Why Citi switched to a single-channel model to boost U.S. credit cards
For Citigroup, a change in how it plans to operate in the U.S. is all about streamlining operations so its global network can be on the same page regarding product development, payments technology and card portfolio growth.
Citi's digital bank network, Global Consumer Bank, is viewed as a driver for its growth in the bank's three priority markets — Asia, Mexico and the U.S. It serves more than 100 million consumer clients in 19 markets in those three regions, driving global card growth, and higher loan and payments volumes.
As GBC potentially reduces the bank's physical presence, communication becomes even more essential. Thus, Citi is turning to the model used in Asia and Mexico in which the executives responsible for the consumer banks — handling retail, wealth management and the branded card business — in a region all report to the same individual.
"We have made tremendous progress and have pivoted to growth," said Elizabeth Fogarty, head of public affairs for global consumer banking at Citi. "Now it is time to align our structure with our strategy."
Even Citi's win over American Express for the Costco Warehouse portfolio, which was engineered by outgoing Citi credit card chief Judson Linville (a former Amex exec), could not solidify the course for Citi's card business — even though Citi reported five months after the June 2016 deal that it had gained 1 million new Costco cardholders as a result.
Citi revealed earlier this year that its U.S. card portfolio was not growing as much as it had anticipated. The bank has decided its U.S. operations could benefit from all bank products and services basically operating through one silo.
"Linville brought a revitalization to Citi's card program, but it still was difficult to read what the strategic plan might be," said Brian Riley, director of card services for Mercator Advisory Group.
If Citi has a model that performs well in Mexico, historically a tough payments market for card issuers, it could provide a boost and streamline processes for Citi, Riley added.
That's essentially why Citi is restructuring — to obtain a communication and management model for the bank that could lift the tide in all regions.
Part of the issue in the U.S. market, however, in the view of global consumer bank leader Stephen Bird and others at Citi, is that the intense focus on each aspect of the bank's various channels led to diminished collaboration and an ability for one channel to aid another's growth.
Bird oversaw the model used in Asia three years ago, and the regional model sets the stage for more cross-product development and faster decisions to move services to market.
"Customers don't think of themselves as a bank client or a card client, they think of themselves as a Citi client," Citi's Fogarty said. "There is an emphasis on how are we going to go to market, how are we going to develop our products, how are we going to realize cross-product synergies."
Having a unified view across retail, wealth and branded cards channels will provide Citi with greater synergy, collaboration and connectivity, Fogarty added. It will likely become easier for Citi to closely examine what a retail banking business channel could offer to strengthen the card portfolio, she said. Under the current setup, that sort of cross-channel view isn't as clear.
The strategy makes sense for Citi, considering 49% of its net revenues came from the North America market and 21% from Asia. It sets the bank up for sharing what works in one place in hopes a variation of it could work just as well in another.
In that regard, under Bird, Citi says its consumer banking sector has generally tested digital products and technology in Asia before spreading those to other regions.
The global consumer banking channels, across all of Citi's service regions, represent 48% of the bank's overall revenue.
Steering it all to future growth will become the responsibility of Anand Selva, who Citi has named as the head of consumer banking in the U.S. following Linville's departure. Selva has been with Citi for 26 years, with expertise in retail, wealth and cards.
He takes over what Citi envisions as its single, seamless client model across the retail banking and branded cards ventures. The U.S. Consumer Banking team, which will include the heads of branded cards, retail banking and mortgage, national digital banking, digital client experience and operational risk and controls, will report to Selva.
Over the past three years, Selva has been responsible for the Global Consumer Bank digital initiative in a 17-country region of Asia and the Europe, Middle East markets.
Citigroup has remained active in technology investment, participating in a $50 million funding round in PPRO Group, a U.K.-based cross border e-payment company; and used Swift technology for tracking and transparency while speeding up B2B payments.