{"id":19977,"date":"2016-11-18T17:30:31","date_gmt":"2016-11-18T22:30:31","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/citi-banking-on-a-digital-future-for-financial-services\/"},"modified":"2016-11-18T17:30:31","modified_gmt":"2016-11-18T22:30:31","slug":"citi-banking-on-a-digital-future-for-financial-services","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/citi-banking-on-a-digital-future-for-financial-services\/","title":{"rendered":"Citi: Banking on a digital future for financial services"},"content":{"rendered":"


\n<\/a>Citi is among the world\u2019s largest and most globally active financial \u201csupermarkets\u201d, offering a wide range of banking products to consumers and businesses. Across its business lines\u2014from payments services to investment banking to household mortgage lending to traditional deposit-taking and cash management\u2014new technologies have begun to emerge that challenge Citi\u2019s position by offering cheaper, faster, or more convenient alternatives. In the consumer banking space, in particular, Citi has begun to develop responses to technological change that, if expanded and enhanced further, can avoid most of the major threats now seen.<\/p>\n

In many cases\u2014such as peer-to-peer lending platforms and some consumer payment platforms\u2014the gains provided by FinTech challengers are from disintermediating, or eliminating the bank as the middleman at the heart of the financial system. In others\u2014like anonymous virtual currencies and new remittance services\u2014the improvements are generated by utilizing an entirely new technology or software to offer services that solve problems banks are not currently addressing.\u00a0 And in others, still, startups and established companies have managed to develop convenient applications that more accurately match consumer lifestyles and expectations.<\/p>\n

Citi has responded to these challenges (and the opportunities underlying them) by altering both its business and operating models. The changes to the business model are readily apparent to consumers, who benefit from expanded services. Like all big banks, Citi has offered mobile banking via an app for several years; recently, with the creation of Citi Pay, they have introduced a mobile wallet that allows customers to make online and in-app purchases seamlessly, as well as in-store payments using Near Field Communication (i.e., tap and go).[i]<\/a> Citi jointed the new clearXchange network earlier this year, which will enable its customers to transfer payments\u00a0 directly from their bank account to anyone, using the recipient\u2019s phone number or email address.[ii]<\/a><\/p>\n

\"applewatch\"<\/a><\/p>\n

In both these cases, Citi stands to benefit by expanding its services to match those offered by emerging competitors. Even though it is not the first mover, it has the advantage of an already large and relatively sticky client base, so adding comparable services should enable the bank to maintain customers who don\u2019t want the friction of switching to entirely new providers just to gain access to these services.<\/p>\n

At the intersection of business and operating models, Citi\u2019s relatively advanced global technology infrastructure\u2014rather than disparate regional or product-specific systems\u2014enables it to achieve the kind of scale necessary to provide high-touch local services.[iii]<\/a> Many of its competitors, including both smaller regional banks and global players whose regional or product operations are managed independently, lack the ability to cost-effectively provide such holistic, customer-centric service. In order to continue to differentiate on the basis of customer service, it must highlight the benefits of these services to customers, particularly the younger segment that may only derive value from digital\/online services.<\/p>\n

Also at the intersection of business and operating models is Citi\u2019s November 2016 decision to launch a global API developer hub.[iv]<\/a> This hub outsources innovation to the global community of software developers, as well as to the FinTech and consumer products industries. In doing so, it will likely bring new services to the bank\u2019s current portfolio by leveraging these external parties\u2019 desire to gain access to Citi customers. It is unlikely that such a large, regulated institution would be nimble enough to succeed at developing the kinds of new technology that push the industry forward, so this decision enables the bank to partner for the purpose of innovation.<\/p>\n

\"\"<\/a><\/p>\n

One area where Citi risks going too far is in the transformation of physical branches. Like many banks, Citi has scaled back its branch network to focus on \u2018smart branches\u2019, which employ machines rather than tellers and bankers.[v]<\/a> While this strategy is highly cost-effective, it risks weakening the bank\u2019s customer-service value proposition and alienating older customers and others who are less enthusiastic about banking\u2019s digital transformation.<\/p>\n

