Case Study 3: Citibank Asia Pacific: Managing Information Technology

Consolidation, Change, and New Challenges

Christina Soh and Neo Boon Siong, Information Management Research Center
(IMARC), Nanyang Business School, Nanyang Technological University
(Singapore)
I. Citicorp
Citicorp in 1991 recorded a net loss of $457 million,1 suspended the dividend on its
common stock, and saw the price of that stock fall to a long-time low before rebounding
after year end. Nevertheless, and despite the magnitude of our problems, 1991 for
Citicorp was in key respects a transitional, turnaround year.
John Reed, Citicorps chairman, acknowledged Citicorps problems in his letter
to stockholders in the 1991 annual report. The bank had been struggling with a large
Third World loan portfolio, as well as significant problems with its commercial property
loans, and with its financing of highly leveraged transactions in the U.S. The bank
needed more equity but Third World debt costs prevented Citicorp from increasing its
equity through retention of earnings.
The severe storms that Citicorp had been subjected to prompted significant
changes. To combat the slowdown in revenue growth, and the rise in consumer and
credit write-offs, Citicorp aggressively reduced expenses in order to improve the
operating margin, issued stock to improve their capital ratio, and made structural
changes at the senior executive level which were aimed at providing more focused
direction to the business. John Reed articulated three requirements for being a great
bank in the 1990smeeting customer needs, having financial strength, and
marshalling human and technological resources . . . more imaginative and costeffectively than ones competitors (emphasis added).
In the midst of this organizational turbulence, one of Citicorps undisputed
strengths was its global presence. It is unrivalled in its network of banks in more than 90
countries. Its overseas consumer banking operations in particular, were showing healthy
growth. Global consumer banking includes mortgage and insurance business and nonU.S. credit card business. Citicorp only entered the field of consumer banking in the
mid-70s. John Reeds vision was to pursue growth in the consumer banking area, and to
pursue it through global expansion and leveraging information technology.
The primary vision in consumer banking is Citibankingcombining
relationship banking with technology that enables Citibank to serve its customers
anywhere anytime with the high standard of service that they receive in their home
countries. In the early 1990s, this involved technology-enabled innovations such as
having a one-stop account opening with paperless relationship opening, instant card and
check issuance, and instant account availability; having a customer relationship
database that supports cross-product relationships; creation of hybrid and customized
products; and relationship pricing that more closely matches the value to the customer.
The Citicard is the key to Citibanking services such as checking, money market, and
bankcard accounts. Consumer banking products are distributed through bank branches,
Citicard centres, and Citiphone banking, which gives 24-hour, 7-day-a-week service.

The global services available to customers were augmented in 1991 when Citibank
joined the CIRRUS ATM network, allowing Citicard holders access to cash around the
world.
Today, the Internet provides another channel for delivery of Citibank services and
products, and the Citibanking strategy now includes ensuring that the bank is one mile,
one phone call, or one click away from anyone on earth.2 The multiple delivery
channels has also led Citibank to emphasize consistency of experience for all customers
by establishing design standards to ensure that every Citibank access point is instantly
recognizable.3 The Citibanking concept has also evolved to include building lifelong
relationships by providing product sets to match customers needs at each stage of their
financial lives4offering all the banking products needed as young people complete
their education, enter the workforce, establish a household, rear a family, and eventually
retire. . . .5
The results of operating and structural changes made in the early 1990s, as well as
the impact of the growing Asian consumer market, contributed to the turnaround at
Citicorp, where the 1992 net earning was $772 million. This earned it an A minus credit
rating from Standard and Poor, which also upgraded the banks outlook from negative
to stable. Citicorp share price also moved up to $36.88 during 1993, from a low of $23
in 1990. In early 1994, the bank was also given permission by the U.S. regulatory
agency to resume issuing dividends. By the end of 1997, the share price had risen to
$126, and net income in 1998 was $5.8b.6
In 1998, Citicorp merged with Travelers to form Citigroup. Each brings to
Citigroup complementary products and servicesCiticorps strengths are in consumer
and corporate banking, and Travelers strengths are in insurance, securities, and
investment banking. Their combined customer list is 100m and the stretch target is 1
billion customers by 2010.7 In 1999, Citigroup had almost $10b in net incomes
worldwide, and its stock has risen 63%.8
II. Citibank in Asia Pacific
Citicorp has been in Asia since 1902 when it set up finance houses in a number of Asian
ports, such as Shanghai and Singapore. It has built up an understanding of the local
markets in which it operates. Citicorps major competitors in terms of established
presence throughout Asia are Hong Kong and Shanghai Bank, and Standard Chartered
Bank, but neither has the global reach that Citicorp offers.
Citibank began pursuing consumer banking in earnest in 1986, and since then
Asian accounts have increased from 1 million to 6 million in 1997. Asian consumer
deposits grew sixfold to $13.6 billion between 1983 and 1992, while loans grew
seventeenfold to $10.8 billion over the same period.9 This growth is a reflection of the
regions high gross savings rate (about 35%), and high GNP growth. Critics had
suggested that Citicorp may run into credit problems because Asians had little
experience with personal debt. Although revenue decreased between 1996 and 1997 due
to the Asian financial crisis, there has been strong growth in the customer deposits and
accounts.10 In 1998, accounts increased 19%, and customer deposits 18%.11 Since then
accounts and customer deposits have grown by more than 20% across the Asia Pacific
region,12 continuing to fuel the growth in consumer banking in Citibank.

