Does IT Payoff?

Strategies of two Banking Giants

Submitted by : Group 4, Section B

Chirag Arora Dhruv Aggarwal Neha Sushilkumar Bhomia Nidhi Singh Nitya Saxena 2013PGP112 2013PGP128 2013PGP248 2013PGP249 2013FPM008

Prasenjit Chakrabarti

2013FPM009

Reasons due to which high investment in IT is justified

Due to change in the strategic landscape of the financial industries, both the banks repositioned their strategic posture by investing in IT leading to provision and delivery of their products and services across the globe, cutting costs, and entrenching their strategic position. The benefits are as follows :

HSBC

Citigroup

Expanded their global reach to over 150 countries and territories Enhanced the banking experience with provision of intelligent banking services Led to rapid decision making and local accountability Increased customer base 1.2 million internet banking customers, 177000 customers using TV banking New technology introduced like internet payment gateway, mobile banking, online storefronts, TV banking. Internet sales increased by 25% in 2006, with over 250,000 new online savings account Better understanding of customer needs and enhanced targeting and analytical insights. In personal finance services, IT services helped in increasing customer by 40% to 16 million and online sales volume by 55% annually

Helped in meeting objective better serve clients and lower costs Innovation due to use of IT in services like e-Citi, round-the-clock account information, research and email exchange between client and consultants and other superior services at lower costs increased the customer base Powerful technology platform led to rapid integration of various systems and accelerated global growth through strategic acquisitions and reaching 100 million accounts in credit card business with more than 800 million accounts online in 2000 Improved efficiency along with delivering value and convenience to its clients International expansion, making targeted acquisitions, global expansion (online banking in 90 countries with processing 39 million transactions in 2004), being rewarded as Best of the Web by Forbes.com in 2003, tripling client number in US in 2005 are some other achievements of Citibank due to investment in IT

Assessing IT investment at HSBC

Focus of HSBC: Providing new and better services to customers and improving operational efficiency Promoted rapid decision-making and local accountability Incorporated IT for different departments to meet local technology needs Strategic Approach of IT investments at HSBC: HSBC strategically employed IT to create joint ventures with other banks, and cooperated with IBM to offer multi channel e-banking services to customers. Took co-branded initiative with Yahoo for direct online payment Collaborated with Compaq Computer to launch Internet payment gateway fro secure payments With hsbc.com as brand name, provided Internet banking platform, and planned to integrate all of its services to customers on common platform IT enabled coordination and several e-commerce projects to strategize on Manage for Value of customer services. Contribution of IT investment towards competitive edge All its IT investments resulted in favorable customer response and increased online transaction volumes. HSBC Mexico became first bank to offer pre approved online mortgage HSBC enhanced targeting and analytical insights to better meet customer needs

Assessing IT investment at Citigroup

Objective of Citigroup was to better serve clients and lower the cost Focused on global approach in providing clients easy access that is location independent. Integrated approach to facilitate knowledge exchange across borders by providing packaged and customized software Strategic Approach of IT investments at Citigroup: Alliance with Netscape to provide interactive investment tools to customers and other strategic alliances with Microsoft Network and AOL to develop different online products Introduced B2B e-commerce system for corporate banking service: Citibank Commerce Trial service with Mobile One in Singapore to manage money using mobile phones Citi on the Net strategy to deliver value and convenience to clients and improving efficiency Citi.com as portal to offer integrated services to customers: banking, brokerage and insurance

Contribution of IT investment towards competitive edge CitiDirect upgraded online banking and was named Best of the Web for 2003 by Forbes.com Citigroup used technology to issue first dual currency card in China in 2005 Citibank as first financial institution for enhanced authentication to sensitive transaction over Internet

Assessing the Value of IT investment

Evaluating Returns on IT investment is complicated as outcome and gains are difficult to attribute to a particular IT investment made during a long business cycle. Still it can be evaluated on certain criteria:

Impact on process and customer satisfaction Evaluating fulfillment of Prior intention to invest example: Business integration Tracking financial gains like from IT support offshore operation IT benchmarking to remain in competition Whether IT implementation is in sink with strategy

HSBC versus CITI: Who is cleverer?

Citigroup was cautious enough in making IT investment decisions and attained average annual growth of 24.5% with just 10.54% of annual increment in IT spending. Citigroup was able to assess its cost and IT investment returns judiciously which facilitated its Market cap overshoot that of HSBC and reach $ 269.1 billion

Citigroup made wise decisions to go for integrated approach to their IT governance worldwide instead of regionally, thus lowering cost yet providing exemplary services to customers. HSBC on the other hand went on investing in all advanced technologies without carrying out benefit analysis