The major non-competitive threats Citi faces from increased digitization are security and compliance risks. Cybersecurity is a major concern for financial institutions, especially given the sensitivity of their data. Citi\u2019s $300 million annual spend and relatively advanced information security capabilities have kept it safe thus far, but adding additional digital and web-based products only increases the opportunity for cybercriminals to exploit vulnerabilities.[vi]<\/a> In terms of compliance, additional digitization has the potential to enable criminal actors to gain access to Citi\u2019s services, thereby violating anti-money laundering regulations. Citi must modernize its KYC (know your customer) processes to ensure that it can verify all its clients, possibly by utilizing biometric information.<\/p>\n

Citi is well positioned to continue to take advantage of opportunities offered by digitalization. By updating its operating (and its innovation) model in key ways along with its business model, it can ensure further evolution to match emerging competitive threats.<\/p>\n

(792 words)<\/p>\n

[i]<\/a> Christopher Brown, \u201cCitibank launches Citi Pay mobile wallet and NFC payments service.\u201d NFC World, 10 November 2016. <http:\/\/www.nfcworld.com\/2016\/11\/10\/348394\/citibank-launches-citi-pay-mobile-wallet-nfc-payments-service\/<\/a>>.<\/p>\n

[ii]<\/a> Business Wire, \u201cCiti Joins Early Warning\u2019s clearXchange Network,\u201d 28 September 2016. \u00a0<http:\/\/www.businesswire.com\/news\/home\/20160928006360\/en\/Citi-Joins-Early-Warning%E2%80%99s-clearXchange%C2%AE-Network<\/a>>.<\/p>\n

[iii]<\/a> McKinsey & Company. \u201cCitigroup on engaging the digital customer.\u201d Interview, June 2015. <http:\/\/www.mckinsey.com\/global-themes\/leadership\/citigroup-on-engaging-the-digital-customer<\/a>>.<\/p>\n

[iv]<\/a> Citigroup, Inc. \u201cCiti Launches Global API Developer Hub to Enable Open Banking.\u201d Press Release, 10 November\u00a0 2016. <http:\/\/citigroup.com\/citi\/news\/2016\/161110b.htm?linkId=31022950<\/a>>.<\/p>\n

[v]<\/a> McKinsey & Company. \u201cCitigroup on engaging the digital customer.\u201d Interview, June 2015. <http:\/\/www.mckinsey.com\/global-themes\/leadership\/citigroup-on-engaging-the-digital-customer<\/a>>.<\/p>\n

[vi]<\/a> John Goff, \u201cCan JPMorgan, Chase, Citi, others protect customer data from cybercriminals?\u201d\u00a0 Crain\u2019s New York<\/em> Business<\/em>, 20 April 2015. <http:\/\/www.crainsnewyork.com\/article\/20150420\/TECHNOLOGY\/150429994\/can-jpmorgan-chase-citi-others-protect-customer-data-from-cybercriminals<\/a>>.<\/p>\n

photos:<\/p>\n

http:\/\/www.dianliwenmi.com\/postimg_4744784.html<\/p>\n

https:\/\/online.citi.com\/US\/JRS\/portal.c?ID=MobileLiteApp<\/p>\n

https:\/\/thefinancialbrand.com\/16452\/citibank-new-york-hong-kong-flaship-branches-of-the-future\/<\/p>\n","protected":false},"excerpt":{"rendered":"

Despite having been transformed by technology over the past half-century, the banking industry is threatened by increased digitalization, particularly the rise of start-ups that utilize technological solutions to provide better services at lower costs. Nevertheless, most large banks are uniquely situated to take advantage of the opportunities posed by advanced technologies. Citi, in particular, has transformed both its operating and business models in exciting ways; by continuing to lead in the industry, it will ensure its role at the center of the global financial system for another 200 years.<\/p>\n","protected":false},"author":2032,"featured_media":20080,"comment_status":"open","ping_status":"closed","template":"","categories":[2336,2050,698,385,845,2205,2797],"class_list":["post-19977","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-apis","category-app","category-bank","category-banking","category-cybersecurity","category-digital-banking","category-mobile-banking"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/digitization-challenge-2016\/","yoast_head":"\nCiti: Banking on a digital future for financial services - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/citi-banking-on-a-digital-future-for-financial-services\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Citi: Banking on a digital future for financial services - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Despite having been transformed by technology over the past half-century, the banking industry is threatened by increased digitalization, particularly the rise of start-ups that utilize technological solutions to provide better services at lower costs. 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