Citibank made significant innovations in packaging financial services for the

relatively rich customer, and has managed to cream the Asian market. They pioneered
the concept of consumer credit in Asia, with then innovative offerings such as roundthe-clock phone banking and automated teller cards. Interestingly, some innovations
such as phone-banking, were motivated by local regulations that severely restricted the
number of branches that it may operate. More recent innovations include International
Personal Banking, which offers a broad and flexible range of investment opportunities,
time deposits, overdraft facilities, and the ability to trade and deposit in any of 18
international currencies. This is to tap the fast-growing offshore banking component of
Asian consumer banking.13
III. Previous Technology Infrastructure
In the early 1990s, each of Citibanks Asia Pacific countries belonged to one of three
automation platformsMVS, AS/400, or Unixand had one of two consumer banking
applicationsCOSMOS or CORE. COSMOS was the earlier set of applications, and
was fairly typical of most U.S. banks offshore banking applications. It was written in
COBOL in order to provide flexibility in complying with varying regulatory reporting
formats, and it provided backroom support for standard areas such as current accounts,
general ledger, and some loans processing. Subsequently, Citibank began to replace
COSMOS with CORE, which was to provide an all encompassing system to run on
IBMs minicomputers, the AS/400s. CORE was used in a number of countries with
smaller operations, like Indonesia. It was not suitable for countries, such as India, where
IBM did not have a presence, and in countries with high volumes, like Hong Kong.
Both COSMOS and CORE were subject to many country- specific modifications over
time, as the local banks responded to varying regulatory and business requirements. The
wholesale banking division also used COSMOS, and it ran on large IBM mainframes.
Over time, the wholesale banking version of COSMOS has also proliferated. The result
is significant differences in each countrys basic banking software.
The underlying philosophy of customizing to meet local customer needs resulted
in each country having its own IT infrastructure and unique applications. While it
worked adequately in the past, the local-markets approach did not allow Citibank to
integrate its products, services, and information to serve its highly sophisticated, mobile
and increasingly demanding global customers. Further, there are substantial economies
of scale that may be gained from standardizing and consolidating bank products and
processing across the diverse countries of the Asia Pacific region. The key to achieving
these goals lay in re-architecting the technology infrastructure that enables the consumer
banking business.
IV. Regional Card Centre as Prototype of the New Strategy
A significant piece of Citibanks Asian Pacific IT infrastructure that provided the
prototype for subsequent consolidation in consumer banking is the Regional Card
Centre. The RCC was set up in Singapore in 1989 to support start-up credit card
businesses in South East Asia. Country managers whose credit card data processing was
to be centralized demanded exacting performance standards from the centre because of
its direct impact on their operating performance. Ajit Kanagasundram, who used to run
the data centre for Citibank Singapore, was given the mandate to set up and run the
centre. He explained the rationale for the centre:

