Market Power

As head of global e-solutions for Citigroup's e-Business subsidiary, ANN CAIRNS has had a major hand in such initiatives as CitiDirect, an online banking application for corporate customers, and the launch of several electronic marketplaces, including FinancialSettlementMatrix, a new company that Citigroup formed with Wells Fargo and three technology partners that packages financial settlement services. Other business-to-business alliances have followed with Oracle-an effort to integrate online payments through CitiConnect-as well as with CitiCommerce and Commerce One. In an interview with BS&T associate editor Karin Halperin, Cairns explained some of the intricacies of electronic marketplaces.

BS&T: What are the biggest projects for Citibank e-Business?

CAIRNS: The biggest one is CitiDirect, which is basically our global banking platform. It's a Web-based delivery system, but it isn't just building a Web front end onto an existing legacy infrastructure. What we've done is hook into the payment systems in the countries we're in. We don't have to go through other banks.

We had knowledge of all the formats and how all these payment systems work. When we went to design CitiDirect, we said we're going to make it easy for the customer. We're going to get to a stage where we can ask the customer who do you want to pay, in what currency, when, for how much and why? To do that, we had to build links into our legacy platforms that run the accounting infrastructure for each country.

We didn't just individually link a legacy system from the back end to the front end to the customer. We built middleware that contained all the rules of how the payment systems worked and simplified them. It's reusable architecture and allows us to build many different things. It allows us to talk to our clients' partners, such as Oracle and Commerce One, and have some means of giving them our standards and formats through the Internet.

BS&T: Where does FinancialSettlementMatrix, or FSM, stand now?

CAIRNS: We had a pilot. They built the infrastructure and they've flowed some transactions through it. We were able to demonstrate the payment flow through the bank to the FSM infrastructure with the information coming back in the right way. Now they're working on the first production and release, which will be out in the third quarter. The platform is bank and technology independent.

BS&T: What advantages does FSM bring to banks?

CAIRNS: Supposing you had built Internet-enabled product or you just wanted to provide transaction-based services to your existing client base. One of the things that you face is, how are you going to get distribution in this marketplace?

What FSM does is give a bank distribution capability. By hooking into FSM you've hooked into an infrastructure that then can plug into a lot of different marketplaces without having to make an investment upfront. So it's distribution without the required proprietary investment.

BS&T: Is FSM a public exchange?

CAIRNS: I would describe it more as an infrastructure or a switch that could work either in a public or private exchange. The idea behind it is that you can bring a lot of different banks and suppliers to the table at the same time. And when you're dealing with big exchanges with many suppliers and buyers, you'll want a number of different banks to share the risk and back the entire marketplace.

BS&T: Is it realistic to expect the creation of common platforms in e-commerce like those that have evolved for credit and ATM cards?

CAIRNS: I think it is. Well before the Internet, SWIFT created standards so that banks could talk to each other all over the world. And the banks adopted it, because we are an industry that has to be highly collaborative.

Banks are also very heavily engaged in EDI electronic data interchange. Those in North America and Europe are deploying EDI even though there's two different standards to transmit data and information with payments.

BS&T: What's the real potential of the Internet in financial services?

CAIRNS: It causes banks and technology companies to build collaborative models for treasurers, for CFOs to manage their day to day activities. We've been doing a lot of work with some of the top treasury workstation providers who themselves are moving to new business models. In the past you used to have a big capital expenditure upfront and buy a system. In the future, you're going to be able to buy on an ASP basis and just buy what you need. And you're going to want to have your bank transacting and interacting with your ASP provider in a holistic way. The Internet allows us to do that.