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Management Strategies

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Citibank, Daring to Dream of the Year 2054, Warns of Lessons of History

Innovation, plus infrastructure investment in databases, mobility and security, can fend off obsolescence, says exec.

Fifty years from now, you will carry a translucent plastic bank card displaying a talking head with artificial intelligence. Cash and checks will have been eliminated in favor of the new electronic currency of "credits," which you'll be able to transfer at will.

You'll use your card to summon up virtual shopping environments, and spend your credits at retailers that know your "bio measurements" and other things about you. It'll even remind you to buy a present for your mother's birthday.

Following the video prelude to her remarks at the TowerGroup 2005 Financial Services Conference in Boston, Catherine Palmieri, managing director at, looked back 50 years, to when U.S. Steel and other domestic producers in the American steel industry were "living the dream," she remarked.

"But the Japanese came along and they built all of the infrastructure brand-new," noted Palmieri. "All of the things that had given us the competitive edge had evaporated."

The same dynamic could occur in the banking industry. "We banks aren't very good students of history," she warned.

Compounding the ability of new competitors to build state-of-the-art infrastructure is the reduction in the "friction of money movement," said Palmieri. The electronification of checks along with the restructuring of the credit card industry from the Walmart and Amex-Discover lawsuits has combined to make inter-institutional funds transfers easier for customers to achieve. "Your ability to capture and retain your customer assets will be significantly impacted by this reduction in the friction of money," she added.

To avoid obsolescence, Palmieri advocates investment in infrastructure -- specifically databases, mobility and security.

All Roads Lead to SQL

Database technology forms the core of the critical infrastructure requirement in financial services for many reasons, not the least of which is the need to gain a competitive advantage in marketing financial services. "A good database is fundamental to good, targeted messaging," she said.

Mobility technology, such as the Bluetooth proximity-based data transmission standard, works alongside comprehensive customer data by making it possible for touch points to react intelligently when a customer approaches. For example, when a customer carrying a Bluetooth-enabled mobile device approaches a service desk, the bank employee should be able to have the customer information ready at hand and suggest financial services. Another example would be a Bluetooth-enabled billboard on the street that switches messages as customers walk past. Whether that would be scalable to New York City foot traffic is another question. "I get a kick out of thinking of a crowd of Bluetooth-enabled people walking in front of a billboard," Palmieri quipped.

Security is the other main driver of infrastructure build-out, which already has been evident at the top banks. Citibank has been aggressive at fighting the online fraud that had beset the high-profile company. "Citibank was the most phished site in the world," said Palmieri. "We're not even in the top 10 anymore."

But the next step in security will require a new level of technological innovation. "We believe that biometrics are going to happen sooner rather than later," said Palmieri. Whether that takes the form of retinal scans, fingerprints or voice recognition is a choice that the customer should make, she noted.

As a proof of concept, Citibank recently conducted an experiment using biometric identification at some of its branches. Instead of multiple passwords that had to be switched every 30 days, employees could use a biometric identifier for authentication. Instead of being seen as a "Big Brother" scenario, it was accepted as a convenience. Indeed, when a technician had to take the system down for maintenance, "we had a mutiny in the branches," related Palmieri. "We do see [that] the [biometric] adoption is going to take place as it becomes more convenient to log-on."

Underlying Citibank's infrastructure-focused, scale-driven strategy is the observation that online adoption has shown no signs of abating. "This is only continuing to grow," Palmieri said. "It hasn't peaked or topped out at all."

Finally, all of the infrastructure in the world can't succeed without innovation and the willingness to take risks. "Don't rely on consumer research," advised Palmieri, who cited the Sony Walkman and the ATM as examples of technologies that consumers would have never requested, but nevertheless were eventually embraced. "Leaders in innovation need a leap of faith," she said.

Palmieri manages online consumer and small business initiatives for Citibank North America, the banking arm of Citigroup (New York, $1.49 trillion in assets).

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