Digital Banking

Citigroup To Market Digital Bank To Credit Card Customers

Citigroup said on Tuesday (May 29) that it won’t use high deposit rates to lure new customers to its digital bank – instead, it will go after its credit card customers.

Citing comments that Stephen Bird, chief of Citigroup’s global consumer bank, made at an investor conference, Reuters reported that the company plans to market the digital bank to credit card customers, including holders of its Double Cash card and the credit cards it issues for American Airlines, Costco and Home Depot. He said that by offering more American Airline mileage credits, Citigroup will be able to attract customers with stable deposits.

Citigroup’s efforts to grow its digital banking offering come at a time when activist investor ValueAct Capital recently revealed that it has a roughly $1.2 billion stake in Citigroup. According to a recent report in The Wall Street Journal, ValueAct has built the position over the past four to five months, disclosing an $80 million stake in Citigroup as of the end of December. That amounts to an approximate 0.7 percent stake.

With a market value of $175 billion, Citigroup is the fourth-biggest U.S. bank by assets. In a quarterly letter to its investors, ValueAct revealed some suggestions for the bank, such as increasing its plan to return cash to shareholders via buybacks and dividends from about $40 billion to $50 billion. A spokesperson from Citigroup said the bank has “been having constructive conversations with ValueAct and welcome[s] them as investors.”

The investor letter also stated that Citi’s advantage is the “old-fashioned treasury management for global businesses” that positions it well in foreign exchange and debt underwriting for multinational clients. According to ValueAct, that makes the bank indispensable to clients while creating stable profits.

“We believe that in this era of banks, the winners and losers will be decided by strategic focus, customer-centric innovation and capital allocation — as opposed to the product breadth, appetite for risk and investment in trading talent that defined competition in the pre-crisis era,” ValueAct wrote to its investors.

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