The legal and ethical issues surrounding e-banking
Alan, F (2002).Your e-banking future. Strategic Finance. Available online at Citibank is a bank that is a subsidiary of the larger Citigroup. Citigroup is a leading financial institution that has services an excess of 100 million clients, close to 6 million online relationships as well as worldwide presence that spans 100 nations. Citibank UAE began its operations in 1987 in an environment that was very competitive. It rolled its services that included a comprehensive array of top notch financial services that targeted the high class and the middle class households. The bank employed cutting edge innovation in order to leverage its global expertise. This positioned it in the UAE region as the pioneering financial institution to introduce e-business solutions such as; CitiPhone (which is a round the clock phone banking service),ATMs, CitiAlert, E-card, CitiDirect and Citibank Online (Al-Mudimigh,2007).The main reasons for adopting the Citibank Online Strategy were; To provide a reliable extension to the existing bank network and to work around the problem of not being able to create several physical branches. To realize savings through the CitiPhone and the operating costs of the branches through the diversion of the existing clients to the World Wide Web (internet).The other reason was for Citibank UAE to enhance the imagery of its brand as well as the brand value as perceived by the customers.
SWOT analysis of Citigroup UAE
By means of its global operations that span 100 countries, the Citigroup has managed to come up with a world class global network that has withstood the tough economic times that have characterized the international financial sectors. Even though it operations are negatively affected by cases of loan defaults, the bank has remained buoyant in its UAE operations. This is as a result of its strategic positioning in the UAE financial sector courtesy of its unique e-business products.
The Citigroup UAE has several strengths
Support from the Citigroup
Citibank has a big advantage courtesy of its mother corporation Citigroup that has unparalleled experience in the offering of financial services worldwide. This gives it an advantage over its rivals as it has very solid technical and financial backing of the main firm Citigroup. This means that Citibank can engage itself in the UAE business ventures as well as business opportunities with little uncertainty as compared to other independent competitors. The other benefits that Citibank could derive from its association with the larger and more experienced Citigroup are the availability of better and tested strategies that are both sustainable and practical. Citibank gets its sustainability from Citibank in times of uncertainty.
Citibank has an array of innovative product offerings that enables it to be a market leader in UAE. The bank has throughout time been able to come up with better partnerships aimed at enhancing its geographical reach. Due to the restriction by the UAE government on the number of branches that it can operate in the region, it expanded its e-business model and strategy to enable it to operate over the internet and telecommunication backbone. This allowed it to provide seamless services at relatively less price and with more convenience to its customers. This has allowed it to gain a competitive advantage over other banks in the region.
Brand name that is tarnished
Despite the fact that Citigroup is one of the strongest financial brands globally, the brand name got tarnished in 2002 as a result of the unfavorable lending practices (SOMO, 2004). The other controversy that has surrounded the Citigroup is conflict of interest. The bank had been fined a whopping $500 million for conflict of interest. These elements of negativity end up tarnishing the Citibank brand name.
Most of its online operations target the United States customers
It is worth pointing out that most of the Citibank e-business operations target the United States customers. This is a significant weakness on its operations. In this competitive online banking scenario, it is appropriate for the bank to increase its online banking portfolio in order to cater for people of all income groups in UAE. This is because their competitors might focus on the low income segment via technological means (using technologies like mobile banking) to drive them out of business.
Problems with their branding
Citigroup has in the past learnt that it is important to properly brand its online services. Earlier on one of its online endeavors, Citi f/i flopped as a result of inappropriate branding techniques. The cat that its branding targets the middle and upper class only neglects the low class whose banking needs are on the rise.
Market suitable for growth
The fact that Citibank has innovative products that are unique for the UAE market makes it have room for expanding its market offerings. This is however risky considering cases of marketplace is not fully liberalized (Mosesov & Sahawneh,2006).Citibank has employed strategic positioning in order to reap the full advantage of a first-mover. The first-mover advantage is very clear in the launch of its banking operations in UAE and Russia. The bank has a focus on both Business to Business (B2B) as well as business to consumer (B2C) interactions. The company has several pilot programs geared towards the employment of mobile banking technology. Its online banking service called Citibank Online has been rolled out across the entire globe and continues to experience phenomenal expansion on a yearly basis.
Unique product offerings
Services such as Click Citi are important since they offer individuals who value their privacy when transacting online.
Fluctuations of foreign exchange
The Citibank global network as a result of its wide geographical spread is very vulnerable to the fluctuations of foreign exchange. In the worst case scenario, the bank would incur heavy losses as a result of the fluctuations in the currency market. The bank is also exposed to a variety of high-risk sectors that include technology stocks and telecoms. This generally results in the bank suffering immensely on its cache of equity portfolio.
Tough market conditions
Citibank operates in extremely tough market conditions. It has to device various strategies to compete with other international firms as well as homegrown financial institution.
Unfavorable regulatory conditions
The financial institution has to operate under very tight regulatory conditions such as the part that limits the number of branches it can operate in UAE. The bank has to operate under stringent laws instituted by various institutions to protect consumers, discrimination, privacy issues as well as correction of billing errors among others. The regulation in a manner limits the extent of their operations in most jurisdictions. As an illustration, it can be pointed out that countries may place limitations on the interest rates as well as fees that should be charged on loans. The countries can also put limitation on the amount that can be borrowed as well as the necessary procedures to be followed for the collection of loans.
The Porters 5 forces analysis
The bargaining power of customers
The concentration of buyers to the firm concentration ratio: The banking industry is an industry characterized by the concentration of high buyers. Several individuals engage their services such as mortgage, money deposits, investment, and currency exchange. This makes the risk to be high. The bank has to compete with 24 domestic banks and 28 foreign ones .The international bank concentration ratio is relatively high which means the Citibank has to compete with large banks such as Barclays and HSBC (High).
The availability of buyer information (High). The introduction of the internet makes it easier for customers to easily access information and compare the available service offering by various banks in UAE. The clients can effectively make use of this resource in comparing prices.
The sensitivity of buyers to prices (High): The services charges as well as the interest rates are sensitive indicators for various customers in the banking industry. The customers may as a result of the indicators transfer their money from one bank to another as a result of low cost of switching.
Availability of substitutes (High): Several substitute products and services have emerged in the UAE banking arena. Online banking is provided by almost all of the 28 international banks as well as by most of the domestic banks. Mobile banking services that offer 24 hours services are also provided by many other banks in UAE.
The bargaining power of suppliers (Low):
The supplier of bank capital (Low): The depositors are the suppliers of bank capital. They will definitely compare the available services with the ones offered by other banks in order to decide whether to withdraw their capital or to leave it.
The supply of computer equipment (Low): This is due to the incredibly high computer concentration ratio. Most companies use IBM computer equipment but other companies are also available.…