Citi Lures Depositors With Credit Card-Like Perks

Citigroup is the world’s largest credit-card issuer, with about 28 million customers, but the gap between its credit business and retail banking has grown larger. To combat this, Citi has begun testing perks for credit cards to encourage customers to get other banking products.

Bloomberg is reporting that Citigroup’s deposits shrank by $5.4 billion in the past two years in the face of competitors and digital banking startups.

In its new initiative, the company offered 30,000 airline points for customers who signed up for an online checking account. Citi is also planning to upgrade both its Thank You and Double Cash reward incentives for a select number of cardholders.

“We go in already having these established Citi customers,” CEO Michael Corbat told investors. “We know who they are, we know what they spend on, we know who their bank is, we’ve seen their payments come in if it’s not us. And we think we’ve got the ability around our value proposition to target them with offers.”

The move illustrates that banking institutions like Citigroup still have an advantage over smaller startups or new entrants that entice customers with new technology and services.

Citi’s scheme has so far been working, and digital deposits are up in Q1 by an estimated $1 billion, which is more than was deposited all of 2018. Total consumer deposits went up 1 percent in Q1 after five quarters of declining.

Some analysts, however, say perks are only a short-term solution, as customers will take advantage of them and then move on to the next enticing offer.

“All you’re doing is basically buying market share and buying customers, but if you can’t keep them, then the money you just spent is not worth it,” said Alyson Clarke, principal analyst at Forrester Research.

Offering a higher interest rate, Clarke said, is unsustainable in the long run.