E-Business Strategy of Internet Banking - Citibank - Essay Example

?Running head: E-Business Strategy Review Report on Internet Banking: CitiBank E-Business work Spring Semester E-Business Strategy Report Task 1: E-Business Strategy Review Report on Internet Banking: CitiBank Management Summary The report will be discussing the e-business strategy of Citibank on Internet Banking. Citibank has been one of the pioneers of Internet Banking from a very early stage of internet revolution. Citibank management was quick to judge the future of business and banking lay in the internet boom and wanted to fully capitalize itself on it. The report will be discussing the situational analysis keeping in mind the theories of PEST and SWOT analysis, the industry analysis like the porter’s five forces. Based on the theories and correlating with the internet banking strategies will be discussed keeping the customer base and their primary utilities in mind. The report will also state the global target and scalability of e-business and internet banking and the future market trend. This will make a company like Citibank focus on the growing market trends, the behavior of the e-customer, their preferences and non preferences to come up with the best service e-age banking can provide to the customers. The legal and ethical issues are also looked into so that there is a proper flow and distribution of relevant customer data and banking information. The key findings to the report are to highlight the growth in the telecommunications and internet network across the world. Telecommunications and high speed internet have made it possible for Citibank to provide phone banking as well as provide internet services via mobile phones. A high degree of internet security needs to be provided which comes with the modern technology and infrastructure of the modern age. Introduction Over the years Citibank has evolved as the world’s premiere multinational bank. It is a subsidiary of Citigroup who is having a very strong financial stronghold with more than 100 million customers and 5.9 million online customer base spread over 100 countries. Citibank, UAE started its operation in 1987 and since then has been very successful in emerging as the leading banker targeting a customer base comprising of affluent higher income and middle income groups. “Ranked as the largest financial institution in the world, Citibank has branches in around 100 countries and over 200 million customers worldwide” (Citibank UAE,2011). With the advent of internet boom, the banking sector has come a long way and Citibank has been the leading provider of internet banking facilities for its clients. In UAE itself, the internet banking users were 30% of the total population as of 2003 and mobile users were 72% which itself was a huge number considering the possibility of internet access gateways through mobile phones. “It was not until the late 1990s when security measures and internet technology made dramatic advancements that banks began offering Web-based interfaces for many of these services” (Bidgoli, 2004). Citibank was one of the first to catch up with the internet age banking. There were constraints also in the path of Citibank in the UAE with the Central bank restricting the opening of new branches for foreign banks. This led Citibank to shift its focus to the internet arena to get the larger base of customers and expand its operation. The internet was the only source through which it can reach out to its millions of customers and vice versa. The bank could foresee the boom in internet technology and wanted to offer the best and simple solutions of all banking needs to be just a mouse click away from the customer. In 2000, there were only four local banks in the UAE who provided home banking to its customers and Citibank management knew of the fact that the internet banking would become the new banking model and quickly capitalized on it. “Internet banking services are offered by a rapidly growing number of depository institutions” (GAO, 1999). “Financial Strength: For the local accounting year ended March 31, 2009, Citibank N.A. India branch reported profit after tax of Rs. 2,173 crores as per the financials submitted to the Reserve Bank of India (20% increase versus previous year)” (Citibank India, 2010). Citibank offered a host of services like CitiPhone which is the phone banking segment, Automated Teller Machines, Internet E-Cards for Shopping, CitiAlert where customers were notified about their dues and given other information, Internet Banking like CitiDirect and CitiOnline for its corporate and retail customers. “CitiAlert is an Internet-based notification system that you can use to keep up-to-date with your account information. You can receive these alerts as an SMS or as E-mail” (Citibank India, 2010). “Citibank Online banking is now up close and personal and has been designed keeping you in mind” (Citibank UAE, 2011). The online services of Citibank include: 1. Account information including summary of balance, account statement download and view. 2. Fund Transfers and Payments locally as well as internationally. a. Payments can be made to individuals as well as payment of taxes can be done. b. Relevant IT forms are available in the payment of Direct / Indirect taxes to facilitate online payment of tax to the customer with relevant acknowledgement. 3. Issuance of Managers check and Demand Draft with facility of standard instructions. 4. Investment Services like mutual fund, maintenance of investment portfolio. 5. 