2. PREFACE
Every student of Master in Business Administration at Allama Iqbal Open University has an
essential request to make report in any of the well reputed organization. The purpose of this
programs is to acquaint the students with practical applications of theoretical concepts taught to
them during conduct of their MBA program.
The internship in TRG limited Pakistan is personally arranged by my own resources and the
department gave me a letter for getting this internship.
Really, it was a nice opportunity to have a close comparison of theoretical concept in practical
field, involving the use of primary and secondary data. All the efforts on the way are summarized
in shape of this internship report. This report may depict deficiencies on my part but still it is on
output of student efforts, for which I beg pardon. The output of my internship analysis is
summarized in a shape of internship the contents of the report shows the detail of sequence of
these. The report is concluded with problem and suggestions. I have no words to express my
gratitude to sir Awais for his intellectual guidance without which it could have been rather
difficult for me to complete this report.
3. ACKNOWLWDGEMENT
“To him belongs the dimension of the heavens and the earth, it is he who gives
life and death and hehas power overall things.”
No one can say that I am perfect everyone should admitthat without the help of
Allah and his people a man can’t get anything so, I bow my head before almighty
Allah with gratitude. I am also very much thankfuland presents salute to many
individualswhohave helped me in shaping this report. I am also very much
thankfulto lot of former fellows who took the time and trouble during the last few
days to speak to me aboutthe waythis text could be further improved. We would
like to admitthat we completed this project dueto parentswho pray for our
success. We also wish to express our appreciation to our teachers who help us a
lot and introduce us to new dimensionsof knowledge. And we would like to
acknowledgeall our work to our parents and friends who guided to accomplish
this never forgetting task I am also thankfulto the staff of Citibank. In the end, we
would like to express our sincere and humblegratitudeto Allah almightythat’s
blessings, help and guidancehasbeen a real source of all our achievements in our
life.
SHUMAILA BIBI
ROLL NO. AW534689.
4. EXECUTIVE SUMMARY
One of the most controversial issues in modern is banking—lifeline banking—continues to
be debated in and outside the deposit-services industry. Banks, thrifts, and their competitors have
been asked in several states to offer low-cost financial services, especially deposits and loans, for
those customers unable to afford conventional services. Some banking institutions have
responded positively with limited-service, low-cost accounts, while others argue that most
financial firms are profit-making corporations that must pay close attention to the potential
profitability and cost of each new service.
Lifeline banking laws were first proposed in several states in the early-to-mid-1980s. Thus
far, seven states— Illinois, Massachusetts, Minnesota, New Jersey, New York, Rhode Island,
and Vermont—have enacted legislation creating lifeline banking accounts. These laws range
from authorizing the state banking department to monitor bank fees and, when appropriate,
regulate them, to mandating that all state-chartered banks offer a low-cost checking account. At
the federal level, amendments to financial reform bills currently under debate would require all
banks to offer lifeline banking accounts.
As more and more financial institutions began to offer free checking, Citigroup – the most
profitable company in the world in 2003 – felt more and more pressure to make a decision.
Markle had mixed feelings about free checking. On one hand, it would attract more customers,
but on the other hand, it could hurt Citibank’s brand. “We do not want to just ‘follow the herd’.
We want to make our own decision based on what is right for us,” Markle said, “However, it is
time to make a decision.”
5. Table of content
S #. DESCRIPTION Page #.
1) Lifeline banking 1 to 4
2) Background
3) Basic banking and lifeline account
4) Stored value and prepaid credit card
Practicalstudy 5 to 9
5) History and introduction of Citibank
6) Organization structure of Citibank
7) Vision and mission statement Citibank
8) Basic banking and lifeline account
9) Data collection method 10
10) SWOT analysis 11
11) Conclusion 12
12) Bibliography 13
6. Lifeline Banking
Background:
Lifeline banking laws were first proposed in several states in the early-to-mid-1980s. Thus
far, seven states— Illinois, Massachusetts, Minnesota, New Jersey, New York, Rhode Island,
and Vermont—have enacted legislation creating lifeline banking accounts. These laws range
from authorizing the state banking department to monitor bank fees and, when appropriate,
regulate them, to mandating that all state-chartered banks offer a low-cost checking account. At
the federal level, amendments to financial reform bills currently under debate would require all
banks to offer lifeline banking accounts.
The New York State law is a good example of a comprehensive form of lifeline legislation.
The Omnibus Consumer Protection and Banking Deregulation Act, enacted in January 1995,
require state-chartered banks in New York to offer low-cost checking accounts. Such accounts
can be opened with as little as $25, have no minimum balance requirement, carry a maximum
maintenance fee of $3 per month, and must allow at least eight monthly transactions (New
York State Banking Department 1996b). From a policy perspective, two conditions must be
met for lifeline banking legislation to provide the unbanked with greater access to the
payments system:
The legislation must reduce the price of payments services,
Consumers must be sensitive to this price change. It appears that while lifeline
accounts lower some payments services costs, many consumers may not be sensitive to
these price changes.
