How Citibank Unfixed Its Problem

Back in the early eighties, things were a far cry from where they are now. And we don’t mean just technology, which is a no-brainer really. Rather, we mean the world of personal finance.

It was a time when things were pretty straight forward for both borrowers and lenders – primarily, banks and their customers. Banks borrowed money from customers and lent the same to companies. It was fairly simple: Customers received a higher interest on Fixed Deposits (FD), and so had no reason to look at other sources. Banks collated all those deposits and had a sufficient war chest to lend to corporate clients at a handsome rate of interest.

Double Whammy

But around that time, a different source did start to turn the heads of the common man. It already existed for over a century, but the concept of IPOs and other such offerings of the stock market started to pique the interest of the traditional FD customer. From the other end, companies found that they could raise money by directly approaching the common man – through IPOs. It was a double whammy for banks. Suddenly life wasn’t so simple. Banks were being bypassed and beginning to bleed plenty in potential working capital.

A savvy entity like Citibank wasn’t going to take it lying down. It had to regain its leaking base – it had to offer customers a reason to park their money with the bank again. The answer did not lie in a charm offensive – extolling its efficiency and customer service; Citi was already the leader in that regard… it was a given. Safety of deposits was in the same bucket – it was expected with a bank like Citi. Nor was there an option for raising interest rates beyond a point. That was governed and controlled by RBI.

Citibank knew they had to come up with something innovative.

Window of Opportunity

The window of opportunity came in an RBI move that allowed banks to grant overdraft (OD) against FDs to the extent of 75% of capital. Not that this was a new product – such loans already existed, however customers needed prior approval from their bank. The new directive took away the need for approval and paperwork altogether.

Citibank quickly worked at making it seem like a new product. In a sense it was. But there were still some finishing touches to put in place before it became a truly exciting proposition for the customer. For one, there was always the psychological baggage of taking a loan. Any loan taker was uncomfortable about taking a loan – it reminded him he was borrowing money that wasn’t his – something he had to pay back… hovering over his head like a Sword of Damocles.

Flip it Around

So… take away the stigma of ‘loan’! Make the customer feel he isn’t taking a loan, merely borrowing his own money for a while – which was true in any case. Instead of positioning the OD in front of the FD, Citibank flipped it around. Now here was an FD that, whenever you needed it, came with a readily-available feature: an OD that you could bank on without needing any approval or paperwork.

Best of all, control was directly placed in the hands of the customer himself. In the conventional loan system, the bank decided how much loan could be given to each kind of customer. Now, the customer could draw as he wished, of course within the limits of his own money parked with the bank.

Suddenly, it wasn’t a loan. At least in the mind of the customer. It was, in terms of the banking system – because that money was still being ‘lent’ at a slightly higher rate of interest than the linked FD. But, importantly, it was packaged as a feature within an FD – a novel kind of FD.    

Of course, such an innovative product came with inherent risk. There was always the possibility of too many customers triggering overdrafts at the same time, which could put an uncomfortable squeeze on the bank’s cash reserves. The bank was really exposing itself to the collective whims of its customers.

Reversing the Tide

But the basic idea was very sound, and a brand as huge as Citibank was willing to take the risk. It summoned its ad agency, Lintas, and tasked them with what was the last piece of the jigsaw: Create a brand name that would tell the story and immediately turn heads.

Lintas entered the mind of the customer. How could it turn around the slightly negative – the OD which still carried the stigma of ‘loan’ – into something beneficial. They focused on the FD part – Fixed Deposit. What was the perceived limitation there? – the word ‘Fixed’. A fixed amount for a fixed period offering fixed returns. So, why not ‘unfix’ it!

And presto, the Unfixed Deposit was born. Worked a peach, too. There seemed to be a feeling of unshackling that probably appealed to customers and they flocked to Citibank, maybe not in droves, but far more than they did other banks. Citi had struck first; anybody else would be the ‘me too’.

The ‘Me-toos’ did arrive in the end, as they always would. It took the banking sector from traditional safety to a riskier place. It did come with a huge cost for the sector at large. Over the years, overdrafts reached crippling levels, and a few banks literally went out of business.

However, purely as a case study, which is the raison d’etre of this series, Citibank had managed to reverse its deposits drain with a masterstroke – down to the brand name. Keep watching this space for more such fascinating stories in the ‘Marketing Folklore Series’.