24x7 Customer Support where they promptly respond to customer requests and problems. Situation Analysis Present Position Analysis SWOT Analysis The present position analysis is extremely important for Citibank for its strategic team to analyze their Strength, Weakness, Opportunities and Threats. Strength of Citibank: Citibank has emerged as one of the leaders in online banking sector. With the revolution of internet has grown the internet banking and Citibank has strengthened its team and system to fasten its grip over the market with the latest technology and with it came superior and faster services. Citibank’s strength also lies in the fact that it has the financial backing of the citigroup which has a strong and highly successful financial background. Their innovativeness which led to the acceptance and usage of modern age facilities which benefitted the customers. Citibank’s strength is that they revolve around the customer which gives them a solid base to expand further as they have done over the years. Weakness of Citibank: Citibank has been more focused in online banking to its US clients which makes a huge void for the customer base in the rest of the countries. Citibank needs to work on this weakness so that they can compete with the major banks that are catering to superior online services across the globe. Opportunities: Citibank is highly focused on the growth markets where they see a huge customer base like the Chinese and Indian markets. They have consolidated their positions by entering these markets and tapping the huge customer base with superior online services. Though their branches are less, but their internet banking provides all the facilities to their customers to perform all their banking needs which take care that they can do it from the comfort of their homes. The growth markets are identified by their customer base, the kind of internet backbone these countries are having. In UAE, Citibank has done a commendable job by not only utilizing the opportunity but being one of the leading multinational banks with a strong customer base. “It has rolled out its online banking service, Citibank Online, across the globe and will continue to expand its online presence on a worldwide scale” (Datamonitor, 2004). Threats: Citibank has a huge threat from its competitors who are constantly upgrading and innovating themselves in the online arena to come up with better value services which is pushing a leader like Citibank to improve themselves. Apart from this they are also wary of the recessions in global markets due to its presence in more than 100 countries, fluctuating market rates. PEST Analysis Political Forces: The political environment in the country Citibank is operating plays a very important role. Analysts need to assess the political forces of the country, its tax regulations, economic policies of the government, stand of the government on standard trade agreements. All these factors need to be carefully assessed by Citibank when it enters into banking operations all over the globe. Economic Factors: “Marketers need to consider the state of a trading economy in the short and long-terms” (MarketingTeacher.com, 2011). Citibank analysts carefully study the market conditions, the rate of interests prevailing, per capita income of the people, GDP of the market as they go about planning their operation in an existing market or new market. This is a constant procedure which needs to be followed in order to regulate the economic factors in its favor. Socio-Cultural Forces: The socio cultural forces plays a very important role for multinational banks like Citibank where they need to know the people, the state, their religion, their preferences, their inclination towards e-age banking or their acceptance of internet technology and their usage. Citibank also analyses their preference towards a foreign bank and its offering. They target the middle and higher income groups and the lifestyle of people. This has a strong impact on their marketing strategies. Technology Factors: Citibank analysts are extremely careful about the technological aspect in a new market. Due to restrictions in various countries, the bank is not allowed to open multiple branches in various cities and usually the number is limited. This means that they are heavily dependent on technology for their operations to flourish. Customers need to login to their bank accounts online, access net banking, perform online transactions, maintain their portfolio and do all the necessary banking transactions online. To achieve the target market should be technologically strong where they have a strong internet backbone at cheaper rates. There should be a strong telecommunications network which makes it possible to inculcate the modern age banking facilities to the customers. Citibank has been leveraging on the technological factors for long and have successfully implemented innovative online banking for its customers to make it a Unique Selling Point for them. PEST ANALYSIS [www.learnmarketing.net] Industry Analysis Porter’s 5 Forces: Michael Porter’s five forces are extremely important strategic analysis for multinational banks like Citibank where they need to understand the industry market better to give an edge to their firms over the rest. Rivalry Rivalries amongst firms are common and it should exhibit a sense of competition, novel ways to become more competitive and challenging. Citibank also has huge number of rival banks who are daily competing to gain an edge in their respective markets. Lowering of prices and interest rates are common but they are all regulated till a certain limit to prevent undue advantage and protect the economies of scale. Fostering innovative practices is the best way to counter rivalry by emerging as the leader in the technical arena with superior quality of services which should be customer-centric. Citibank’ banking model revolves around its customer and this customer orientation has reaped them with high benefits in this diverse global markets. Their acceptance to technology and helping customers to enjoy the benefits of internet banking has been a huge boost for them over their rivals. The channel of distribution like the internet is a strong factor in providing useful functions and information to its customers. Sharing of useful data and information on a click of a button has made the customer reap the benefits of technology and rival firms unable to achieve this high quality of modern age e-banking are left in scrambles in order to protect