Emlyn Jacoby
12 Dec 2008
A.Gauvin
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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 online services of Citi F/I and Direct Access in
creating a new product in a time frame of less
then 12 months
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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 nononline customers
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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
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Improvement in Attrition rates
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Higher Balances
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New customers and Activations
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Cross sell opportunities
- had lower account cancellation rates then the
traditional bank users
- Online users tended to have higher balances and
more accounts
- Provided new ways of attracting customers, activate
existing off-line account holders making it easier for
them just to enter their ATM card number
- Offering incentives for users to expand their online
usage for services such as direct deposits
◦ The emergence of Hybird banks was on the rise.
These internet-based banks had a very strong
internet presence that was based out of nontraditional 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.
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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
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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
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Value versus Price:
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Trust:
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Emerging Models:
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Innovation:
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
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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?
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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 online assistance and no one to personally speak too.
-Users only feel more secure in these instances
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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.
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