New banks

Challenges of digitization across incumbent FIs: 5 questions with the Global Head of Sales at Citi, Steve Elms

  • We explore the idea of how FIs adopt digitization and improve customer journeys.
  • And can the metaverse transform banking in remote future?

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Challenges of digitization across incumbent FIs: 5 questions with the Global Head of Sales at Citi, Steve Elms

In the past couple of years, the financial industry has undergone extensive digital growth, a growing openness toward blockchain solutions, and a focus on creating new regulatory compliance and policies by government to adapt to the changes.

The multiple waves of Covid-19 forced banks, FIs, and consumers alike to embrace digital and all that digital entails. Consumer banking habits that evolved during the pandemic have increasingly cemented – challenging financial institutions to keep pace with improving their tech to deliver innovation. 

Citibank is diversifying digital solutions to enable growth, speed-to-market, and deliver a better user experience. To keep up with the new wave of digitization, Citi provides online and mobile banking solutions to its clients via the web-based banking platform CitiDirect. For file exchange, messaging processes, and API solutions for cash management, the bank has developed the CitiConnect online channel service. The bank also facilitates digital wallet transactions for users across the globe.

Earlier this year, Marqeta and Citi Commercial Cards announced a new partnership to power global mobile wallets offering. Citi will leverage Marqeta’s tokenization technology to expand payment options for their commercial card programs enabling their global cardholder base to provision physical and virtual cards directly into mobile wallets.

Thinking about how incumbent banks are handling digitization, I spoke with Steve Elms, Global Head of Sales, Citi Treasury and Trade Solutions for Corporate, Commercial and Public sectors – about topics revolving around how Citi Commercial Cards will power global mobile wallet offering, challenges for traditional banks in 2022, and remote future opportunities for the banking sector in the metaverse.

How does Citi help businesses, which seek digital growth in the (almost) post-pandemic world?

Steve Elms: Citi’s platforms cover online and mobile banking needs, which are digital doorways to our banking network as clients need global digital solutions to transact across many countries — avoiding the complexity of using multiple banks across regions. We are actively investing to meet the evolving needs of both “digital natives” as well as our traditional clients that are also embracing digital. 

We continue to invest in these global digital platforms to help companies grow by providing market access to instant payments, cross-border payments, leveraging API technology inclusive of tokenization and QR codes. Additionally, we’ve expanded our Cross Border Payment solutions adding Instant Payments and Alternative Payments Methods to meet the needs of our clients with gig economy, business to consumer and direct-to-consumer (D2C) models. We are live with digital wallets globally along with UnionPay International launching this year in China.

We are thinking like a tech company versus a traditional bank — and are involved and working with other governments that are launching their own central bank currencies.

How will Citi’s tokenization for mobile wallets help customers?

Steve Elms: Such offerings can offer a step-change over traditional financial methods. With tokenization, whether managed mobile wallets or payment intermediaries — with the likes of PayPal, Apple and Google, Alipay and WeChat Pay — we are moving towards technologies that are always on and allow for commerce and payments to be transacted in a 24×7 environment. Furthermore, many are now starting to evolve further through the provision of offering through blockchain/DLT technologies, which not only allow for immutability but can also provide programmable solutions such as directly linking the transfer of assets to the transfer of payments. This is helpful to solve some of the inherent challenges that are common today – of separate delivery v/s payments processes.

An extra advantage these offerings can bring in is a much greater level of transparency, especially in the cases of public blockchains, in which participants can see all transactions that previously were only available to intermediaries.

What is fintech’s effect on banks providing credit to SMBs?

Steve Elms: Fintechs are enabling lending to the underserved segment and helping to bridge certain capability gaps in the market. For example, while not having the same level of regulatory scrutiny as a large bank, fintechs can be more efficient in areas such as onboarding of new clients and the origination of loans via their platforms, thereby reducing time to market. They also look to access various vast data sources to enable data-driven credit underwriting and fraud prevention approaches that are producing acceptable default rates; although models are yet to be proven through a full credit cycle. 

Banks themselves need to evolve their thinking around extensions of credit to consider such approaches. At Citi, from a Trade and Working Capital perspective, we have a considerable focus on partnering with fintechs to accelerate lending to SMBs, especially in the e-commerce space. We can both underwrite and extend credit from our own balance sheet, as well as play a key role in securitization efforts with access to the industry’s largest and broadest pool of investors for funding the SMB segment.

What challenges dotraditional banks face in 2022, given the requirement to up their focus on regulatory compliance and policies?

Steve Elms: The landscape we find ourselves in is complex: companies are going global at record speed; many of our clients are born global these days. Digitization is creating the need for massive scale and greater agility. Businesses and geopolitics are so intertwined that they’re creating an entirely new paradigm for multinationals. From Citi’s perspective, we have embarked upon a transformation to become the preeminent banking partner for institutions with cross-border needs, a global leader in wealth management and a valued personal bank in our home market. We are working to build a modern, simpler and more efficient bank – to get that done, we’re strengthening our risk and controls, industrializing our operating model and are flattening our organizational structure.

Traditional banks are challenged to modernize to meet the demands of the digital economy with people, processes, and infrastructure that is resilient and robust. 

What opportunities do you see for growth and development of the banking sector in regard to the metaverse ten years from now?

Steve Elms: The metaverse today is like the Internet was 25 years ago with much potential, but many unknowns, as it is still in a very early stage. Over time, as it matures, payments and commerce will play a fundamental role, with the need to be meaningful developments on cost and speed of emerging transactions with Web 3.0. Currently, the confluence of gaming, payments infrastructure and virtual reality is cementing the runway for the metaverse, bringing people into VR concert settings and 3D shopping experiences, however, for the time being, payments will have to be modular to work with different models as these models evolve.

As the metaverse evolves, there is an opportunity for the banking sector to engage with clients in new and innovative ways that will allow for better and immersive experiences. 

Ten years from now, the metaverse may have its own banking sector and commerce with specialized products, services and capabilities – and that might be a new wave of evolution of banking to provide services for businesses based on new ecosystems.

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