Reduced Pricing:
Although detailed information on the use of lifeline accounts is not available, lifeline
legislation clearly lowers the price of payments services for some consumers. Its proponents
argue that in addition to drawing the unbanked into the traditional banking system, lifeline
legislation offers this group inexpensive access to the payments system in two ways: by lowering
the minimum opening balance requirement—an important barrier to opening an account—and by
7. 1.
reducing the monthly maintenance costs they would pay at some banks. The New York State law
addresses both of these cost factors directly: banks must offer accounts with no minimum
balance requirement and can impose only a low, fixed cost for a set number of monthly
transactions.
Price Sensitivity:
Lifeline banking will achieve its goals only if the unbanked are sensitive to the cost
advantages it offers them. To investigate the extent to which the unbanked respond to changes in
price, we explore how these consumers currently access the payments
system and we compare the associated costs with those of banks.
Dear New Yorkers:
For people with limited incomes, checking accounts can be complicated and
costly. Many banks charge fees that go up as the size of the deposit goes down.
At the same time, it’s becoming increasingly difficult to maintain a “cash only” lifestyle: both the
government and employers frequently insist on using direct deposit of benefits and payroll. Fortunately,
there are alternatives. New York State requires banks to offer affordable banking services. All banking
institutions in the State, including commercial banks, savings banks and credit unions, are required to
offer “basic banking” accounts, commonly known as “Lifeline Accounts,” to any and all customers. In
addition, prepaid debit cards are becoming more popular as an option for those without a bank account.
While this may be a convenient alternative, it’s important for consumers to know the pros and cons of
using these cards. Always make sure you carefully read all user agreements, understand all the fees you
may be liable for, and shop around for the best and safest banking deals. Sincerely,
Eric T. Schneiderman
(Eric T. Schneiderman was elected the 65th Attorney General of New York State on November
2, 2010. As the highest ranking law enforcement officer for the State, Eric has taken on the tough
fights to protect New Yorkers because he believes there has to be one set of rules for everyone,
no matter how rich or powerful.
2.
8. Basic Banking or "Lifeline" Accounts
Lifeline bank accounts offer significant savings to consumers and all banks in New York State
must offer them. There are some restrictions; your financial institution may require you to:
• Direct deposit of your social security, wage or pension payments;
• Close any other transaction accounts.
Here is what to expect if you open a lifeline account.
• Low Initial Deposit: You can open your Lifeline account with a deposit of only $25.
• Minimum Balance: To keep the account open, you will need only one penny on deposit as a
minimum balance.
• Maintaining Your Account: Your financial institution cannot charge you more than $3 per
month to maintain your Lifeline account.
• Free Withdrawals: You can make withdrawals from your Lifeline account at least eight times
per month at no charge.
• No Monthly Minimum Deposit: There are no restrictions or penalties as to the minimum
number of deposits you make per month.
"StoredValue" or Prepaid Debit Cards
Prepaid debit cards can receive deposits (cash or direct deposit from an employer or
government agency) and be used to make payments or withdraw cash from an ATM. Often the
cards are “branded” by major credit card companies and can be used anywhere those cards are
accepted. Here are some issues to consider:
• Prepaid debit cards may have unexpected charges such as fees for activation, monthly service,
reloading money, ATM withdrawals, balance inquiries, and fees for making a purchase when
there is not enough money on the card. There may also be a fee if you close the account or don’t
use the card for a few months.
3.
9. • Unlike a credit or debit card linked to a bank account, there are often no protections if the card
is lost or stolen.
• Finally, although prepaid debit cards are often marketed to those with credit problems, using
one will not help repair a poor credit history.
Before signing up for a prepaid debit card, look carefully at all the costs involved with using
one. Compare the costs with those involved with a lifeline account or a local credit union. Most
important, carefully consider which banking options offer you the most protection against loss or
fraud.
4.
11. Introduction and History:
Citigroup
In 2004, Citigroup was the largest U.S. bank holding company and a leading global financial
services firm. Headquartered in New York, it had a presence in more than 100 countries across
six continents, where its 275,000 employees managed 200 million customer accounts. Its
services included credit cards, consumer finance, retail banking, corporate and investment
banking, retail brokerage, life insurance and investment management. Major brand names under
Citigroup’s trademark red umbrella included Citibank, CitiFinancial, Primerica, Smith Barney,
Banamex, and Travelers Life and Annuity.
