End in sight for traditional banking?

Naresh Kumar, Citibank''s e-commerce Asia Pacific director, explains why traditional banking could soon be left behind.

Q: Is e-banking really nothing more than traditional banking services done electronically?

A: We see e-banking in two parts. Firstly, it is about e-enabling your entire core services, and then adding to that all the facilities and features that the internet enables. For example, the internet can enable new discovery processes, and the customization of those processes. It is about the empowerment of the customer with choice, convenience, speed and access. That is one part, taking your existing products and improving those products using the tools that the internet provides you.  The second way is creating new products that would not have existed without the internet. For example, products like smart cards, internet payment products and security.

At Citibank, we look at ourselves as an e-business. E-business is going beyond banking. In banking, there are two pillars: traditional banking on the internet and the new services on the internet. We see ourselves as playing a role of e-enabling our customers and if that means doing more than traditional banking would entail us to do, so be it. For example, going out and helping customers create commerce platforms, helping customers handle e-procurement, and manage their supply chain.

Q: Is that moving away from your core competencies?

A: The way we see it, we are starting with our core competencies but then extending our expertise  to the value chain of our customers. Starting with understanding our customers' businesses, the risks involved and the relationships, and using this as building blocks to enable them to become e-businesses. If that means to do payments and collections, which is rightly part of our core competencies, so be it. If a part of it is about extending beyond payments and collections to hosting e-commerce applications for our customers, so be it. On the web, there is a reconstruction and deconstruction of the value chain. What that means is that there are no longer discrete components such as selling and purchasing, and payment and reconciliation. The internet has the power to seamlessly integrate these activities. Where one begins and the other ends is not necessarily a clear line.

Q:Where can banks add value to this value chain?

A: Banks have traditionally signified trust. And we see trust manifesting itself in different ways in the value chain. It may be in the way we deal with privacy, confidentiality, customers' proprietary information, security and finances. But that is only the starting point. From these relationships, and from the knowledge that we have about the companies' processes and appetite for risk as well as our ability to manage those risks, we have the building blocks for conducting business. We must not forget that the internet is only one way of conducting business. Sure enough, in a couple of years' time, it may be the principal way of doing business, but in today's world it is still going to be a clicks and bricks world. Companies are going to be doing business in the real world and on the internet world. It is about helping our customers make the transition from the real world to the internet world, but using some of the fundamental ways of doing that. That's where banks bring value.

Q: Is it better to collaborate or buy off-the-shelf products from specialist internet technology companies when building new capabilities. Or is it better to create your own?

A:  There are some technologies that need to be nurtured by the bank in a way that is close to our core competencies. E-citi is our arm that does innovation and does our strategic investments, but most of their activities are related to the banking side. We are not in the business of developing complex applications. We are in the business of using technology to the extent that technology meets our propositions. Having said that, we have numerous partnerships û alliances with Commerce One, Netscape to name a few û and a dozen other alliances that are in the pipeline. And these are all alliances with first-rate technology companies. If there is a good technology solution, we are better off using that solution where we think there are certain gaps.

Q:  What are those gaps?

Most of the technology platforms are made on a high level of generality. When working with specific customers, it has been our experience that customization is key. If you want that corporate platform to work for a specific customer, there is a significant amount of customization that needs to be done. And that customization can only be achieved if you have an intimate knowledge of customers' work practices, intimate knowledge of their business process.
Q: But is it a case of 'if you build it, they (clients) will come'?

A: You cannot create something in a vacuum. If you haven't had the market validation for it, it is likely that what you have built is not what your customers want. We work very closely with a few pilot customers. These customers are on the cutting edge of innovation û the early adopters of technology. If you look at the technology adoption curve, after the early adopters, comes the early majority, then you have the masses. It's not about creating an infrastructure and hoping customers like it; it is about creating an infrastructure that has been validated in the marketplace.

Q: And what successful pilots have you run?

A: We have had multiple initiatives, and each of them is at various stages. We have Citicommerce pilots, bill presentment pilots, among others. Our approach with each of the pilots is to make sure that we use this customized technology to create a proposition that works. And these initiatives are in different stages. I can't provide you with any names or details at this stage.

Q: Citibank started to think and act on e-commerce strategies very early on. What do you think are the key lessons Citibank has learnt from past experience?

It's been case of validating some of own assumptions. The first one is to start with the customers: don't start with technology, start with the customers needs. If you start with the technology and platform, that is not going to lead you to a winning proposition. Secondly, don't be afraid of seeking meaningful alliances. Thirdly, there are no quick solutions; you have to be prepared for customization. It's about taking the tools in the real world and making them work for individual cases.



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