Citibank’s Transformation of Traditional Money Management Into E-Business

Citibank’s strategic intent is to convert its traditional money management business into an e-business framework. How does Citibank transform its traditional assets into digital assets? What issues, if any, do you envision that Citibank must overcome in order for the implementation to be successful?

According to Porter two main ways for a company to compete are on cost advantage or on differentiation. Citibank chose not to compete on price, but instead chose to compete on differentiation.

Since many other companies have similar products and services, Citibank bases its differentiation on customer service. Traditionally, this involved “offering telephone hotlines, relationship managers who understood clients’ needs, product consultants who provided service expertise and most important, continuous investment in technology to support both the front-end and the back-end electronic banking systems”. In order for “successful” transformation of traditional assets into digital assets 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 must do so to a higher level than the competition.

One main way that Citibank achieved transition from traditional to digital was via alliances with such technological companies as Oracle, Commerce One Inc, SAP AG, Wisdom Technologies and Bolero.net. Earlier the company invested millions of dollars on its own in multiple areas of e-business, and failed. Technology is not Citibank’s area of expertise, and it found dealing with constantly changing technology to be an expensive struggle, which it ultimately lost. However, by 2000 Citibank had 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 reduced Citibank’s risks and costs, increased its effectiveness, and allowed it to remain flexible in meeting changing technological and customer demands.

Customer demands varies, both in the short term and long term. According to McCauley and Kahn, one of the most important obstacles for Citibank to overcome in migrating customers from traditional to digital service was meeting their deep seated concerns about security. While to some degree this hindered Citibank’s efforts in rolling out Web-based applications, Citi 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 (2002, p. 9). In addition, with digital processing it looked to transform repeatable processes that could be “commoditized” into an efficient digital factory. Commoditizing repeatable processes improves efficiency, but also allows resources for additional regional focus — localization. So too, Citibank’s strong brand name 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 key question, however, is whether this value translates into a competitive advantage which translates into additional profits. Though Citibank met their customers’ needs in the area of information technology, how unique is what it offered? Cutting edge technological capabilities can soon become “hygiene factors”, which are considered to be required, rather than a competitive advantage. These then, do not qualify for differentiation or competitive advantage. While at one point Citibank may have offered cutting edge technological capabilities, the competitive advantages these afford can quickly be eroded. Customer service and transactional efficiency are important. However we need to ask what other areas of business require attention in order for Citibank’s ultimate success. If these are not met, the corporation will not meet its growth goals.