their customer base which is eroded very fast. Rivalry amongst forms intensifies as they grow in number and fight for a larger market share in a common customer base. Market growths are usually slow for which rivalry intensifies. Switch over costs from one bank to the other is so low that rivalry is bound to intensify. Product differentiation is there at a very low level as all modern multinational banks are giving the same kind of services to its customers be it internet banking, phone banking, automated teller machines, credit card facilities, online payment of utility bills, payment of taxes online using net banking facilities etc. There are high exit barriers for banking products Threat of New Entrants Citibank needs to be wary of the new entrants to its market who can give them a stiff competition and take away their market share of customers. However industry norms do protect the existing high profiting firms by making the barriers to entry. Government creating barriers, patents, and economies of scale are the driving forces behind the barriers to entry. Citibank needs to analyze all these factors as they enter into a new market or some new bank is entering into their market. As profits rise in a specific market like UAE or India then there is a tendency of the other banks to enter into the market and take a share of the profit. Threat of Substitutes Substitutes are products which come as an alternative to an existing product in the market. Banks have a host of products and their substitute products come up with other banks offering similar services with a different uniqueness which affects the existing product. Any substitute product price differentiation has an effect on the existing products and the market sales are dependent on these variables. Price competition increases and with it the demand of technology also increases where banks want to offer better and affordable products which increases efficiency and reduces cost. Buyer Power Buyer power is the power of the buyers in the industry which depends on the number of suppliers and buyers. Buyer power is strong if there are more suppliers and lesser number of buyers. Being strong buyers can then determine the market trends, demand and rates. Currently banks offering internet banking facilities are low in number considering the large number of customers. In such a case prices of the internet banking products cannot be high as they have the large pool of people to cater to and competition increased in a limited number of suppliers. Buyer power becomes weak when the buyers are more in number and the suppliers less. Buyer power reduces as they are disintegrated and fragmented so that no particular buyer has a say in the market prices. Supplier Power Supplier power increases for Citibank if the following factors come into play: If the banks maintain regulatory conduct of banking and are concentrated in their approach. If the switch over cost is very high for the customers to switch from one bank to the other. Customers needing to shell out a significant cost will reduce the chances of switch over. Supplier power decreases if the following factors come into play: When there are many suppliers having a common or similar product. This is evident from the internet banking products, multinational banks like Citibank have. These products and services are available in the major banks where the banks need to strengthen their quality to maximize their customer base. Switching over is very easy where no significant costs are required to switch over to another bank and their products and services. If the products are supplied to a select group or segment. E Marketing Strategy Customer Adoption and Perspective plays a key role in determining the e-marketing strategy of a multinational bank. Bank analyst needs to study the specific market where they want to launch their products and services. In today’s modern world, the internet has become a huge boon for everybody, be it suppliers or purchasers. All are benefitted from the increase in business they are able to generate (suppliers) and the benefits of services the buyers are able to get. These benefits of services to the customers have made a significant impact on their respective businesses where they have been able to adapt to the new age of information technology to do things faster, better and in a smarter way. All these changes in the technological world have brought a see-saw change in the way the world used to do business before and the manner in which it is conducted today. Previously companies were doing business by trying to figure out a way to advertise and reach out to their customers in the conventional marketing ways. Now things have changed where they have another extremely effective tool in their armor and that is undoubtedly the internet. Nowadays the internet backbone have become so strong that the majority of the customers doing business and trade have a high speed internet connectivity to stay updated, have database managed systems to perform their business operations. There is hardly any company in the world who can manage their business operations without a system. The banks were quick to see these enormous changes which changed the outlook of the global industry. The industry has become a lot closer due to the telecommunications and internet network. Multinational Banks like Citibank began to develop their e-marketing strategy which would help them in reaching out to a global customer base. They were quick to analyze that the most convenient and effective marketing tool lay in the internet rather than conventional banking models. The internet provided them with a gateway in which the customers do not have to go their respective bank branches to perform banking transactions, business and operations on a day to day basis. Instead came a convenient option for the customers to check their account balances online through net banking, perform financial transactions like payments locally as well as internationally. All these factors have made