World's best digital bank 2017: Citi

Two years ago, when Stephen Bird took over as chief executive of the global consumer bank at Citi, the new boss gathered his senior management team for their first meeting in Silicon Valley. 

He asked them to imagine they were no longer running the consumer division of a 200-year-old bank with 110 million customers in 19 countries, a world leader in credit cards and mass-affluent banking, bringing in revenue of around $32 billion a year. Instead they should imagine themselves running their own worst nightmare: a state-of-the-art fintech disrupter that would make Citi itself redundant.  He then told his team they must build that disrupter themselves. In the past 12 months, Citi has begun to deliver this to its customers.

“The journey to becoming a future-proof, truly digital bank is as much about transforming culture as it is about transforming underlying technology,” Bird tells Euromoney. 

“It is not enough just to overhaul the integrated core banking platform, a process which we accelerated in 2015, or to design wonderful new apps. We are developing a rhythm of continual innovation, of constantly working with our customers to refine apps, re-prioritize investment in services that customers want and sometimes deliver improvements they didn’t even know they wanted. We are doing this now at the speed of Silicon Valley but at vast scale.”

Citi may have come a bit late to the realization that digital technology will transform banking utterly, but the zeal of the convert has gripped the organization. Bird has hired product design experts from Amazon, Google and PayPal, building a new fintech unit to be a spearhead towards the future. 

A breakthrough came at the end of 2016 with an upgraded smartphone app aimed at affluent Citigold customers in North America, a key segment for a global leader in affluent banking that it had not properly served in its large home market. 

Citi’s engineers rebuilt hundreds of core processes, reducing the time and steps needed to open a brokerage account, to execute a payment, or to deal with a disputed charge on a credit card. It gave customers click and call access to be put straight through to a relationship manager to talk to.

Results are beginning to show. Mobile usage is up 46% in North America in the last 12 months; up 35% in Asia and up 59% in Mexico. The bank was adding five mobile users a minute in 2016, 6,500 every day. Citi now has more digital users than Amazon Music and more mobile users than Google Play.

“Citigold customers that go digital tend to have high balances, are low cost to serve and loyal; they are great customers,” says Bird. “What has blown us away since we delivered the new app and refreshed the Citigold offering is the sheer number of customers who have self-enrolled in Citigold, often transferring balances from elsewhere to capture the benefits. We had $3.8 billion of net portfolio growth in the first quarter of 2017 in Citigold, compared with $3 billion for the whole of 2016. I had to do a double-take when I saw the numbers, but it shows we are becoming the primary bank for more affluent customers. And that is all about digital.”

Some of the winning features seem mundane, but since Citi offered the capacity to turn off a temporarily mislaid credit card on its app and then turn it back on when the card is found, customers have availed themselves of this 1 million times. 

“Previously that would have been 1 million phone calls, hundreds of thousands of newly minted cards to embed chips in and deliver, sometimes via FedEx to business travellers in their hotels abroad,” says Bird.

While Citi declines to give specific targets, investors can hope the digital transformation will drive both revenue and cost benefits, delivering positive operating leverage on an already vast business.

Inside the firm’s corporate and investment banking division, the Institutional Clients Group, digital is even more deeply embedded. In 2016, clients initiated or authorized transactions with a total value of approximately $1.84 trillion via mobile platforms, representing 240% growth from 2015. Corporate and institutional users of CitiDirect BE Mobile and Tablet have increased from 900 in 2013, to 25,540 in 2016. 

CitiFX Pulse, Citi’s end-to-end electronic FX solution for corporate clients, is Wall Street’s only FX platform providing access to onshore pricing to more than 26,000 clients in nearly 80 countries.

Citi has introduced several proofs-of-concept in distributed ledger technologies, including management of post-trade life cycle events for standard single-name credit default swaps, a solution that reduces risk in reference data management, and, in collaboration with 40 global financial institutions, technology that facilitates issuance, secondary trading and redemption of commercial paper.