性视界

Last year, digitization鈥檚 threat to banks was coined 鈥渂anking鈥檚 Uber moment,鈥� [1] comparing the potential downfall of banks to the gutting we have seen in the taxi industry. As advances in technological innovation and emerging FinTech startups abounded over the past few years, many traditional banks took steps to protect themselves from the dangers of this new disruption. Citi is among one of the more dedicated innovators who has adapted to the changing digital environment in an effort to keep up with rising competition from non-traditional incumbents and entrants.

 

In Citi鈥檚 digital arm, its business model is structured around creating value for a newer type of consumer who prefers quicker methods of banking using digital platforms. An example of this consumer who Citi aims to help is who CEO Mike Corbat refers to as the 鈥渟erial balance checker.鈥� While she used to have to contact Citi鈥檚 call center and endure long wait-times, she can now use Citi鈥檚 online platform and mobile app to check her balance as many times a day as she wants [2]. In this very simple example, Citi is creating value for its customers through digitization.

 

Of course, the company is taking on many more strategic steps to enhance certain operating models that will deliver value to the client. Citi, who was named Best Overall Global Digital Bank for 2016 by Global Finance magazine [3], knew that it would be challenging to completely change the operations of the traditional and massive banking giant, so the company instead took on a smaller approach. They created Citi FinTech, a group comprised of top executives from across the firm鈥檚 many divisions as well as seniors they poached from from tech companies such as Amazon and PayPal [4]. By keeping the group small 鈥� 40 people of the firm鈥檚 230,000 鈥� the hope is that this elite group can operate more like a start-up in terms of speed, agility, adaptability, and experimentation. This unique operating model has not been adopted by any of Citi鈥檚 peers, and is integral to delivering the value that its business model seeks to create.

 

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The group has done significant work since its formation. They created Citi鈥檚 mobile app to increase the ease with which customers bank. They are currently working on releasing an improved app, which is expected to 鈥渁llow direct-payment methods from person-to-person or person-to-company, [and include] a voice, touch or face-activated account log-in [and] an easy credit card payment/check鈥︹�� [5] Citi was also the first bank to launch an app on Apple Watch. Creating the product in an impressive 120 days, Citi鈥檚 entrance into the wearables market was a bold example of the company鈥檚 commitment to fast-tracking its digital rollout [6]. One could argue that it could not have been executed so swiftly if the company were still utilizing its archaic and bulky operating model, rather than its newer and nimbler process under Citi FinTech.

Features of the Apple Watch app included innovative elements that its mobile app lacked, including color images that alerted users to how close they were to their credit limits. The company was able to recognize and fulfill millennials鈥� need for tools 鈥渢hat show them how they are spending in order to become wise about what they are doing,鈥� and in the process created value for their customers [6].

While the company has taken steps to create value externally using digital technology, I believe that they could also be leveraging digitization to create value for themselves. Recognizing the digital shift, they have begun shrinking their physical branch presence by rolling out the concept of 鈥渟mart branches,鈥� [2] but there is still more that can be done. Many of Citi鈥檚 internal processes, including client onboarding, customer relationship management tools, and back office operations are still time-consuming and costly processes. One area in which Citi could invest more is their trade settlements operations. According to a report, 鈥渢he cost of settling trades in the finance industry runs as high as $80 billion a year. If each transaction that requires human verification is included, the figure is much larger鈥� [7]. Similarly to how the introduction of ATMs caused a drop in the need for bank tellers, more digital systems for settling trades could save Citi both the manual time needed to perform these tasks as well as the costs associated with them.

A potential solution comes from the idea of blockchain, whose complex technology creates a ledger on which transactions are recorded for all parties to see, such that the transaction history of any security traded is both traceable and verifiable. Though this technology has not been used for trade settlements yet, if Citi can invest in building a feasible platform based off of the blockchain network, it would be able to significantly improve its business and operating models.

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[1] 鈥淏anking’s ‘Uber moment’ is a ‘big threat’;鈥� Kharpal (2016):

 

[2] 鈥淐itigroup on engaging the digital customer;鈥� (2015):

 

[3] 鈥淐iti Retains Top Honor in聽Global Finance聽Magazine’s 2016 World’s Best Digital Bank Awards;鈥� (2016):

 

[4] 鈥淗ere鈥檚 How Citigroup Is Embracing the 鈥楩intech鈥� Revolution;鈥� Gandel (2016):

 

[5] 鈥淎ll-new Mobile Banking App: Pay ‘Citibank’ Bills Password-less!!!;鈥� Lagura (2016):

 

[6] 鈥淲hy Citi Was the First Bank on the Apple Watch;鈥� Wisniewski (2015):

 

[7] 鈥淏lockchain is Banks鈥� Secret Sauce;鈥� Langner (2016):