the e-marketing strategies for Citibank to be really strong. Citibank emerged as the leaders in Internet Banking as they were quick to analyze and harp upon the opportunities the World Wide Web were offering. Banking analysts and strategists had the vision to see the future of banking industry which meant better and efficient services for the customers. Their entire strategy rolled around its customers and they did every technical enhancement for the benefit of their customers. Customers began experiencing the benefits the internet banking were having and changing their lives for the good. They could see the benefit of efficiency in work where they did not need to travel to the bank branches to perform business transactions, make payments, transfer funds. All these functions saved them a lot of time and money and internet banking became the obvious choice of the customers. The e-marketing strategy of Citibank was simple. The global perspective and vision of the bank was to reach out to millions of customers in multiple countries. The opportunities were galore with the internet backbone spreading fast and wide to different portions of the globe thanks to the telecommunications network. Citibank e-marketing strategists were able to envision the large customer base they could procure for their bank and their mode of marketing always revolved around the customers. Keeping a customer centric approach was the key to the e-marketing strategy of Citibank. They reaped the benefits of it by keeping their e-business model customer oriented where their customers had all the facilities to perform their banking transactions with ease. The launching of the internet banking model keeping in mind the global perspective made their services to the customers, a unique experience for them which started as early as in the year 2000. The e-business model which was incorporated by Citibank was: 1. Advertising through websites, search engine optimization. 2. Brokerage where buyers and sellers came across a single web platform to purchase and sell products and services. 3. Merchant transactions where retailers can sell goods and services directly to customers. Banks also perform this kind of retail merchant transactions to its customers. Citibank online performs this kind of merchant transactions. 4. Information media or infomediary where the banks collect and disseminate information and data online. 5. Manufacturers also can sell online directly to the customers and thereby increasing profitability by removing the wholesalers and retailers from the transactions. 6. Subscription model whereby there are payments made by customers to access information, services and use relevant data. The General Analysis and Deduction for the E-Marketing strategy is that the Citibank strategy of the e-marketing model was a highly successful one as the bank was able to make consistent inroads by acquiring a good customer base all over the globe. In UAE alone, the online active Citibank customers grew from 4000 in 2001 to 7500 in 2004 with transactions value climbing from $656000 in 2001 to $1230000 in 2004 (Al-Mudimigh, 2007). Citibank has come from strength to strength in the internet banking arena since the late 1990s and are constantly innovating themselves to remain the leaders in online banking services which has given them a tremendous growth in the last decade. The global market is well aware of the immense potentiality the internet has and how it can change the course of business. “CEOs worldwide recognize the strategic role that the Internet plays in their company’s ability to survive and compete in the future” (Al-Mudimigh, 2007). To complete Al-Mudimigh observation, it cannot be understated that banking is the core of all businesses and therefore the advent of internet in the banking sector through the internet banking has become the revolutionary concept of the last decade which has changed the business for the good. Citibank has relentlessly shaped the internet banking era which has leaps and bounds to achieve in the years to come. The future trends can be analyzed from the fact that how much percentage of the global population is using internet banking. There is a lot of work to be done in this sector as Internet much reach each and every corner of the globe just like the mobile phones. In poor countries the government needs to up the literacy level, introduce computers in primary school and make the internet a global phenomenon. There is a need for careful planning by the governments, the banking industry in making this model a success. The banking industry analysts has the potential to see the future trends where every services will be available online where people do not need to run from pillar to post after a bank employee to get their work done. All that is required is a click of a button and the work gets done. This is the future of the e-marketing model which is not very far from the reach of mankind. Legal and Ethical Issues In compliance with the international World Wide Web consortium, the legal and ethical issues are equally important in shaping up the internet banking experience of the global world. E-Commerce and internet banking have made life comfortable for the customers who are just clicks away from getting their purchase and financial transactions done. However with the advantages, serious efforts need to be given for the legal issues pertaining to it. There can be people who can break the security cordons and so some mischief over the internet by taking over somebody’s bank account and doing unauthorized transactions. Security in the backend plays an important part and so does the legal and ethical issues. “Legal issues of internet banking generally should involve that the matters like entering into agreements, providing proper evidence, bearing the liability, ensuring security, maintaining privacy, and secrecy of the banks” (Internet Banking Legal Issues). The people in general should have strong ethics not to get into these kinds of cyber crimes which acts as a