to create super financial services such as insurance and brokerage services • Creates increased customer loyalty with new earning streams that become available

3. CitiBank Online • Started in 1997 by John Reed whom was the chairman and co-CEO • Other Competitors included Wingspan.com and BankOne’s pure play internet banking • Citibank had tried several online strategies with multiple internet based products over 2 year period • Reed championed the creation of Citi F/I in 1997 • Citibank was committed to developing an effective internet presence an wiling to experiment with internet strategy

4. CitiBank Online • Mark Parsells, former Wingspan.com employee became president an chief operating officer in 2000, Reed resigned the same day • Parsells knew he had to prepare a strategy for long term competitors that lacked short term profit expectations • He became responsible for the online retail strategy an implementation • CitiBank over the years, with their many strategies were very interested in growing into online banking • Citibank’s initial online consumer products took two forms, Direct Access an Citi F/I

5. CitiBank Online: Direct access • Web based retrofit of Citibank’s old dial-up PC banking service • Primary purpose was to inform account holders with basic information regarding their accounts • Latest incarnation of Citibank’s long running effort to move customers to electronic banking • Direct Access positioned as a value added service for traditional retail banking

6. CitiBank Online: Citi f/i • John Reed the mastermind behind it • Was the newly formed stand alone, internet only banking unit • Separate organization within Citibank and competing wit its own traditional banking business • Jupiter researched an predicted a 400% annual growth in on-line banking that would attract large amounts of capital • Mr. Reed an others were filled by high expectations and false predictions that ultimately fell short • Competitor BankOne, headed by Parsells launched its Wingspan.com online banking unit in just 5months

7. CitiBank Online: Citi f/i • Both Citi F/I and Wingspan.com weren't doing as well as they were expecting to do and were not gaining as many customers • After more then 2years of product development Citibank launched Citi F/I to the public • Initial reception was lukewarm so hired Mark Parsells, Wingspan key employee to improve Citi F/I • Parsells became head of Citi F/I in February 2000 and faced difficult situation • Knowing that Citi F/I was trailing expectations as it had taken too long, cost to much money with little in return, Parsells took over

8. Competitive Environment • When many were crafting their online banking initiatives the online banking industry took 2 forms: • Traditional Banks which would offer that of web access to existing retail accounts • Pure-play banks or Internet–only banks such as E-trade an Netbank whom only had few key selling points such as fees, access accounts through cell phones and PDA’s

9. Advantages of Traditional Banks • Large establishment base of existing account holders • A wide variety of financial products • A well established brick ‘n mortar presence • Generate greater trust among banking clients • Larger banks had successfully enrolled several million account holders in their online services

10. Advantages of Internet-only Banks • There were few or if any fees • Generous interest-bearing checking accounts • Cutting-edge technology based services • Internationally internet-only banks were more successful. The British internet only bank, Egg had over 1.2million customers

11. Fatal flaws of on-line banking • Internet only banks were based on 97’ and 98’ research of on-line users • People of this day and age were referred to as the early adopters whom rarely doubted the internet’s security • They despised going into branches • They disliked old-economy brand names • Were named priced based customers as they made choices primarily based on price • Price based customers were always looking for the best price therefore not loyalty an not profitable customers

12. Fatal flaws of on-line banking • Customers whom should have been targeted were online customers of 99’ and 00’ termed the late adopters • These new on-line customers wanted a trusted, traditional brand that would secure their personal information • Late adopters were less comfortable with technology an less tolerant of glitches • More risked averse making them more focused on usability and security

13. Citibank's Online Problem Solver • Parsell scraped the pure-play Citi F/I in favor of a new bricks-and-clicks strategy • Rather then working as a separate entity, would work within the traditional bank • Offer a new strategy which was a personal financial portal, which would include services similar to online banking now at local banks such as account summaries etc. • Improved Citibank online would merge the on-line services of Citi F/I and Direct Access in creating a new product in a time frame of less then 12 months

