CitiBank Online
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CitiBank Online







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Lee Dubois. CitiBank Online. Overview. CitiBank is one of the most popular international banks and credit card giants in the U.S. Headquartered and Founded in NYC, with their credit card dept. headquarters in South Dakota.
CitiBank Online

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Slide 1

Lee Dubois

CitiBank Online

Slide 2

Overview

CitiBank is one of the most popular international banks and credit card giants in the U.S.

Headquartered and Founded in NYC, with their credit card dept. headquarters in South Dakota.

As of 2007, it is the largest bank in the U.S. by holdings. Its largest sharedholder is Prince Al-Waleed bin Talal of Saudi Arabia.

Founded in 1812

Slide 3

Citibank Online

CitiBank was interested in expanding into online banking, had many variants over the years.

Direct Access vs. Citi F/I

CitiBank F/I, championed by John Reed, was essentially a pure-play bank, owned by Citi but operated separately.

Direct Access was basically the web-enabled version of their old dial-in PC banking system.

Slide 4

Citi F/I

Management envisioned a separate online organization that would eliminate the costs of having buildings with impressive lobbies and having to hire and pay personal attendants.

Research firm Jupiter anticipated a 400% annual growth in online banking. Citi wanted to jump in on this.

Slide 5

Citi F/I

Started in 1997 by John Reed, alongside other competitors such as Wingspan.com, BankOne's pure-play internet bank.

These founders were fueled by excessive optimism and nice predictions, but their services fell short.

Both Citi F/I and Wingspan.com weren't doing too well, and were not gaining as many customers as anticipated.

Slide 6

Citi F/I

Mark Parsells, a former Wingspan.com key personnel, was hired by Citi in 2000, the same day that John Reed announced his resignation. This meant big changes to the Citi online experience.

Seeing that the Citi F/I service was not meeting expectations and was costing too much for the company to continue, Parsells took over the helm to re-vamp the online experience.

Slide 7

The Competitive Environment

This era gave way to different competition:

Traditional banks offering online access to accounts and bank services

New pure-play banks like E-Trade Bank and NetBank, and traditional banks that were starting separate pure-play banking systems like Citi and BankOne.

Slide 8

Traditional Banks: The Good Side

Large established base of customers.

Wide variety of products.

Well established brick and motar presence.

More percieved trust.

Many of these larger banks had enrolled many account holders into online services.

Slide 9

Pure-Play Banks: The Good Side

Little if any fees.

Generous interest bearing checking

Cutting edge technology service like account access on your phone.

E-Trade bank, NetBank, Wingspan, Bank Direct, etc fall in this category.

Internet banks were not able to attract the growth and volume they wanted, however, as e-trade bank had only 290,000 accounts. International Internet-only banks were doing better, such as Egg in the UK, with over 1.2 million customers

Slide 10

Houston, We Have A Problem

Why was online banking flawed? Why was it not doing well?

Research was gained from internet users of 1997 and 1998 in developing online banking solutions.

These people were early adopters of technology, people who were comfortable with technology and rarely doubted the net's security.

They also did not like to go into branches and made choices primarily by price.

Price-based shoppers are only looking for the best deal – not much money to be made there.

Slide 11

Houston, We Have A Problem

Who they should have researched was the late adopters of 1999 and 2000.

These customers wanted a trusted traditional brand that would keep their information secure, and deliver great service.

They were less tolerant of glitches and less net-savvy.

They were also more risk-adverse

Slide 12

Houston, We Have A Solution!

Scrap the pure-play citi FI and go with a more click-and-mortar approach to online banking.

The new Citibank Online worked hand-in-hand with traditional methods of banking.

Features of this service would include services similar to that of online banking now at the local banks, such as account summaries and detail, funds transfer, loan payment, and a lot more, including a fully customizable homepage and no additional fees.

Citibank Online was planned to merge the existing online services, F/I and Direct Access. The product would be launched in 12 weeks. And it did, on Oct 12, 2000. It was a major success in its initial form, exceeding goals.

Slide 13

Okay, Now How Are We Doing?

Citibank Online would evaluate its performance in two ways:

Use data and ratings from an indipendent rating service, and they would also

Figure out their contribution to return on invested capital by evaluating how Citibank Online customers were different from traditional customers, what they were doing, etc.

They wanted to be the #3 online banking service as rated by the Gomez ratings by the end of 2001.

Slide 14

Wow...

After only 5 weeks on the market, the Citibank Online service was ranked number 1!

Back when Parsells was first hired (when John Reed was in charge), Direct Access was number 9 in the Gomez ratings, and Citi F/I was rated all the way down at number 17.

By completely revamping, and combining these two services in different ways to form Citibank Online, operating costs were dropped by 50% and new account acquisition was up by 50% as compared to 1999.

Slide 15

Again, How Are We Doing?

Their ROI was measured using 4 metrics:

Improvement in Attrition (Account Cancellation) Rates: Citibank Online had lower attrition rates than did the traditional users.

