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Bill Hanifin
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Citibank launched its ThankYou! Network in 2004 and in doing so, staked out ground as the first top-tier bank to embark on a rewards program that went beyond credit card and included multiple retail bank products like checking accounts and consumer loans.
Credit to the first bank to launch a Relationship Banking program in North America goes to Banco Popular de Puerto Rico which launched its Premia program in 2002. The architect of the Premia program, Fabio Garcia-Passllacqua, deserves kudos for incredible vision and courage in launching Premia and can be proud that the program continues to return strong results to the bank.
Citi has made progress with its program, its alliance with Expedia just one example of extending the value of their ThankYou! points through intelligent partnering.
Two news items sighted this week, however, may signal a change in course for the ThankYou! program and its value for it members.
First, AMR Corp., owner of American Airlines, announced that it had taken steps to raise $2.9B cash to quiet investment community concerns about its future liquidity. In a press release, AMR revealed details of the cash raise and that it had agreed to sell $1 Billion of AAdvantage Miles to Citigroup, its long standing cobrand credit card partner.
Though Citi reported to treat this advance purchase as a loan, it clearly indicates the importance of the Citi AAdvantage credit card as the flagship product in Citi’s card business and the confidence the firm has in its ability to drive card usage and acquisition by offering AAdvantage miles as a reward.
It also highlights that while relationship banking remains a challenging concept to sell to consumers, credit card rewards programs are like the high-hot heat that got Nolan Ryan into the baseball hall of fame. Like the fastball, it’s a straight-down-the-middle value proposition that consumers understand.
The second news item that not everyone will connect to ThankYou! is Citi’s announcement that it is concentrating its retail banking business in the U.S. on six key markets. Explained another way, Citi is executing a plan to close branches in many markets and shrink its retail delivery system. Though Citi offered a statement that “Customers, not products, are driving Citi’s strategy for North America consumer banking”, one has to wonder how easy it will be to compete for deposits with the likes of Bank of America and Chase when the only way to open an account for customers outside of the 6 markets is through a website.
The two announcements taken together makes you wonder if the expansion of a relationship banking program can be successful as the institution scales back its retail network, and if the temptation to return to a cards-centric approach to rewards to meet short term goals will put ThankYou! in a back seat.
