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Citibank Offers Instant Gratification Online

Active Internet users are lured with cash and prizes, and reeled in with a fast account-opening process.

Citibank (New York, $1.26 trillion in assets) intends to make it easier to open a bank account online than at a branch. "The expectation of today's savvy online user is that it should be easy, it should be convenient and it should be better than a face-to-face experience," says Catherine Palmieri, managing director, "That's what we've strived for," she asserts.

According to Palmieri, Citibank's internal research has determined that customers who bank online use a greater number of products from the bank and are 40 percent more profitable for the bank than their off-line counterparts. But Citibank's online strategy is also notable for the product it avoids - new online customers will not be issued a checkbook, unless they specifically request one.

Given the potential lifetime value of the online-banking-only customer, it's not surprising that Citibank has offered substantial incentives for opening a new account with a $1,500 balance, such as $75 for visitors to, $100 cash to The New York Times online readers or a Sony DVD player for customers.

Citibank's technology partnership with CashEdge (New York) supports its online acquisition strategy, Palmieri says. CashEdge helps Citibank initiate account-to-account balance transfers. That's useful for customers who maintain accounts elsewhere for occasional use, but who nevertheless wish to use Citibank for their main checking account. The funds-transfer capability also helps to speed up the online account-opening process, which now takes minutes rather than weeks, Palmieri notes. Citibank now conducts the entire identity verification process online, also with the help of technology from CashEdge, she adds. Once verified, the customer is prompted to transfer funds using the account-to-account tool and, the following day, it's an active account.

About three days later, the new customer receives a welcome kit in the mail, including a working ATM/debit card. That's a big improvement over the prior process, still used by many banks, in which the initial mailing contained merely an application form and a request for a paper check for funding. "It makes life so much more easy for the consumer," says Palmieri. "They're more willing to complete the application, so we get higher completion rates."

Likewise, the bank doesn't have to follow up with paper documents, Palmieri continues, nor does it have to wait in the hope that customers will reply. Also, the quicker sign-up leads to higher customer satisfaction and better word-of-mouth, she explains.

According to Palmieri, customer churn has been minimal so far. "It's not so much churn as what we call 'gaming' - coming to us just for the offer, opening the account and then shutting it," Palmieri says. "We monitor that very closely, and we're not finding it to be at levels that we would consider in any way excessive."

Even though the cash incentives are reminiscent of the long-distance telecom wars of the early '90s, there's a big difference between interstate dialing and e-banking, Palmieri notes, in that most people haven't yet tried the latter. "Once they pay a couple of bills online, they're hooked," she says.

Sign Me Up!

Identity verification during account-opening takes advantage of whatever information can be gleaned over the Web, from credit reports and by combing through the bank's existing records. Furthermore, Citibank and CashEdge have deployed a question-and-answer dialogue to ask "out-of-wallet questions" that an identity thief would be unlikely to know, such as the exact amount of a monthly mortgage payment.

"We're taking that to even higher levels of sophistication towards the end of the year, where the questions we ask you will be even more obscure, such as, 'Which of these addresses are familiar to you?'" says Palmieri. "It may have been some place you lived 20 years ago." Additionally, in order to throw off even the most sophisticated identity thieves, some of the questions are designed to have a "none of the above" answer, she adds.

By the end of the year, Citibank intends to provide its new online customers with an ATM/debit card number and PIN immediately following account registration, so as to allow the customer to sign in and start conducting business immediately.

CashEdge will also provide similar capabilities for some of its other customers. "We have a number of smaller regional banks and credit unions with whom we're in the process of implementing [the capability] as well," says Sanjeev Dheer, chief executive officer of CashEdge. "In some of those cases, we're actually integrating it directly with the core processor, so that you get that straight-through processing effect, so to speak."

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