Founded in 1812 with $2 million authorized capital and $800,000 paid-in capital, the City
Bank of New York opened for business to serve a group of New York merchants. Over the next
century, the bank continued to expand and diversify its product line and services, serving
businesses as well as individuals. By 1929, it became the largest commercial bank in the world
with over $1 billion in assets, with offices in Asia, Europe and India. In 1976, the bank changed
its name to Citibank, N.A. (National Association), following its parent holding company’s
change to Citicorp two years ago to “better suit its global business”.1
Citibank Consumer Retail Banking:
Retail banking was the 2nd biggest grossing product line in the Citigroup family, just after its
world leading credit card business. It had a net income of $4.2 billion in 2003. Citigroup’s retail
banking offered banking, lending, insurance and investment services to individual consumers
around the world. It had 3,100 retail bank branches, 9,800 ATMS, online services as well as a
network of Priamerica independent agents worldwide.
Citigroup’s retail banking boasted many successful innovations; in the early 1920s, it was the
first national bank to offer services to consumers; in 1961, it created the Certificate of Deposit
and in the late 1970s it widely deployed and popularized the use of 24-hour ATMS in the U.S.
However, it took them over a decade to launch a fully integrated Internet service. Citigroup’s
size had created a hurdle for integration of its many financial services onto one single Web
5.
12. portal. As other national and regional banks began to offer the technology to consumers,
Citigroup was still trying to create a “new standard”. It launched the award-winning CitiDirect in
late 2000. However, it is estimated that fewer of its consumers actually conduct transactions
online than Bank of America and Wells Fargo.
Markle joined the managerial associate program after graduating from business
school in 2000. At the end of the comprehensive training program, she chose to work in the
Marketing Division of Citibank. As the Director of Product and Marketing, Markle’s marketing
team is responsible for working out the overall marketing strategy nationwide, in key markets
and by market segment. Some major concerns in her job included the acquisition and retention of
customers.
Board of directors:
Citi's Board of Directors jointly oversees the activities of our organization, and offer guidance
in operations across the globe.
Michael L. Corbat (Chief Executive Officer)
6.
13. Ellen M. Costello (Former President, CEO, BMO Financial Corporation and U.S.
Country Head, BMO Financial Group)
Duncan P. Hennes (Co-Founder and Partner of Atrevida Partners, LLC)
Peter Blair Henry (Dean, New York University Stern School of Business)
Basic lifeline banking of Citibank:
There existed several options for Citibank to obtain a larger market share in the newly
consolidated banking industry. These options included acquisitions, increasing and improving
branches, and offering free checking. Once a distant memory, many financial institutions had
reinstituted free checking accounts. Fifth Third Bank experienced 17 percent growth in account
balances after becoming one of the first U.S. banks to reintroduce free checking. Since then,
nearly all national banks had followed suit, offering a similar product. In 2003, Free Checking
Accounts were offered at 35 percent of all US financial institutions.
Financial Institutions often marketed all checking accounts with no monthly fee as “Free
Checking.” However some of these accounts did not adhere to the legal definition set forth in the
Truth in Savings Act of 1993. This act stated that “free accounts” cannot require an average
7.
14. minimum balance, charge a monthly maintenance fee or incur per-item transaction fees.
Additionally, under regulatory guidelines, banks cannot require direct deposit and still market
accounts as free.
Lifeline Checking:
Experience the benefits of City National’s Lifeline Checking account – a low-cost checking for
those clients who write a minimum number of checks per month.
Account Features:
Low-cost checking account for those clients who write a minimum number of checks per
month.
Limited check writing
No minimum balance requirements
Low monthly fee
Paperless Statements
Negatives:
There were several factors associated with free checking that needed to be considered.
The first and largest factor of Citigroup was brand erosion. Citibank had always been a price
leader, offering a premium product and foregoing market share. By switching to free checking, a
new type of customer with less money to deposit would be attracted. Markle was unsure if this
type of customer would be more transient and jump from bank to bank in order to avoid fees.
Since retention rates varied greatly in the industry the California trial was not a clear indicator of
retention for Citigroup. While the current attrition rate for Citibank checking accounts ranged
from 20%-50% on average, it was unknown how free checking would affect this rate on a
national level.
The perceived value of a free product was also a concern. Markle believed strongly that
8.
15. customers would feel that they were getting a premium service when they pay monthly fees.
With free checking, people may be less trustworthy of the quality of service that they will
receive. The final concern Markle faced was the lost fees from a free checking account. In 2003
Citibank was making an average of approximately $100 in customer net revenue on checking
accounts.
Positives:
On the other hand, free checking had already become a commodity in the banking industry.
