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Does IT Pay Off HSBC and Citi

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Introduction

Global banking Industry • Deregulation in 1980s
 led to the removal of regulatory barriers to international banking  allowed banks to expand the scope of their operations globally.

• Advent of internet & advanced telecommunication technologies
 allowed financial institutions to operate more easily & cost effectively .

• Offshoring gained importance as a way to
 cut down labour costs.  benefit from skilled & well educated workforce.  improve customer service.

• Banks used consolidation to rationalize their operations and lower the costs. • M&A –penetrate into newer markets and introduce innovative products. • Investments in IT to improve provision and delivery of their products and services across the globe.

Comparison of IT strategies
HSBC Decentralized management approach to allow regional IT services to meet local needs. CITI GROUP Integrated approach to their IT governance world wide.

The departments responsible for system development were grouped by type of application and by end users served
Adopted offshoring process Aims at providing new & better services to customers and improving their own operating efficiency. Hsbc.com was designed to provide a common presentation & browser capability to offer all of the services to any of its customers.

The departments responsible for system development were grouped as 1. Corporate Investment Banking Technology 2. City Technology Infrastructure.
Offshoring was not adopted Aims at having common standards across citi group to serve the clients better at lower costs. Citibank portal provided integrated set of consumer services in the area of banking, brokerage and insurance.

Assessing the value of IT investments
• The payoffs for IT investments are to be evaluated over a period of time. • Assessment can be evaluated in terms of tangible metrics such as:
 Increase in the customer base  Savings  Return on investment made

• There are also other intangible metrics such as customer satisfaction etc.

COST

HSBC

BENEFIT • Led to an annual savings of $67 million • • 1.2 million internet banking customers 177,000 customers using TV banking.

Transferred its back office work to Group service Centres in India & china. Invested more in IT staff to support service improvement projects and online banking Launched HSBC direct.

• Reached 343K customers with a total of $7.2 billion deposits

Cooperated with IBM & Sky digital to develop Interactive Financial Services---offering multi channel e-banking service & TV banking service respectively
New E-banking platform for corporate & mid market customers was launched in 2004 Invested over $2 billion on technology including dotcom initiatives. Incurred $1.1 billion in development of new capabilities in corporate, I-banking & markets

• Attracted over 126,000 registered customers by 2000

• No. of customers registered for internet banking increased by 43% • No. of E-banking customers doubled • website services were utilized by customers in 150 countries. • 76,650,000 site visits • 24% increase in customer base • 116% increase in online transaction volumes.

2G innovative business solutions allowing the site to recognize customers and provide relevant personalized contents

• sales went up by 25% • 250K new online savings accounts • Raised $5.7 billion.

CITI GROUP
COST 10 strategic acquisitions in credit card business. Acquired Lava Trading BENEFIT • Reached 100 million accounts. • Tripled its client number • Expanded its US electronic trading capabilities. • Processing more than 39 million transactions globally in 2004 • Named “Best of the Web” for 2003 by Forbes.com • Raised $10 billion in deposits in the US in the first 9 months

Upgraded Citi Direct online banking

Launched Citigroup Direct

Launched biometric credit card services in Singapore • First financial institution to use enhanced & biometric ATMs for micro finance customers in India authentication----Competitive Advantage

Which of the two banks is cleverer?
• Citigroup followed a strategy of using technology to provide superior service at lower costs. It reduced number of data centres and consolidated its call centres for efficiency. • HSBC transferred its back-office processing functions to group service centres in India and China. It resulted in significant reduction of staff costs. • HSBC invested in different regional departments thereby leading to value addition from different regions. In comparison Citi group’s investments were consolidated.

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