The purpose of the RCC was to jump-start the credit card businesses in Citibank
countries in South East Asia. Setting up the processing infrastructure before offering
credit card services in each country would take too long and be too costly for start-up
businesses. The time constraint to make the RCC operational also dictated our
approach, which was to get the operational software requirements from a couple of lead
businesses, in this case, Citibank Hong Kong and Singapore. Trying to get requirements
from all countries would be too time consuming and result in missed market
opportunities. Further, 80% of credit card operational requirements are stipulated by the
card associations and were common across countries. We recruited a few staff
experienced in credit card operations, used our own production experience, plus on-site
consultants to modify the package software, CARDPAC, and got the RCC operational
in eight months.
By 1990, we had reduced the processing cost per credit card by 45% and we were
given the mandate to extend our operations to cover the Middle East and North Asia,
excluding Hong Kong. By 1994, in the midst of heightened cost consciousness because
of corporate financial troubles, our cost per card was down to 32% of the 1989 cost.
None of the country managers asked for decentralization of the credit card operations
who wants cost per card to triple overnight?
In 1993, Citibank beat out other regional rivals to become the issuer of affinity
Visa and Mastercard for Passages, a joint frequent-flyer program of 15 Asian airlines.
Citibank credits its ability to launch and support the cards regionally, enabled by the
RCC, as being a key factor for being selected. By 1999, the RCC was processing credit
cards for 27 countries12 countries in Asia, 7 in Central Europe and the Middle East,
and 8 in Latin America. The cost economies offered by the RCC made it obvious for
countries to join it rather than go on their own. Average costs in 1999 were 40% less
than they were 3 years earlier, and it is projected that the marginal cost of adding 5
million cards will be a third of the current average costs. The creation of starter kits
also means that new countries can be added with relative ease and at far less expense.
The decreasing costs of telecommunications and the cost savings from standardizing
hardware, software, and procedures enable RCC to reap ever increasing economies of
scale as each new country joins its fold, and as businesses of member countries grow.
The RCC concept combines both centralization and decentralization ideas to meet
specific local business needs and low costs of processing at the same time. The business
strategy, marketing, credit evaluation, and customer service for credit cards continue to
be decentralized in each country to cater to local market conditions and needs. The
front-end data capture and printing of customer statements are also decentralized to each
country. What is centralized is the back-end transaction processing and data repository.
The control and active management of credit card businesses continue to be with
country managers and the business gains are reflected in the financial performance of
each country. The RCC provides the technology infrastructure for lowering operational
costs, diffusing best practices, and attracting the needed technical talent.
The RCC experience provided the experiential base for subsequent re-architecting
of the technology of the consumer bank. The experience and expertise that RCC had
built up would be repositioned to serve the processing requirements of the Asia-Pacific
Consumer Bank.

V. Re-Architecting the IT Infrastructure

The appointment of George DiNardo as the new Chief Technology Officer signalled the
banks strategic intent to develop a new technology infrastructure for capitalizing the
opportunities from rapid economic growth in Asian countries which is expected to
continue well into the twenty-first century. Recipient of Information Weeks CIO of the
Year Award for 1988, DiNardo had been with Mellon Bank in Pittsburgh from 1969 to
1991 and was its executive vice president of their information systems function from
1985 to 1991. Prior to joining Citicorp, he was a consulting partner for Coopers and
Lybrand, and professor of information systems at a leading university. He crisply
summed up his job portfolio at Citicorp:
My job is to introduce the most advanced technology possible in Asia and I spent
35 years doing that for other banks, Bankers Trust and Mellon Bank. I am truly a
bank businessman and a technologist . . . I have also been given the responsibility
for all reengineering efforts in Citibank Asia.
According to George DiNardo, the Citibanking vision requires that
A customer going anywhere in the world is able to transact the same way wherever
he goes. It is moving to (the concept of) Citibank recognizes you, and relationship
manages you. If you have $100,000 with Citibank, you have certain services free,
and it will be the same wherever you go. Its the ability to use the ATM wherever
you are.
Moving toward this level of global banking requires that a Citibank branch
anywhere in the world have access to the customers addresses, customary services, and
relationships anywhere else in the world. It would have been costly to achieve this with
the current decentralized computing structure, where each country in the Asia Pacific
has its own host computer and where each country has a different technology platform.
It would also be difficult to ensure simultaneous roll-out across countries of new
products. Hence, the foundational changes to computing at Citibank Asia Pacific begin
with the centralization of processing, and having a uniform backroom platform. The
bank standardized on an IBM MVS platform. DiNardo explained the logic of
centralization for Citibank Asia:

