The Technology Implications of Citigroup’s Egg Deal

In the wake of New York-based Citigroup's ($1.88 trillion in total assets) announcement in late January that it will acquire London-based Egg Banking, the world's largest pure online bank and one of the U.K.'s leading online financial services providers, industry observers are weighing the technology implications of the deal. Citigroup has said that it will stick with Egg's "outstanding online platform," while combining it with Citigroup's global banking capabilities and product set.

"We like Egg's brand, we like Egg's platform, we like Egg's customer engagement model and we like Egg's customer set," said Ajay Banga, chairman and CEO of Citigroup's global consumer group-international, in a release announcing the deal. "We will deliver growth by combining Egg's leading-edge online products and distribution with Citigroup's global banking expertise and scale."

However, Citigroup CEO Charles Prince may have delivered a contradictory message in his speech at the 2007 Citigroup Financial Services Conference in New York on Jan. 31. The company will break down the silos of the "very strong separate product franchises," Prince stressed. "What you can expect from us going forward is one face to the customer, one Citi to the customer."

Although Egg has a "very good platform," Citigroup has been developing its own Java-based online banking platform, which already is in use in a number of countries and is scheduled for U.S. deployment later this year, according to George Tubin, senior analyst in TowerGroup's (Needham, Mass.) delivery channels practice. In fact, last year Citigroup started its own online bank, Citibank Direct, in the United States, he notes. "In any banking acquisition, the acquiring bank has to decide what they want to do with the technology," Tubin says.

London Calling

While Citigroup's technology strategy may not be clear, the bank's market strategy seems obvious. "This is a terrific acquisition for Citigroup, because it provides us meaningful scale in consumer financial services in the U.K., a key strategic market," Banga said in the release. The purchase of Egg from London-based Prudential for about $1.127 billion in cash includes more than 3 million Egg customers, as well as the institution's products and services, such as online payment and account aggregation services, credit cards, personal loans, savings accounts, mortgage, insurance and investments.

Citigroup has said it intends to build on Egg's existing relationships, including the use of the Egg brand. As of press time, reports surfaced that Citigroup would add new branches in London and England's Southeast region under the Egg brand, which would greatly increase Citi's presence in the United Kingdom. Currently Citigroup has five branches in the region. The deal is expected to be finalized by April.