At the 2014 Mobile World Congress, Citi Global CEO Michael Corbat said, in his keynote speech, “We see ourselves as a technology company with a banking license.”1 In Hong Kong, Angel Ng, Consumer Business Manager of Citi’s consumer operation in the city, considered how the bank had changed to fulfill his directive. In Asia, technology companies had been encroaching on the banking space, with tech giants such as Apple and Alibaba launching payment platforms like Apple Pay and AliPay. Angel knew Citi had to fulfill the CEO’s mandate to stay relevant, more so in this part of the world to transform the business and combat unavoidable market landscape changes.
With the advent of technology, consumer behavior had changed drastically. Technology platforms had brought convenience to consumers. E-commerce had changed shopping habits with recommendation-based purchases, and social media had made the world a smaller place. Data-driven technologies used by companies like Amazon and Netflix monitored customers’ activity to tailor their online experience. Banks had slowly begun to understand the power of data-leveraged technologies.
Angel needed to win in the fintech space and, by doing so, improve the client experience for customers in Hong Kong. But, first, the bank needed to overcome certain external and internal challenges. Angel thought about Hong Kong’s specific cultural challenges. How could Citi educate customers about the benefits of new technologies that could transform the traditional banking services? While Citi had made significant strides, it was not as nimble in bringing new technology to the market as the fintech companies or other high-tech companies. The challenge lay in establishing a culture of innovation within the business, while ensuring that compliance and regulatory requirements are being met, allowing customers to build their trust in Citibank.
1 Citibank, “CEO Michael Corbat’s Keynote at the Mobile World Congress, accessed August 2017.
Karishma Grover prepared this case under the supervision of Professor Chu Zhang solely as a basis for class discussion. The authors may have disguised certain data to protect confidentiality. Cases are written in the past tense; this is not meant to imply that all practices, organizations, people, places or facts mentioned in the case no longer occur, exist or apply. Cases are not intended to serve as endorsements, sources of primary data, or illustration of effective or ineffective handling of a business situation.
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The term “fintech” had been around since the 1980s and, simply put, meant technology development geared toward financial services. Worldwide, fintech companies targeted unbanked customers as well as banked customers who wanted cheaper, faster, and more efficient processing for their money. In the United States, startups such as Dealstruck,2 Fundera,3 and Funding Circle,4 among others, assisted small businesses with quick lending opportunities, easy loan applications, highly skilled advisers, and flexible financing terms. Others deployed more disruptive methodologies, such as crowdfunding platforms like wefinance5 that allowed multiple members of the community to finance a business or individual. Some startups directly collaborated on digital banking platforms with innovative customer engagement techniques, such as automated messaging platforms that leveraged existing social media platforms, allowing banks to engage through these channels and tailor marketing and product offerings based on new insights about customers.6
Nearer to Hong Kong, in China, fintech companies were launched by some of the largest conglomerates in the country. Alibaba, the largest e-commerce firm in the world, owned Ant Financial, which supported the financial needs of small and micro-enterprises. Ant Financial’s Alipay provided a widely used payment platform in China that had caught the attention of the United Nations as a technology that could support the “Better than Cash”7 Alliance and provide digital financial services.8 Alipay had already made its foray into Hong Kong by partnering with 2,000 shops and restaurants in its first phase, and its managers were optimistic they could capture more of the Hong Kong market.9 Another giant in payments was Tencent’s WeChat Pay. Together, Alipay and WeChat Pay had become the de facto payment applications in China, capturing 94% of the country’s mobile payment market in 2017.10 They strongly competed against each other, and each company’s vision was to expand to markets where a growing number of Chinese tourists traveled. JD Finance Group, part of JD.com, operated several lines of business in China, in the areas of micro-lending, crowdfunding, payment services, and insurance, among others. Lufax Holdings was reported to be the world’s largest and most successful fintech firm and offered wealth management and insurance services to its customers.11
Hong Kong was ranked the fifth leading fintech hub worldwide, ahead of South Korea, Switzerland, and Frankfurt.12 In November 2016, the Hong Kong Monetary Authority (HKMA) collaborated with the Applied Science and Technology Research Institute (ASTRI) to establish an HKMA-ASTRI Fintech Innovation Hub, which was a way for various stakeholders in the industry to collaborate and innovate together. In early 2017, HKMA launched the Fintech Facilitation Office to foster the development of the fintech ecosystem in Hong Kong and promote Hong Kong as a fintech hub in Asia.13 Additionally, in September 2017 HKMA Chief Executive Norman Chan shared seven initiatives that would herald “A New Era of Smart Banking”. 14 With such programs in place, HKMA aimed to further the adoption and proliferation of fintech in Hong Kong, by targeting the banking sector’s technology divisions.