The old days of having the computer centre next to you are gone. Where should
your computer centre beremote! Now, with fibre, put your console, command centre
in your main office, and your big box is remote.
Your command centre is here in Singapore. . . . The telecommunications are
improving enough that we can centralize. The economies of large IBMs are important to
banking. I have promised that if we regionalize on a new single system, we will get a
saving. It will cost $50m to do this, but we will break even in year two, and we should
have a $50m running rate cost reduction at the end of year four. We will put the largest
IBM box we can get in a centre in Singapore. I have promised a 1020% computing
reduction every year. How am I going to do that? You buy the biggest building, so you
can pull any computer in anytime, backup for 100% uptime, 99.9% on-time completion
of batch jobs. Therefore you dont need backup all over Asia. You put in all the other

countries account processing, and transmit all the rest.

Initially, the major saving will come from avoiding the building of another
computer centre in Hong Kong. Savings arise also from having all processing in one
site, with only one other hot backup site, as compared to having processing distributed
in 14 countries, with each country having its own backup. Citibank will be leveraging
off the networks that are already in place as a result of the regional card centre. Another
significant source of savings comes from the centralization of software development.
Citibank is aiming for uniformity in its backroom processing software. Citibank
replaced individual country systems that have evolved over time with a $20 million
integrated back-office banking applications package from Systematics. The strength of
the Systematics package is that it has evolved significantly through its sale to more than
400 banks, and therefore offers many functions and features. It uses a traditional design
based on the MVS/CICS/COBOL platform, and has been proven to support high
volumes. According to DiNardo, the idea is to not reinvent the wheel by writing yet
another in-house back-office processing system, but to take this package and turn the
2000 Citibank systems professionals loose on innovation . . . its delivery and panache
that counts . . . to create reusable modules to be called in through Systematics user exits.
Systematics has promised to keep the exits constant through time. The plan also calls
for eventual conversion of all other programs to the Systematics format, for example,
using the same approach to data modelling, COBOL programming, and naming
conventions.
A new Asia-Pacific data center running an IBM ES/9000 model 821 mainframe
was set up in Singapores Science Park on the western part of the island in October
1994. The hot-site backup running an IBM ES/9000 model 500 was located in
Singapores Chai Chee Industrial Park on the eastern part of the island.
The conversion of the Asia Pacific countries to Systematics was completed by the
end of 1997. Work then began on Y2k certification. Citibank has one of the more
stringent Y2k certification processes in the world, and is estimated to have spent $600m
globally over three years on Y2k certification.14 However, a senior executive noted that
Y2k certification was easier and probably less costly in Citibank Asia Pacific because
the backend systems had been centralized and standardized prior to the certification
process.
VI. Building Common Front-End Systems
Running in parallel with the IT infrastructure changes was a reengineering effort. Peter
Mills, then director of business improvement, noted that the goal was to:
Create common business processes that may result in common front-end systems
that are compatible with our back-end platforms. As part of the re-architecting of
Citibanks technology infrastructure, we initiated several process reengineering
projects to develop new process templates for Asia-Pacific. For example, we will
use the redesigned Australian mortgage process and the new Taiwan auto business
process as templates for other countries.

