Customers usually assume that the banking services and products they use are entirely developed and provided by their bank. They are, of course, often wrong in this assumption. It is becoming increasingly common for banks to source specialised services and products from another bank and then label and offer them as their own.
Citi’s Global Transaction Services (GTS) is a major provider of such white labelled products to other banks – so-called because they are provided unlabelled for other banks to attach their own brand names and logos. GTS provides cash management, trade finance and securities services (clearing, settlement, custody and fund administration) to financial institutions, corporations and governments around the world, in many cases under a white label arrangement.
One such customer is Kiwibank, a wholly-owned subsidiary of New Zealand Post that provides banking services through post offices, ATMs and other outlets. Set up in 2002, it has the biggest bank branch network in New Zealand. It has met its profits targets and now has more than 500,000 customers.
The rationale behind setting up Kiwibank was to create diversified revenue streams to compensate for declining postal revenues, which were being hit by the growth in telephone and internet communications. New Zealand Post’s core business – mail collection and delivery – provides an ideal ‘bricks and mortar’ network to deliver financial services.
However, a problem that all new entrants face is that developing all the necessary systems, platforms and services from scratch can be difficult and expensive.
Although Kiwibank has developed a range of banking services in-house, it chose to align with Citi to provide a number of corporate banking services. It signed an agreement in September 2006 to source international payment and trade finance services from Citi and provide them as its own.
The result is that Kiwibank’s customers enjoy a broad range of services including international money transfers (also known as telegraphic transfers), trade finance, foreign currency accounts and forward foreign currency contracts.
The two key elements of the Citi offering are Cross-Border Payment Solutions for Banks, which allows banks to use Citi’s processing and infrastructure network; and CitiDirect Online Banking, a web-based electronic banking platform that enables banks to initiate international and domestic payments, view real-time balances and reports and automate accounts reconciliation. Taken together, these two elements are valuable tools for managing cash flows, reducing costs and achieving better use of working capital.
Beauty parade
Sam Knowles, Kiwibank’s chief executive officer, says that time, money and proven operational reliability and efficiency were the reasons for sourcing the services from outside rather than in-house. “Speed to market was a key driver for us, especially delivering the complex foreign currency accounts and trade suite of products,” says Mr Knowles.
“There is also real value for a small, independent bank at the bottom of the world in having a large, well-regarded international associate to allow it to box above its weight on the international stage. When Citi asks why a payment has been delayed, other banks take notice – that in its own right allows us to deliver a better service to our customers.”
Kiwibank held a beauty parade of five financial providers, and looked at two in depth, including Citi. “Citi was successful because it delivered a broad range of services with a well-specified user interface, CitiDirect,” he says.
“It also focused on service level agreements and quality assurance for our main operational calls and has a structured approach to ensure this is delivered. We also reviewed its ability to provide system access to its FX rate engines, which we saw as a critical factor to delivering an improved customer experience,” says Mr Knowles.
Implementation was not without its difficulties, but these were easily overcome. “The Citi New Zealand and Asian regional teams have been fantastic advocates for the Kiwibank cause, working across cultures and time-zones to deliver the information and technical assistance required,” says Mr Knowles. “When Citi puts its collective global experience to work, it delivers good outcomes.”
Citi keeps its promise
| Nigel Dobson, head of cash management for GTS Asia at Citi, agrees that the alliance has saved Kiwibank much time and money and has enabled it to offer more reliable and efficient services to customers than if it had tried to develop its own. |
“The alternative for Kiwibank was to build an entire international payments platform through a traditional correspondent banking structure, which would have taken up valuable time and resources,” says Mr Dobson.
The collaboration between Citi and Kiwibank is ongoing with new services constantly being added. Kiwibank now offers real-time payments through its internet site, using live FX rates. This allows it to offer both retail and business customers the ability to send wires, cheques and automated clearing house payments through its website with real-time FX rates.
“We are working towards offering multi-currency payments online by early next year,” says Mr Dobson. “These enhancements put Kiwibank ahead of any other bank in Australasia.”
Citi provides similar services to a number of other banks around the world, and this particular agreement is a good example of both parties leading with their strengths. There is a synergy between Kiwibank’s broad customer base and distribution strength in New Zealand and Citi’s extensive network covering more than 100 countries, international product capabilities and delivery channels.