deterrent for the entire world. There are loads of information and data available on the huge web servers for the banking industry and should be kept in the highest level of secrecy. The gathering, processing and distribution of these banking repositories forms the backbone of the internet banking industry as all the data are processed for information to be available to all the customers from these repositories itself. Utmost care, precautions, security and legal agreements and enforcements needs to be in place in all the countries to make the breaching people accountable and punishable as a legal offence in that country. Recommendations & Conclusion Based on the report for e-marketing strategy review on Internet Banking for Citibank, it is highly recommended that Citibank continues to have a proper coordinated e-marketing planning and strategy to overcome any lapses pertaining to customer orientation. There are reports that Citibank internet banking is more oriented towards U.S customers. “Much of Citibank’s online operations are geared towards US clients. This is a major weakness in Citibank’s armory, as it has worldwide operations, but not a sufficient Internet presence to compliment its branch business” (Datamonitor, 2004). Citibank should step up its online presence in all other countries by having effective and smart internet banking. The bank should be focused on improving its services, providing 24x7 online supports to its customers, facilitate faster transactions, reduce and eliminate security breaches. They should also educate their customers with constant support so that elderly customers not used to new advances in internet technology should feel at ease while using the internet banking facilities. Finally we conclude this report by stating that the internet banking has just started with a healthy and convenient way to modern age banking. Citibank should take it up to the next level for seamless integration between customers and the banking products and services ensuring faster, reliable and smarter way of banking needs. There is a huge scope of improvement and the coming decade will define a new dimension to modern age banking and the world’s leading bank needs to keep up their good work and further innovate for the road to success, not only for themselves but for the entire banking industry and for its customer base all across the globe. Task 2: Reflective Report The objective of the report was to define the role played by internet banking in the modern age banking, how it has changed the banking industry and the e-business strategy required by a bank like Citibank to foster the growth opportunities provided by online banking. We found that Citibank has clearly defined its online marketing goals and objectives by keeping it customer centric which means that they have planned their strategy in such a manner that they revolve around the customers’ needs. The evaluation of the process included going through the e-books and websites which provided insight into the Citibank’s history, their performance models, their ability to correlate their e-business strategies with Michael Porter’s five forces of industry analysis, SWOT analysis and PEST analysis to determine the position analysis requirement of the banks. The e-marketing strategy was discussed at length and the e-business models which acted like the guidelines to a successful internet banking strategy. The case study of Citibank, UAE was an eye opener as to the way Citibank became the most successful bank with online operations in the Middle East. On the other side, the customer mindset was also discussed including socio-cultural issues which are equally important for implementing an internet banking program for Citibank spanning more than 100 countries. If given another opportunity, then the next work should be to have a proper survey done in multiple countries to get an insight of the implementation of these strategies, the confidence level of the people in using these services across the world and a comparative analysis of the same. This would lead the strategists to think over the various ways or alternative ways for the customers to accept online banking rather than their traditional counterpart. More training emphasis needs to be given to the old age people to make things simpler for them. There should be online videos available on the web for mass training so that they do not have any trouble accessing their bank information and doing any kind of financial transactions. Small things like tool tips in each and every step make them understand the process of internet banking. References 1. Datamonitor, 2004, Company profile available from http://213.194.86.162/Webtools/Basvurular/!webpubpic/file/Citibank.pdf 2. QuickMBA, 2010, Porters Five Forces – A Model for Industry Analysis available from http://www.quickmba.com/strategy/porter.shtml 3. MarketingTeacher.com, 2011, PEST Analysis available from http://www.marketingteacher.com/lesson-store/lesson-pest.html 4. Bidgoli,H.2004, The Internet Encyclopedia, Volume 1 John Wiley & Sons. 5. Internet Banking Legal Issues, Internet Banking Legal Issues available from http://pcinternetbanking.com/internet-banking-legal-issues/ 6. LearnMarketing.net, Marketing Environment – PEST Analysis available from http://www.learnmarketing.net/pestanalysis.htm 7. Al-Mudimigh,A.S.2007, Journal of Internet Banking and Commerce An open access Internet journal (http://www.arraydev.com/commerce/jibc/) 8. GAO.1999, Electronic Banking US General Accounting Office 9. Citibank India. 2010, At a Glance – Citi in India available from https://www.online.citibank.co.in/press-room/citi-in-india.htm?eOfferCode=CBPRSRM 10. Citibank India. 2010, Citibank Online and Mobile Services – FAQs available from https://www.online.citibank.co.in/customerservice/onlineservices_faq.htm 11. Citibank UAE. 2011, Citibank at Work available from http://www.citigroup.com/uae/gcb/cbaw/employ.htm 12. Citibank UAE. 2011, Citibank Online available from http://www.citigroup.com/uae/gcb/cbol/ Read More