14. Performance Ratings • Citibank wanted to set performance goals for its on-line operations an did so in 2 ways: • Judging Citibank Online by ratings from independent rating services • Citibank Online’s goal was to be ranked number 3 by end of 01’ from the Gomez rankings • Measure Citibank’s Online’s contribution to return on the invested capital by assessing how their online customers differed to that of non-online customers

15. Impressive Work !!! • When Parsell was hired Citibank's product Direct Access was ranked number 9 and Citi F/I was ranked a lowly 17 in the Gomez rankings • 14 months ahead of schedule and after being in the market for only 5 weeks, Citibank Online was ranked number 1 • This was the first time a traditional bank had been ranked at number 1 • In reaching their desired goals, expenses were cut by 50% and account acquiring in first quarter was up by 50% to that of last years

16. Return on Investment (4) • Improvement in Attrition rates - had lower account cancellation rates then the traditional bank users • Higher Balances - Online users tended to have higher balances and more accounts • New customers and Activations - Provided new ways of attracting customers, activate existing off-line account holders making it easier for them just to enter their ATM card number • Cross sell opportunities - Offering incentives for users to expand their online usage for services such as direct deposits

17. Emerging Competition • The emergence of Hybird banks was on the rise. These internet-based banks had a very strong internet presence that was based out of non-traditional locations to do simple transactions. • The hybrid banks were becoming so big so rapidly as 80% of their products sold by banks were done in person • Pure-play banks were heading in the other direction an were establishing physical locations and ended up by acquiring many brick ‘n mortar organizations to suit their physical location need, such as NetBank.

18. Emerging Competition • Internet only bank Directbanking.com opened a physical branch in Boston, increased the bank's assets by 22 million in just 4.5 months compared to the same time it had been online • As of Aug 2001, Citibank Online had signed up 9 million new user accounts through its web portal • They were the first bank ever to offer aggregated account services, make credit card payments, loan payments and get information regarding life, auto, home insurance or track their portfolios as Salomon Smith Barney • The technical barriers of entry are very low so other firms might be able to move into similar territory as Citibank online, such as brokerage firms, insurance agencies, and credit card issuers

19. Success Criteria • CitiBank are operating at a very good level but if they wanted to hang on to their number one ranking, they might want to re-access certain criteria's to keep them at the top and leaps ahead of their competitors • Value versus Price: • Trust: • Emerging Models: • Innovation:

20. Recommendations • Value versus price: -CitiBank is considered a value play opposed to a low cost (low fees) -More emphasis on their pricing structure as the cheapest price is not always the best but you don’t want to over charge (visa versa) -Differentiating their products/services from competitors and offering at a price that will be at a value for its customers

21. Recommendations • Trust: -First impressions last the longest. -CityBank has a good reputation as a bank that has been around for a long time -People or late adopters still have a hard time with technology and still prefer to actually walk into a bank and speak to representatives -ATM’s are more commonly used now and online banking will take the same route and duration as ATM’s did -What is your preference?

22. Recommendations • Emerging Models: -There are Hybird banks, but these are banks that are only pure-play and exists on the web only -Hybird banks don’t posses the same presence as CityBank does -CityBank is not rated number one for no reason, they offer the same features and services as pure-play banks and have physical banking locations -If you encounter a problematic situation that needs to be resolved, users can go to an actual teller at a physical CityBank where as if Hybirds only have on-line assistance and no one to personally speak too. -Users only feel more secure in these instances

23. Recommendations • Innovations: -CityBank successfully exploited the multichannel link by adding the clicks n’ mortar -City bank should think about adding more physical locations so that it increases their public awareness therefore generating more customers _ Notification via text message or an email regarding any movement pertaining to your account -Occasional reminders to account holders pertaining to when next loan payments are due -Next step could be similar to PayPal and partner with a big company so that payments can be made without having to deal with numbers, less confusion.