Banks race to follow where new arrival leads




The global giant is making an impact on retail banking customers, but it has yet to stir local rivals into competitive action

By Mark Huband in Cairo

Financial Times, 10 May 2000

For months last year, Egyptian bankers awaited the arrival of a global giant. It was widely expected to mark a sea-change in banking activity, and provide the benchmark for the future of the retail banking industry.

Now Citibank Egypt is firmly ensconced in Cairo. It has provided trade and corporate services here since the 1970s, but has been aggressively inserting itself into Egypt’s underdeveloped retail sector since July 1999. Months of talk about the expected impact of Citibank’s tried and trusted consumer banking operations have slotted into the banking scene at a time when the industry is going through its most difficult period since Egypt embarked on its economic reform programme in 1991.

Consequently, the anticipated rapid development of retail banking has been slightly disappointing, despite promising results for Citibank itself.

Citibank launched its card services in July 1999, and now has 10,000 cards in circulation. In February it launched a personal finance service, essentially providing loans.

It is now launching an internet service with a local service provider, as a means of raising its profile and attracting new customers. They will be provided with a computer terminal and other hardware repayable in installments over three years.

The bank is widely expanding its use of machines, with the planned introduction later this year of Speed Collect Lock Boxes, whereby cash payment of bills for anything ranging from insurance to mobile telephone bills can be paid and deposited in the box.

But the lock boxes act as a symbol of how far Egypt has to go to catch up with the demands of its business community. They were held at customs for nine months before the paperwork was accepted allowing them into the country.

Citibank’s learning curve in the Egyptian retail market has been dominated by a process of ascertaining the spending patterns of its clients, to an extent which few other banks have attempted.

As it is not planning on opening more than a handful of branches in the main cities, and will depend on telephone banking and automated services to give its customers the most advanced banking facilities in the country, Citibank’s success depends upon assuring customers of high quality.

“Certain infrastructural development is needed in the banking industry, though a lot has happened in the past year.

“The framework around the legal structure needs to become a little better,” says Sanjay Kao, Citibank marketing and sales director.

“Meanwhile, there’s little experience in unsecured credit, and we have learned a fair amount about customer behaviour.

“The thing that stands out in terms of customer behaviour is that there needs to be an expansion of card acceptance among retailers.

“On current assumptions, we expect 50 per cent of Citibank’s business in Egypt will be retail within five years,” says Mr Kao.

Citibank’s modern and efficient office is now receiving 1,000 telephone calls daily, as clients make use of its 24-hour telephone banking service.

To date, rival banks have not installed similar services, nor has Citibank noticed a perceptible intensification of competition by banks seeking to acquire new customers.

“I’m not really looking too hard at what the existing banks are doing. Most of what we do we do in isolation,” says Dhiru Tanna, vice-president for global transactions.

“What we desperately need is electronic clearing and an improved telecommunications network so clients can look at balances.

“Meanwhile, the picture looks very rosy. Our investment in Egypt is going up and up.”

© Financial Times