A common thread that emerged from both the reengineering and infrastructural
change efforts is the idea of incorporating best practice. In the area of software
development, the emphasis on adopting best practice among the Citibank countries is a
guard against the common trap of settling for the lowest common denominator in the
process of standardization. The commitment to develop a reengineering template
incorporating the best redesigned processes from each country, for use in developing
common systems is another embodiment of this idea. DiNardo explained what is being
practised in Citibank Asia Pacific:
The purchase of the Systematics package provides the bank with increased
functionality and standardized processing without significant systems development
effort. In-house development effort will be focused on strategic products such as those
for currency trading, Citiplus, and the SABRE front-end teller and platform systems.
The approach to future systems development will no longer be one of letting a hundred
flowers bloom. There will no longer be systems development or enhancement only for
individual countries. Any country requiring any change needs to convince at least two
other countries to support it.Any changes made would then be made for all Citibank
countries in Asia. Several countries have now been identified as likely centers of
excellence for front-end software development: Taiwan for auto loans processing,
Australia for mortgage products, Hong Kong for personal finance products; India,
Philippines, and Singapore will become centers for application software development,
design, and the generation of high quality code at competitive cost.
The reengineering of business processes in Singapore provides a glimpse of how
Citibank intends to introduce best practices in banking products and service delivery,
which would be built into common front-end systems. Citibank has been in Singapore
for more than 90 years. It started out as a wholesale bank. The consumer bank business
was started later in the 1960s. Being a foreign bank, it is allowed to set up only three
branches in Singapore. Nonetheless, Citibank has done very well in Singapore.
Customer accounts have more than tripled since 1989, largely due to the successful
introduction of Citibanks Visa card business. There has been an accompanying tenfold
increase in profit in the same period.
The increase in account volume however, has been accomplished without any
major increase in staff or changes in processes. Staff, processes, and infrastructure that
were originally designed to support about 50,000 accounts are strained when they have
to support an account volume of about 250,000. This has contributed to a drop in
customers perception of service levels. Annual surveys conducted indicated that
customer satisfaction has dropped from a high of 90% in 1987 to a low of 65% in 1993.
Some departments are experiencing high overtime and employee turnover. A cultural
assessment study conducted by consultants confirmed that some employees did not feel
valued and trusted. Frontline operations were also paper intensive and perceived to have
significant opportunities for improvements. In addition, there was the need to achieve
the vision of Citibanking, which required cross-product integration as a basis for
relationship banking.
The project was carried out in three phases: (1) building the case for action, (2)
design, and (3) implementation. In the first two phases, the consultants worked closely
with four Citibankers who were assigned full time to the reengineering project. After six
months, the team had completed phase two and had come up with a list of 28

recommended process changes. Three core processes were identified for change
delivery of services to the customer, marketing, and transaction processing. The
delivery process included account opening and servicing, credit, and customer problem
resolution. The team found that it was encumbered with many hand-offs, a makerchecker mindset where transactions had to be checked by someone other than the
originating employee, and unclear accountability for problem resolution. The
transaction processing process was basically the back-end processing for the
transactions originating in the branches. The major observation here was that the
processing was fragmented by product or system. The marketing processes were
currently also product focused, and there was limited understanding of customer
segments and individual customers.
The vision that the team presented included a streamlined front-end delivery
process with clear accountability and quick turnaround on customer problem resolution,
a unified approach to transaction processing, and segment-focused, cross-product
marketing. They felt that the most radical change required would be that of the
organizational culture. One aspect of culture manifested in the many maker-checker
was a legacy of the days when the bank was a wholesale bank, and each transaction
value was very high while volume was relatively low. In the retail bank business, the
high volume and low individual value of transactions required a different mindset.
Other aspects of Citibank culture that would need to change included the emphasis and
the incentive system that rewarded product innovation and individuality. The process
changes required a culture that focused more on relationships with customers and on
team efforts.
The team also set detailed targets for each of the core processes. Among the many
set for the delivery processes, examples are a rise in the percentage of customers who
were highly satisfied from 64% to 80%, an increase in the percentage of customers
served within 5 minutes from 71% to 80%, and improved transaction processing
accuracy from 2 errors per 5,000 transactions to 1 error per 5,000 transactions. Detailed
targets for productivity and cost improvements were also set. These targets were in
effect also a list of measures that would be used to evaluate each process on a recurring
basis.
In phase three, three implementation teamsservice delivery, operations, and
product development and marketinginvolving many more employees were formed.
Each team was headed by the vice president in charge of the function. The role of the
consultants in phase three was scaled back. Some resistance was encountered to the
recommended changes. George DiNardo and Peter Mills addressed the problem of
resistance by having discussions with key stakeholders of the processes to be
reengineered, and by focusing on a number of projects. Before the end of the first year,
the consultants had been phased out. The Citibank implementation teams were driving
their own implementation.
A major part of implementation was to develop and implement the information
systems needed to support the reengineered processes. One resulting new system is
SABRE (Strategic Asia Pacific Branch Retail Environment). SABRE consists of two
complementary subsystems: SABRE I is at the teller level and provides automated
support for signature verification, paperless teller transactions, and Citicard transactions.
SABRE II includes the phone banking systems, together with facilities for

