Question

e-Business Strategy and Models in Banks : Case of Citibank

E-business strategy in Citibank:

Banks today are up-to-date with both the pros and cons of the internet. They are aware of the opportunities and threats that are associated with the Web. Not a single traditional bank is brave enough to face investment analysts without an Internet strategy. But even a very thoughtful approach to the Web may do no good to the company/ organization.

The main purpose behind launching online banking services is to provide the customer an alternative way which is more responsive and less expensive i.e. is cost friendly. CitiDirect is the centre of the Citibank global e-Business strategy. The Business strategy of Citibank is to :

•             - CONNECT their customers to their web enabled services,
•             - TRANSFORM their capabilities into new Internet offerings and
•             - EXTEND our reach into new markets via integrated infrastructure solutions and 
partnerships with technology companies or e-Commerce market makers. They have innovative e-business solutions like:

1) CitiPhone – 24 hours Phone Banking Service

2) ATMs- Automated Teller Machines


3) CitiAlert – GSM notifications service


4) E-Card – Internet Shopping Card

5) CitiDirect – Corporate Internet Banking Service, and

6) Citibank Online – Retail Internet Banking Service.

Citibank is committed to an “e-business strategy-Connect, Transform and Extend-was to web enable its core services, develop integrated solutions and reach new markets.” (McCauley & Khan, 2002, p.1). Their strategy is to position Citibank as the embedded Financial Services engine that powers the Internet economy. Citibank tries to differentiate itself from competitors by using its customer service efficiently. Several services are offered to their clients. Citibank offers telephone hotlines, customer relations managers to give individual care and attention to address the issues of their customers, and service experts. Citibank has been investing in technology for the front and back end of the banking systems, consistently for a long time now. Citibank was also committed to its customers. According to the case study, ‘Citibank’s vision was to become the world’s leading e-business enabler’. Citibank had over 268,000 employees located in over 100 countries and their focus was to embed their services into the everyday lives of the local population. It’s a bank that has its roots spreading all over the country (US) as deep as any local indigenous bank, offering diverse products, building a broad customer base, actively participating in the social community and recruiting staff and senior management from the local population and hence guaranteeing employment and stability to the economy.

Apart from being committed to employees and customers all over the world, Citibank has strong brand recognition and continues to invest in technology. The leading Citigroup formed “alliances with Oracle, Commerce One, Inc., SAP AG, Wisdom Technologies and Bolero.net” to help metamorphosis of its company to an e-business model, to place itself strongly within the technology sector. In 2000, four companies got together with Citibank to form Financial Settlement Matrix.com – It is a company that connected buyers and sellers in e-marketplaces with credit, payment processing and other services through multiple participating banks and financial service companies”. Citibank is always open to adjustments to adapt to the ever-changing business environment and thus it obtains the place of one of the most successful banking chains in the world. Citibank, in its pursuit of transforming its traditional assets to digital assets has established departments necessary to manage the process. Citibank formed the Internet Operation Group which shouldered the responsibility of distributing Internet activities among e-Citi and all other business units. Shortly after that, e- Consumer and e-Business segments were established with the aim of infusing internet to the entire customer and corporate banking activities and services. After a while, e-Capital Markets and e-Assets Management departments were also established. The e-Business unit has the task of developing the software needed to set clients up with electronic business accounts, utilizing both IT and business people. The e-workplace gave a tremendous boost to Citibank when it was in its pursuit of transitioning from the traditional way of doing business to the electronic way. Constant attention is given to development in order to make upgrades in the e-business model. The key to manage the flow of money, for its corporate consumers through the World Wide Web was delivering an integrated solution that would “enable its corporate customers to conduct transaction on-line”. Citigroup desired to be the middle intermediary between buyers and sellers for any sort of transaction. Their strength is the customer-centered approach including “response time, technology and support” which gains the confidence of the customers on the products of the bank. Citigroup is dedicated towards creating products that cater to different industries and business needs by taking appropriate steps, be it investing thousands of millions of dollars in the online technology or starting e- business groups. By the end of 2000, customers had begun demanding electronic invoicing, online payments guarantees and digital receipts stored online and automatic application of payments to account receivables. Citibank’s strategic intent is to convert its traditional money management business into an e-business framework. Porter had accorded two main ways for a company to compete on the global front. One was cost advantage and the other was differentiation (Porter, 1980). And Citibank’s strategy was not to compete on price and was bored rooted to the differentiation aspect. Since there are many other companies which market similar products and services, Citibank bases its differentiation on customer service. Traditionally, offering telephone hotlines, product consultants who provided service expertise, relationship managers who understood clients’ needs and expectations, and most important, continuous involvement in investing in technology to support both the front-end