Almost all major banks were already using it in some form, and it was almost expected from the
customer. Because of the consolidations in the industry, it had become increasingly difficult to
gain market share. The industry standard was to offer free checking, and customers had become
aware of which banks were offering this product.
As far as retaining newly attracted customers, various requirements could be tied to the
checking accounts in order to increase the rate. For example, many banks offered free checking
only with a direct deposit requirement. Because direct deposit took time and effort to set up,
people were less likely to switch banks. Citibank also offered other free services such as online
banking and financial needs analysis which helped retain customers. However, Markle was
concerned that these perks would not have a strong enough effect to increase retention to the
necessary rate.
Cross selling products was a major selling point for free checking. While fees might be lost
and low-income customers attracted, these two negatives might only be short term. As a person
goes through one’s life cycle, financial situations would change. Citigroup wanted to capture all
customers and recognized that a person with little money could eventually be earning and saving
a substantial amount. One would then turn to one’s bank for other services such as investing,
mortgages, and loans. In the end lost fees could be made up by customer spending, and thus it
would be most important to first obtain the customer regardless of financial situation.
9.
16. RESEARCH
METHODOLOGY/DATA
COLLECTION METHOD
The methodology reported for collection of data is primarily as
well as secondary data. The biggest source of information is my personal observation while
having discussion with staff. Formally arranged interviews and discussions also helped me in this
regards.
PRIMARY DATA COLLECTION:
Formal interviews.
Informal interviews.
The formal interviews include people from the top management and the informal interviews
included people from middle and lower management.
SECONDARY DATA COLLECTION:
Internet search:
www.google.com
Newspapers.
References books and other literature.
Annual reports of the organization.
LIMITATIONS
One of the major limitations while carrying out this research was the lack of co-operation on
the part of the management of the Citibank in providing the data regarding the organization and
its policies.
10.
17. SWOT ANALYSIS
The acronym SWOT stands for a firm’s internal strengths and
weaknesses and its external opportunities and threats. The
purpose of such analysis is to build on company’s strengths in
order to exploit opportunities and counter threats and to
correct company’s weaknesses. On the basis of environmental
analysis of Citibank, the structural analysis of fast food
industry, and the assessment of internal resources of the company, following strengths,
weaknesses, opportunities and threats are there for Citibank:
Strengths:
Being one of world’s largest financial services providing companies it
has a strong market position.
It has a diverse range of products to meet the different needs and
demands of its clients.
Citibank is a leader when it comes to consumer service business, which that has three
segments, cards, consumer finance and retail banking.
Weakness:
Weak consumer finance as compared to other banks.
Citigroup has strong financial position, but recession in the economic
market can create financial hazards for the company.
Opportunity:
There are some growing economies across the world and the company
needs to expand its business in new markets.
The company has great potential to get profit from the consumer
banking within or outside US.
Threats:
Financial crisis like recessions can tell upon the business of this financial institution.
With the increase in number of financial institutes the competition is growing severe day
by day. 11.
18. Conclusion
Finally, one of the most controversial issues in modern is banking—lifeline banking—
continues to be debated in and outside the deposit-services industry. Banks, thrifts, and their
competitors have been asked in several states to offer low-cost financial services, especially
deposits and loans, for those customers unable to afford conventional services. Some banking
institutions have responded positively with limited-service, low-cost accounts, while others argue
that most financial firms are profit-making corporations that must pay close attention to the
potential profitability and cost of each new service.
As more and more financial institutions began to offer free checking, Citigroup – the
most profitable company in the world in 2003 – felt more and more pressure to make a decision.
Markle had mixed feelings about free checking. On one hand, it would attract more customers,
but on the other hand, it could hurt Citibank’s brand. “We do not want to just ‘follow the herd’.
We want to make our own decision based on what is right for us,” Markle said, “However, it is
time to make a decision.”
12.
19. REFERENCES/BIBLIOGRAPHY
For successful completion of this project we have utilize different available resources from
which we have obtain required data. This resources lie in both digital and analog form. Most of
the information is obtain from internet, while a visit to organization is also made to get further
information. We are thankful to company management who had welcome and cooperate with
us. Resources which are consulted discussed below.
References:
Good, Barbara A. “Bringing the Unbanked Aboard.” Economic Commentary, Federal
Reserve Bank of Cleveland, January 15, 1999.
Bailey, Jess. “Minnesota Bank Begins to Shed Its U.S. Bonds.” The Wall Street Journal,
December 20, 1988, p.3.
Lopez, Jose A. “Supervising Interest Rate Risk Management.” FRBSF Economic Letter,
Federal Reserve Bank of San Francisco, no. 2004-26 (September 17, 2004), pp. 1-3.
Resources:
https://cnb.com/banking/checking/individual/lifeline-checking.asp
www.google.com
13.