telemarketing and cross-product marketing at the branches. The bank developed the
SABRE system in-house, because it considers this to be a strategic product. SABRE I
has been a great success and is considered to be best of breed. Today, the SABRE
platform itself is of strategic importance as a vehicle to deliver Citibanking to
customers, and to enable cross-selling of multiple products to customers.
VII. Managing Change
The changes to the IT architecture and business processes are not trivial. George
DiNardo, as chief technology officer, was a catalyst for change, and his ability to
communicate convincingly with senior officers of the bank in corporate headquarters
and in Asia was an important asset. He brought a different perspective to technology
management, starting from the premise that the IT infrastructure had to be standardized
to obtain the maximum benefit for the bank. Countries wanting to be different will have
to justify it, quite a change from the days when country managers decided the types of
technology they wanted for each country.
The RCC experience provides a useful model for the current consumer bank
consolidation. The in-depth technical expertise gained from running a regional data
centre would be directly relevant to the new infrastructure that Citibank is putting in
place for Consumer Banking. Not surprisingly, Ajit was asked to set up and run the data
centre for the new Asian Pacific Consumer Banking technology infrastructure.
However, the new infrastructure is more than just scaling up to process more
transactions. The business of Citibanking in Global Consumer Banking is more diverse
and complex than cards and requires the internalization of many business parameters in
developing software to support back-end banking operations. Correspondingly, the
business impact is also far greater. Citibank, as an American bank operating in Asia, is
subjected to restrictions on the number of branches allowed in each country. The
reliance on an electronic interface with customers and for an electronic channel for
delivery of banking services is significantly higher than many local banks. Citibank sees
the new technological infrastructure as a key enabler for flexibility in its product and
service offerings throughout Asia at a competitive cost.
The conversion to a new technology infrastructure at Citibank Asia Pacific meant
some loss of control over computing for the Citibank country managers. DiNardo felt
that there had not been serious opposition to the changes, although country managers
were understandably nervous about the sweeping changes. He stated:
Its an idea whose time has come. The Asia Pacific high profit margin must be
maintained! They all know this. They know the value of what were doing. Computer
costs will be down for them, it will affect their bottom line. There is no longer any
desire for the sophisticated manager to have his/her own mainframe computer. They
know that I have done it 700 times already. No one objects to the logic of the idea. We
will insist on a postimplementation audit. The country managers in Asia did see that to
survive the next 10 years something like this is necessary. Its all about customer
service.
However, it is the level of service and support from the center that country
managers are concerned about. The standardization and centralization strategy
obviously restricted flexibility in country operations. It was adopted consciously and the

gain in integrated customer service and economies of scale is substantial. Nonetheless,

the issue of responsiveness to local needs is unlikely to go away, and there are concerns
about how priorities for enhancements will be handled if there are not enough resources
and capacity to meet requests in a timely manner. In 1999, George DiNardo retired from
Citibank. Without his forceful personality to enforce standardization, countries requests
for customization will be more difficult to resist.
VIII. New Challenges: Merger and the Internet
By 1998, when Citicorp merged with Travelers, Citibank Asia Pacific had largely
completed its centralization of back-end processing for consumer banking. The other
regions began a little later but had also been centralizing their IT infrastructure for
several years. At the time of the merger, Citicorp was three-quarters of the way through
a huge back-office restructuring effort, under Mary Taylor, head of Citibanks
operations and technology division. She took restructuring one step further, pulling
together the operations and technology for the corporate and consumer sides of the
bank. Today, Citibanks data centers have gone from 66 to 12 worldwide. Ms. Taylor
notes that
The consumer bank handles huge volumes of transactions that are of much
smaller value. The corporate bank handles fewer transactions but with large dollar
value. There are real synergies you can take advantage of because you can add more
transactions without really impacting capacity.15
Outside of the United States, the main data centers are now in Dublin, London,
Singapore, Hong Kong, and Sydney, and together serve over 100 countries.
The merger with the Travelers Group posed another set of challenges to the
banks infrastructure. The merger offered the opportunity of providing a financial
services supermarket to customers. However, to do so requires integration of
information systems, customer databases, product lines, and multiple transaction
types.16 The integration options that are open to Citigroup are broadly total integration
of platforms, servers, risk management and front- and back-office operationsor
instead establish a data warehouse for customer information, accessed by objectoriented middleware.17 The latter option is more expedient and avoids the need for
risky reengineering of business processes. However, total system integration offers
more effective cross-selling of products and risk management. The decisions made are
likely to have implications for the IT infrastructure in the Asia Pacific given the banks
desire for increasing standardization globally.
The other global trend that affects Citibank Asia Pacific is the rise of Internet
banking. E-banking offers some unique opportunities and threats to established banks.
For example, Internet transactions cost about one-tenth of traditional bank counter
transactions, according to William Lo, chief executive of Citibank Hong Kongs
consumer banking operations.18 Citibank, with its long tradition of technology-enabled
banking initiatives appears well placed to take advantage of the Internet. However, it
has not been smooth sailing.
Citigroup has spent about $400m on e-banking, more than other large banks.19 In
1999, Citigroup recorded a $172m net loss in e-banking.20 Citigroups biggest

