After years of Citigroup
Inc. shrinking its U.S. retail banking franchise to focus on affluent customers
and a handful of big cities, the global bank is ready to become a national
player once again.
This time, however, it doesn’t plan on gobbling up rivals or opening any
new branches. Instead, Citigroup says it will use an expanded mobile app to
fully serve new customers.
The move puts Citigroup more in line with upstart Silicon Valley rivals,
who believe that consumers want purely digital services, than its megabank
peers, who believe that their large physical footprints are still central to
retail banking.
The strategy also resembles that of a different Wall Street titan, Goldman Sachs Group Inc.
That investment bank has made an uncharacteristic push into consumer banking in
the last two years using a digital strategy that avoids branches.
For Citigroup, the effort is more of a reboot than a debut. In the
second quarter, the bank—run by Chief Executive Michael Corbat —plans to add
new features to its mobile application, which would offer a full suite of
banking, credit-card, lending, and investment tools to all users, including
holders of the bank’s over 120 million U.S. credit card accounts.
Bank executives say that three years of investing in digital tools has
laid a foundation for the rollout. New services will include virtually instant
account opening and a so-called “aggregator” feature that lets users—even
people who don’t have any Citigroup accounts—view data from their accounts at
other banks, akin to services offered by startups such as Intuit Inc.’s Mint and
Betterment LLC.
Later this year, Citigroup also plans to launch a series of new digital
products in the U.S. via the app, such as “roboadviser”-style automated
investing and small credits to people buying goods at a retailer, known as a
“point-of-sale” loan.
Purely digital banking isn’t new by any means. Many consumers park some
of their cash with online banks such as Synchrony Financial , Discover Financial Services or Ally Financial Inc. that
pay higher interest rates and don’t rely on branches.
Global banks including JPMorgan Chase & Co. and BBVA Co mpass Bancshares
Inc., a unit of Banco Bilbao Vizcaya Argentaria SA, have also launched digital
offshoots to capture younger customers. The products feature new names, like
“Finn” for JPMorgan Chase’s offering and “Simple” for BBVA’s version. Goldman
rolled out a high-interest savings account as part of “Marcus,” its retail
product named after founder Marcus Goldman.
Year-end North American consumer depositsat Citigroup declined in 2017,
whileinvestment management assets grewYear-end North American consumer deposits
at Citigroup declined in 2017, while investment management assets grew
Citigroup, meanwhile, would be the first among the country’s giant,
full-service banks to pitch an entirely mobile relationship to a wide swath of
consumers under its primary brand name.
It calls the strategy “light bricks, heavy clicks,” said Stephen Bird,
the bank’s global consumer banking head since 2015.
It is a timely move. Citigroup has closed or sold branches across the
U.S., even in large cities such as Philadelphia, Boston, and Houston. With
those cuts, Citi has sacrificed some of the scale that has helped rivals such as JPMorgan Chase, Wells Fargo & Co., and
Bank of America
Corp.
While those three banks have dominated deposits, Citigroup’s North
American consumer deposits fell from $185 billion at the end of 2016 in to
$182.5 billion at the end of last year.
By concentrating branches in New York, Los Angeles, Chicago, Washington,
Miami and San Francisco, Citigroup has reduced its U.S. branch network by more
than 300 locations since 2009 while refocusing on customers with big balances,
encouraging them to move some money from deposits into wealth-management
products. U.S. retail investment assets under management rose 14% last year, to
$60 billion.
Citigroup also struck a deal last year to double the number of its
fee-free U.S. automated teller machines by striking a deal to add ATMs in
30,000 retail locations nationwide, such as at CVS Health Corp. and
Target Inc. stores.
In New York, where Citi is based, the bank has the second-most branches
behind JPMorgan, according to Federal Deposit Insurance Corp. figures for
mid-2017.
Citigroup doesn’t plan to give its new digital banking services a new
name or to attract new customers by debuting unusually high interest rates,
like Goldman is doing.
Depositors are increasingly shopping for good deals from banks, and may
make that a top consideration as interest rates rise, over other services or advice.
“We want real relationships,” said David Chubak, head of global retail
banking and mortgage at Citigroup. Attracting customers with high rates is “the
most commoditized business model on the planet.”
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