and the back-end electronic banking systems”. In order for the transformation of traditional assets into digital assets, to be successful, the company must maintain or enhance its differentiation. Since the company’s differentiation is based on customer service, that means that in the transformation from traditional to digital assets the company must continue to be highly responsive to the customers’ current and future needs and cater to the expectations of every single client without any fail or bias, and must do so to a higher level than the competition and set a higher standard than that set by the other competitors in the market. The alliance with the four companies Oracle, Commerce One, Inc., SAP AG, Wisdom Technologies and Bolero.net helped the Citigroup to transform and grow. In earlier occasions, the company had invested millions of dollars on its own in multiple areas of e- business, and had miserably failed. As technology is not Citibank’s field of expertise, it found keeping in sync dealing with constantly changing technology to be an expensive battle, which it ultimately lost. However, by 2000 Citibank learnt from its failure. Taking lessons from its experience it changed its strategy to one of garnering alliances and using its partners’ strengths to create the technological infrastructure that the company needed to access markets and meet its customers changing demands. Working through alliances increased its effectiveness, reduced Citibank’s risks and costs, and allowed it to remain pliable in meeting changing technological and customer demands. Both in the short term and long term, the customer’s demands vary. According to McCauley and Kahn (2002), one of the most important hurdles for Citibank to overcome in canalizing customers from traditional to digital service was addressing their deep seated concerns about security. While to some extent this troubled Citibank’s efforts in rolling out Web-based applications, it did actively implement “multi-layered security architecture... public and private access keys, single-use passwords and multiple authorization controls” in order to meet customer needs (McCauley and Kahn 2002, p. 9). To add to it, with digital processing it aspired to transform repeatable processes that could be “commoditized” into an efficient digital factory. The transformation of goods and services (or things that may not normally be regarded as goods or services) into a commodity is known as commoditization. Commoditizing repeatable processes improves efficiency, but also gives scope to resources for additional regional emphasis i.e. localization. The strong brand name of Citibank is a resource that translates into increased trust as a “trusted provider” when competing with Deutche Bank and other competitors. In fact, most Fortune 500 companies assign value to Citibank’s specific offerings, and prefer it to other international payment providers. Citibank, then, offers multiple areas of value to customers. The evidences of constant work in the field of imbibing recent technologies and adjusting to the changing business environment are many. The cooperation of the software giant, Microsoft and financial giant, Citibank led to the reinforcement of high standards. “With a global network spanning more than 100 countries, Citi will benefit from this collaboration because the CitiDirect BE platform will help monetize its best-in-class service offerings and broad geographic coverage, while taking full advantage of Microsoft’s expertise in platform engineering, development of independent software vendor communities, and product life- cycle management,” read an article on internet.

Thus the commitment of Citibank to deliver global services and enhanced value through world-class partnership and innovative e-business solutions that meets the customer’s expectations in very evident and worth trusting. But the question that is worth focusing on now, is whether this value translates into a competitive advantage which translates into additional profits. The focus now would shift to question how unique are the solutions offered by it. Soon the cutting edge technological capabilities might become ‘hygiene factors’ which will be considered to be required and not a competitive advantage and thus would not qualify for differentiation. Potential growths in e-business are always happening and continuous developments are indispensable. More and more companies are willing and opting to do everything from banking to purchasing to marketing online. Thus it becomes very essential for Citibank to align itself with the right partners in order to maintain their standards and their stance in the e-business sector. Company executive Tom Edgerton stated, “In the future, it won’t be what your company can do, but what the network of companies you work with can provide”. In order for Citi to continue to grow, it must evolve in its e-Business model and develop unceasing updates to its online products. Expanding on their existing good reputation, enhanced web features and exceptional customer service, would be the fundamental opportunities for Citibank. According to Edgerton, “Citibank brings considerable value to potential alliance partners. They’re interested in our brand, our financial services expertise, our global presence, our strong customer relationships and position as a trusted provider, as well as our knowledge of specific industries and international markets”. The regionalization and specialized processing centers that Citibank has developed has provided them with “scale and continual improvement opportunities”.

Like all other sectors and organizations, Citibank is also dedicated towards improving information management practices. This in turn improves the efficiency of business processes, the demands of compliance reg.

Q1. Propose a Business Model Canvas for the Banking Sector regarding Citibank Case.

Please no hand writing, please make sure you give a unique answer (not copied one).

This question is from ECOM 421 e-Business Strategies and Business Models course.

Answer 1

e-Business Stra and Models in Banks: Case of Citibank Key Partners Key Activities Value Propositions Customer Relationships Partnership with Oradle, Commerce One, CONNECT theircustomers to their webTo provide customers a more Inc., SAP AG, Wisdom Technologies and enabled services Bolero.net Global customers responsive and efficient customer Efficient customerservices TRANSFORM their capabilities by introducing new Intemet offerings Citibank offers telephone hotlines customer relations managers to give individual care and attention to address the issues oftheir customers, and service experts E-marketplaces like Financial Settlement Matrix.com Ensure cost effectiveness Trusted technology partnership with Microsoft EXTEN D their reach to newermarkets through integratedinfrastructure solutions Key Resources Channels Global reach 268,000 employees located inover 100 countries Huge social community Fortune 500 Company, an u brand name and "Trusted Provider CitiPhone-24 hours Phone Bankins Service ATMs- Automated Teller Machines ndisputable CitiAlert-GSM notifications service E-Card -Internet Shopping Card CitiDirect-Corporate Intemet Banking Service Citibank Online-Retail Internet Banking Service Costly maintenance of in-house technology, betterto outsource it to Technology partners Changing technology and incre ased demandfrom customers Need for implementing multilayered security architect Revenue Streams Commodisation of goods and services CitiDirect BE platform will help monetize its best-in-class service offerings and broad geographiccoverage