consumer banking initiatives are either in test phase, or have only been soft-launched.
Citi f/i, (f/i stands for financial interactive) rolled out quietly in mid-1999, and will not
be widely marketed yet.21 There are those who believe that Internet banking will take
off when the most common devices for connecting to the Web are mobile phones. This
may be particularly true in Asia where mobile phone ownership is much higher than PC
ownership. In 1999, a trial service began in Singapore with carrier Mobile One to let
users perform retail banking functions using cell phones. The long-term goal is to allow
customers to switch easily among banking, credit card, insurance and brokerage
services using the cell phone.22
In contrast to retail e-banking initiatives, Citibanks corporate e-banking
initiatives appear to be more well received. In 1999, Citibank launched a well-regarded
small-business siteBizzed.com, which is expected to make a profit in two years.23 In
May 1999, Citibank also launched a B-to-B e-commerce systemCitibank
Commercethat lets customers order products, monitor order status, complete
settlement and reconciliation processes. Interestingly, it was first made available in the
Asia Pacific region.24 It targets 8,000 Citibank corporate customers in the Asia Pacific
region and will be introduced to the United States, Europe, and Latin America later in
2000.25 The service has its competitors even in the region. For example, the Singapore
government and Visa International recently launched an on-line business-to-business
trading network for companies and financial institutions in Singapore, called the
Commerce Exchange.
The rise of Internet banking also has strong implications for the banks IT
infrastructure. Citicorp is converting its technology platforms to make them more Web
compatible. For example, its internal data networks are being converted worldwide to
TCP/1P, with the help of AT&T. E-Citi, Citigroups Internet banking innovation group,
is developing middleware that links the mainframe environment to the Web
architecture.26 At present, most of the core products will remain on mainframes, but
they will increasingly be linked to Web-based front-ends. Internet-based direct banking
initiatives are already using different core banking systems. Sanchez, a client/server
based core banking system, is being used to support Citi f/i. Citibank is also considering
Sanchez as part of an ongoing effort to standardize operations and processes across the
banks various consumer businesses.27 To that end, all four of Citibanks regional
consumer banking operations have the option to independently acquire Sanchez for their
core retail banking system. Sanchezs potential advantages compared to mainframe core
retail banking systems, such as Systematics, are responsiveness to time-to- market
demands, and channel integration requirements. Questions about scalability of
client/server systems to meet traditional retail banking volumes however remain.
While Citibank Asia Pacific has managed the transition to centralized back-end
processing, it continues to face new challenges from global trends in bank mergers and
Internet banking. Virtual banks without brick and mortar compete with established
banks and have the advantage of lower overheads, greater agility and speed of response
to the market. Nonbank companies like AOL and Microsoft are also offering financial
services and compete on the pervasiveness of their customer reach, as well as the large
set of potentially complementary products and services. Sunil Sreenivasan, chief
executive of Citibank Singapore, clearly recognizes the implications for Citibank:
In the future, the list of competitors in financial services will include unfamiliar

names such as telcos, power companies, and dot-com companies. What is frightening to
us traditionalists is that we will have to cannibalize our own products in order to avoid
others cannibalizing those very same products. Or put more extremely, we may in
certain respects need to commit suicide in order to survive.
Case Study Questions
1. What business strategy has Citicorp been pursuing in Asia?
2. Evaluate Citibanks Asia Pacific information technology (IT) infrastructure and
systems in light of this strategy. How well do they support it?
3. How well do Citibanks infrastructural changes made in the 1990s support the
merger with Travelers Group and Citigroups efforts to deal with the impact of
the Internet on the banking and financial services industries? What management,
organization, and technology issues will Citibank need to address?