The new Relationship Tier system announced by Citi in August 2023 will help the bank expand on its affluent US clientele. The idea behind the initiative is for customers to keep unlocking new Tiers by growing their combined balances at Citibank, and with that, accessing rewards similar to airline or hotel programmes. The initiative will help engage younger generations and build long-term relationships with new and existing customers, ultimately growing assets under management in Citi’s Wealth Management business. However, the desired benefits to be gained from expanding this generally profitable business segment will likely take longer than expected to realise.

GlobalData 2023 Financial Services Consumer Survey

Relationship Tiers are set to replace Citi’s previous account packages, with the primary aim to provide a “simplified banking” experience for its customers. GlobalData’s 2023 Financial Services Consumer Survey has found, however, that 96% of the bank’s existing US customers are satisfied with the simplicity of current products, which are running under the same names as well as retaining the same minimum qualifying account balances, as the new Relationship Tiers will.

As there is no significant alteration in the value proposition or rewards of the new system (89% of Citibank’s clients are also satisfied with the loyalty rewards on offer), the change and the marketing campaign are aimed at client acquisition rather than retention.

Indeed, GlobalData’s survey has shown that the simple understanding of products is the number one priority among Gen Z in the US when looking for a financial service provider, and it falls second for Millennials.

The move will help Citi target younger generations, with the aim of acquiring them at the beginning of their wealth building journey. As the name of the new system suggests, Citi is trying to build lifelong relationships with its customers, since one Tier jump could potentially take decades for the average client to achieve, given the substantial gaps in the minimum qualifying balances for each Tier. However, faster Tier advancements are facilitated by combining clients’ balances across checking and savings accounts, different peer-to-peer payment platforms, as well as the Family Linking of accounts.

A boost for Citi’s Wealth Management unit

Additionally, moving customers into higher Tiers quicker translates as another incentive from Citi to push the promotion of its Wealth Management division. Citigroup’s assets have been in decline for some years, with the bank struggling to grow its most profitable segments. In response, the group diverted resources towards Wealth Management, seen as a bold shift in company strategy, and has since exited 14 consumer markets outside of the US.

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Another major restructuring of business segments followed last year, combining the Personal Banking and Wealth Management divisions, which was reported to have since increased referrals of Citi’s affluent and HNW customers to its Global Wealth Management services. Despite the group’s expectation of this segment’s revenue generating an annual growth of approximately 10% last year, it fell by 5% year over year in the second quarter of 2023.

Such a tactical move of exiting consumer markets for the benefit of growing more profitable segments has been adopted by several major banks too (Wells Fargo, Bank of America) in recent years. Behind the simplified banking experience offered for US customers is a bank that is working to simplify its own business. During its long existence, Citi has expanded into many business segments in too many geographical markets.

Disinvesting in losers and investing in winners instead is an appropriate step towards turning the falling KPI trends around in the long run. Much more must be done though if Citigroup wants to get near its pre-2008 levels again than relaunching a system that has technically already been in place.

Blandina Szalay is an analyst at GlobalData