Citibank launched Citi Fintech in 2015 in New York City, the global headquarters of the bank. Citi Fintech comprised 40 employees handpicked from various divisions of Citi and poached from tech companies such as Amazon and PayPal. The idea behind the new division was to create an elite group that could operate with the agility of a startup and engage in rapid prototyping—working on projects in two- week sprints.18 The group delivered a new mobile banking experience within a year of launch that featured improvements such as logging into the banking portal using touch ID or facial recognition. Citi considered itself a front-runner in digital banking, and many fintech entrepreneurs shared the sentiment that Citi moved faster than many other big banks. Yolande Piazza, Head of Citi Fintech, had a 30-year career in banking technology development. Under her leadership, Citi completed six successful partnerships with fintech companies in 2016 and nearly 20 more by the summer of 2017, expanding banking and wealth management features offered on mobile for its retail bank clients in the US.19
Citibank Hong Kong clients were typically “emerging affluent” or “affluent” customers who looked for convenience in their fast-paced lives in Hong Kong. On average, customers were well educated and worried about data privacy, a concern shared by the Hong Kong government.20 Citibank conducted an annual survey to better understand its customers across a variety of key products such as investments, deposits, mortgages, loans, credit cards, insurance, and mobile banking. The Citibank Digital Banking team also used the survey to understand online banking platform usage. Citibank had the highest digital-savvy customer bases among Hong Kong banks, with 52% of the total Citibank customers using digital banking at least once in three months. The bank classified its customers into three segments based on their banking balance. The emerging affluent segment was called Citi Priority, for which a customer had to have a minimum account balance of HKD500,000.21 Citigold was the affluent segment, requiring a minimum balance of HKD1.5m. If the customer held a banking balance over HKD8m with Citibank, he or she would qualify for the Citigold Private Client status. According to the market survey, 71% of the Hong Kong based emerging affluent segment used online banking [see Exhibit 1].
Citibank’s digital banking platform had altered its positioning within the bank and had become ingrained within the business. Its primary focus had been addressing known consumer pain points across the traditional transaction-based banking services Citibank offered its customers. In 2008, Citibank launched its mobile app globally, and over the last decade, it had worked hard to make it more robust and more convenient for customers. It had tried over the years to improve the user interface, such that it was simple and easy to use, and provided the ultimate “remarkable client experience” that Citibank aimed to deliver. The digital banking team scoured the market for opportunities that could assist them with this aim, viewing fintech as an opportunity, rather than a threat.
To corroborate its efforts in the build-buy-partner model and the launch of the APIs to the developer community, Citibank Hong Kong hosted the Citi Fintech Challenge in 2017, in which developers from all over the world competed for the best fintech solution that could address Citibank customers’ pain points. Startups, as well as established companies that had already worked with other banking institutions, participated. The competition described three success factors for winning candidates: first, solutions had to be innovative, with comprehensive functionality; second, there had to be solid business potential in the idea, and the new service developed had to have a market along with scalability of the solution; and third, the solution had to be designed to fully integrate with the existing digital banking platform. To generate maximum benefit from the competition, Citibank also arranged for top business leaders from PwC and Alibaba to coach the participating teams in their delivery. The competition solutions were in four subject areas: wealth management, payments, data analytics and compliance, and operations efficiency.
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