Citibank e-Business. Sankar Krishnan, Oct. 21, 2001

1
Citibank e-Business
e-Services for SMEs
Sankar Krishnan, Oct. 21, 2001
2
Agenda

• Challenges
• Traditional Approach
• Emerging Trends
• Structuring Solution Sets
• Building Blocks of a SME Proposition
• Key Success Factors for a SME
• e-Solution Examples
• Way Forward

3
Challenges

• Challenges for SMEs
• Fragmented markets and limited opportunities for
  economies of scale
• High trade barriers
• Lack of supply chain management
• Limited trading opportunities
• Inadequate product development
• High transactions cost complex fulfillment
  procedures
• Inadequate access to technological know-how
• Inadequate access to financing
• Inadequate access to information

• Challenges for FIs
• Risk Management - Considered as High Risk
• Information Asymmetry
• Micro Credit Management - Higher Administrative
  Transaction Costs
• Lack of Appropriate Credit Guarantee Mechanisms
• Lack of Leveraging Skills with existing Top End
  Corporate Relationships
• Sub-Optimal Technology Adoption

4
Challenges for SMEs

• Challenges for SMEs
• Fragmented markets and limited opportunities for
  economies of scale
• High trade barriers
• Lack of supply chain management
• Limited trading opportunities
• Inadequate product development
• High transactions cost complex fulfillment
  procedures
• Inadequate access to technological know-how
• Inadequate access to financing

5
Traditional Approach
BENEFITS
CONSTRAINTS

• Delay in obtaining finance
• Venture Capital Option tend
• to be avoided
• Inadequate quantum of
• Credit
• Elaborate Documentation
• Hassles
• Inflexibility in structuring
• solutions

• Individual Credit Appraisal
• Mechanism
• Superior Service based on
• Performance Success
• One on One Relationship

S M E

• Individual Services
• Higher Returns
• Incentives from
• Government
• Discretionary Lending

• Resource Administrative
• Intensive
• Risk- Return Parameter
• No-Portfolio Approach
• Lack of Clarity on Customer
• Segmentation Needs

B A N K
6
Emerging Trends
JANUARY 2000 Africa 2.1 Million
Asia/Pacific 40 Million Europe 70 Million
Middle East 1.9 Million Canada USA 120
Million South America 8 Million World Total
242 Million Source Various Methodology

• Emerging Trends
• Internet Communities evolving
• Cost of Access going down
• Greater Information Sharing
• Widening of Market Access to e-Space
• Enhanced Technology Adoption (e.g. ERP, etc.)

World Total 2000 242 Million
2001 349 Million 2002 490 Million 2005 765
Million
7
Emerging Trends

• Top Benefits from Online, 2000
• Faster Order Time
• Convenience
• Cost Savings
• Speed/time savings

Source Flash Eurobarameter, July, 2000
8
Structuring Solution Sets
Small and Medium Enterprises
Corporate Banking
Consumer Banking
Consumer Business Professional
SME
Partnership Family Owned Businesses
Small Medium Sized Companies
Individuals as Consumers
Individuals in Business
Individual in Business
Top Tier Local Corporates

• Stage V
• Advisory
• MA

• Stage IV
• Advisory
• MA

• Stage I
• (Leverage Personal Assets)
• Citibanking
• Personal Mortgage Backed Credit
• Financial Assets Backed Credit
• Deposits
• Insurance

• Stage II
• Cash Management
• Trade Services
• FX
• Working Capital Line
• Equipment Finance
• Business Mortgages
• Deposits
• Insurance
• Value Added Services

• Stage III
• Venture Capital
• IPO
• Advisory

Early Stage
Decline
Stand Alone Business
Mature
Rapid Growth
Global Corporates
SMEs typically constitutes 40 of the banks
corporate revenue base!!!
9
Building Blocks of a SME Proposition
Segments
MANUFACTURING
TRANSPORTATION COMMUNICATION
WHOLESALE RETAIL TRADE
SERVICES
INTERNATIONAL
Products
CASH
TRADE
FX
LOANS
ABF
DEPOSITS
VALUE ADDED SERVICES
Channels
Customer Based

• Sales
• Industry Team Leader
• Developer (mobile)
• X-Seller (mobile)

• Delivery
• Internet EB
• Fax
• Phone
• Correspondent Bank Network

Bank Based

• Anchor (Telemarketer)

• Anchor
• Customer Service

e-Solutions

• Web Based Access for
• Banking Accounts
• Service Delivery

Value Added Propositions

• Community Portals for
• Information Exchange
• Trading
• e-Procurement
• Financial Settlement

10
e-Finance
Technology Envelope
Suppliers MNC / Large Corporations / SME
CUS TOMERS

• Industry
• Size 15B
• Flows approx. 25B
• Includes
• Cars
• CVs
• Tractors / MUVs
• 2 Wheelers
• New Replacement Market

Channel SME
OEM MNC / Large Corporate
OEMs MNC / Large Corporations (Tyres, Batteries)
After-Market Wksp / Retail
EMPLOYEES
PRODUCTS Existing vs. New Anchor Center of
Plate vs. Sec. X-Sell
Working Capital - Vendor Finance Term
Finance Trade Finance - Domestic -
International Structured Products Guarantees Liabi
lities Products
Working Capital Term Finance Cash
Management Trade Finance - Domestic -
International Structured Products Guarantees Liabi
lities Products
Working Capital - Channel Finance Operating
Account Cash Management Term Finance Guarantees L
iabilities Products
Auto Loans - HP / Loan - Refinance Liabilities
Products Cards Mortgages Personal Loans Branch
Banking e-Banking
Liabilities includes currently 3rd party
products like Insurance and Mutual Funds
11
Key Success Factors for a SME

• Participant relationships
• Member acquisition and retention
• Member management

• Risk Evaluation Mechanism
• Portfolio Approach
• Target Market Approach
• Credit Scoring Mechanism
• Geographical Reach
• Diversified Portfolio
• Credit Guarantee

Appropriate Organizational Structure and Financia
l Model

• Transaction/Technology
• Commerce engine platforms
• Software applications
• Profiling technologies
• Hosting
• Security

• Value-added Services
• Logistics
• Decision support
• Financial services

• Vertical Domain Expertise
• Industry specific content
• Buyer supplier of data

12
e-Solutions for SMEs- A Few Examples
13
A SME community portal with Value Added
services
14
A B2B e-procurement portal for SMEs in the
Middle East, North Africa South Asia region.
15
Example of Value Propositions
A B2B vertical exchange for the pharmaceutical
industry in Egypt
16
Way Forward

• Credit Bureau
• Information Sharing / Resources
• Partnership with Industry
• Government Encouragement
• Priority Sector Approach
• Credit Guarantee
• Convergence
• Financial Services
• e-Solutions
• Value Added Propositions

17
(No Transcript)