Higher Balances: The online users tended to have more money in their accounts.

New Customers and Activations: Citibank online motivated it's customers to actively attract new online customers, and tried to get it's traditional customers to sign up, making it easy for them to just enter their ATM card number and pin to activate the service.

Cross-sell opportunities: For different services like direct deposit and online bill pay. Incentives to sign up for these services.

Slide 16

Again, How Are We Doing?

Their ROI was measured using 4 metrics:

Improvement in Attrition (Account Cancellation) Rates: Citibank Online had lower attrition rates than did the traditional users.

Higher Balances: The online users tended to have more money in their accounts.

New Customers and Activations: Citibank online motivated it's customers to actively attract new online customers, and tried to get it's traditional customers to sign up, making it easy for them to just enter their ATM card number and pin to activate the service.

Cross-sell opportunities: For different services like direct deposit and online bill pay. Incentives to sign up for these services.

Slide 17

Just When They Thought it was Safe

So Citibank Online is rated #1 by the Gomez ratings, but there is always opportunity for someone else to step in.

Hybrid banks were emerging. These were mostly internet-based banks (or banks with a very strong internet presence) that had nontraditional locations/branches to do simple transactions.

Juniper, for example, mostly online, using the existing ATM network, and allowing for simple transactions to be done at certain Mailboxes, Etc locations.

Also, many pure-play banks were establishing physical locations and/or acquiring many brick-and-mortar organizations to suit their needs for physical locations, such as NetBank did with Market Street Mortgage.

Slide 18

Just When They Thought it was Safe

80% of new products sold by banks are done in person. That's why hybrid banks were becoming so big.

Directbanking.com opened a physical branch in Boston, growing the bank's assets by 22 million in just 4.5 months.

Other firms might be able to move into similar territory as Citibank online, such as brokerage firms, insurance agencies, and credit card issuers. With the low cost of technology they could do many things.

Slide 19

Just When They Thought it was Safe

Since Aug 2001 (until book publish date), Citibank Online has signed up 9 million new user accounts.

They were the first bank ever to offer aggregated account services (letting consumers consolidate their banking tasks and services online) and doing things like getting insurance quotes or tracking their portfolios as Salomon Smith Barney.

Even though they're number one and are doing well, they could perhaps do a few things to help them keep this position and ensure that competitors don't overtake them.

Slide 20

Any Suggestions?

Value vs. Price

Citibank Online has traditionally used the value play model more than the lowest cost provider model offered by other internet only banks.

They should continue to do so, but in doing that they also need to distinguish their products and services from everyone else's who might have a lower price.

If Citibank Online wants to have the best product/service and keep their #1 rating, they'll need to have a good price to charge and justify that price by providing superior product and customer service.

Lowest price does not mean best deal.

However, they do not want to over-charge either.

Slide 21

Any Suggestions?

Trust

How do they get trust from their customers, and more importantly, how do they maintain it? It's not hard for them.

They've got a reputation as a bank that's been around for a while with many customers, and they also have the physical presence to back them up. People nowadays still like to have a building they can go to where their money is at, and have an actual personality (teller) behind the counter.

Eventually I believe online banking will become as commonly accepted as the ATM is today, and it is already starting to be come commonplace.

Who would you rather bank with?

Do it right, the first time. That's when trust comes about

Slide 22

Any Suggestions?

Emerging Models – Hybrid Banks

In my opinion, hybrid banks do not pose as much of a threat to Citibank Online. Citi has a reputation as a great bank both traditionally, and online.

Hybrid banks are basically just pure-plays who are trying to meet customer needs for a physical presence. This is great, and I'm sure it will probably work well, but not to compete with Citi.

Let's say you need access to a physical location, who do you go to? A teller / officer at Citibank who knows about the business, or some average Joe at the UPS store?

Plus, Citibank Online is rated number 1, and has the same features and benefits that rival that of the pure-plays. So really, there might not be much competition.

Slide 23

Any Suggestions?

Innovation

I can see traditional banks with a strong online presence growing rapidly.

Citi could do a few things to successfully continue to grow, from small to big.

A new innovation: Citibank could start up its own online funds transfer site to compete with PayPal.

This service would not be tied to any Citi account or account holder. This would be something that would make it easy for people to move money around, transferring funds in and out of accounts with other banks to different people, doing credit card transactions, etc, the same way as PayPal.

Citi could partner with big companies such as PayPal did with eBay, to provide secure payment/money receipt methods without having to give out any numbers.

Slide 24

Big to Small

Innovation

Other ways Citi could grow is by opening more physical branches. More physical branches means more Citibank Online customers = more growth.

Even something as simple as online E-statements sent right to customers email. This way, lots of money can be saved on paper, postage, and office supplies. Citi could use this extra money to expand even more.

Slide 25

Let's high-tail it out of here

THE END!


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