[HERALD INTERVIEW] ‘Era of free banking is over’: Citibank

As banking becomes more mobile and branchless, it is also to bring a change in the way people perceive traditional banking services, and Citibank has introduced a new maintenance fee system to encourage consumers to adopt faster to the new trend, according to Brendan Carney, head of consumer banking of Citibank Korea.

With the introduction of the account maintenance fee system, which will start from March, the bank will charge new customers with less than 10 million won ($ 8,319) in bank deposits with monthly fees of between 3,000 won and 5,000 won. Customers who use any of the bank’s services via mobile platforms do not have to pay the fee.

Aware of a backlash from financial customers, the Korean branch of the largest US bank has also said that the fee will not apply to elderly customers over 60, younger ones under 19 and those in the lowest income bracket.

“With the introduction of the account maintenance fee, we try to have good pressure on our customers to be more digital with us,” Carney, who has been leading Citi’s consumer banking in Seoul since April 2015, told The Korea Herald. “We think this is the way most banks are going to go, and we are already doing so in every other market we operate in.”

“That’s not to say all customers should pay the fee,” the executive said. “If you are willing to be digital, you don’t have to pay the fee. For us it’s not about driving customers away, it’s about encouraging customers to be more digital and bring more relationships.”

Application of the fee is part of Citibank’s transformation into a truly digital bank for the Korean market, according to Carney.

The bank last year embarked on changing its approach to the Korean market -- one of the most competitive markets according to the executive -- by launching a new mobile banking platform and opening the largest wealth management center in Cheongdam-dong, southern Seoul.

“We stepped away from trying to be like all the other banks and tried to have our own strategy focusing on customers in a way that we can serve them better and add more values for,” Carney said.

The essence of Citibank’s digitalization strategy is to have its customers own a bank branch in their pockets and manage their financial life via the mobile platform. If customers need more than the basic services, they can visit Citi’s WM centers.

“Nobody goes to a record shop for music anymore, and banking is moving in that direction,” the head said. “While customers want easy banking tools, they always want some guidance and help, since finance is complex, which is why we have WM centers.”

This year, Citibank plans to open several more WM centers in Seoul. A facility that is bigger than the newest Cheongdam Center is currently under works with a plan to be launched before July.

“We plan to continue the innovation momentum this year,” Carney said. “We are planning to introduce the Citi Global Transfer service which charges no fee on international transactions among Citi accounts, and the transfer is going to be made instantly.”

The bank will continue making the mobile app more robust, while upgrading its online banking platform during the second quarter of the year.

Then, it will phase out account passbooks to go even more digital, he said.

Since Citibank is smaller than domestic banks, it needs to be more focused on customers whom the bank can serve, he stressed.

“Citi is much smaller, so we try to be innovative and have to have a strategy different from some of the bigger banks,” Carney said. “If all the customers want basic checking accounts and debit cards there are other banks to serve them. We try to focus on customers with more complex financial needs.”

Adding that the bank is aware of not being able to serve “everybody,” Carney said, “The bank’s core customer segment would be a more affluent segment, 50 million won or above in terms of relationships ... But that’s not to discriminate customers. We have a boarder spectrum of customers for our card and loan businesses.” 

By Song Su-hyun (song@heraldcorp.com)