Citigroup Links With Tech Giants To Put Fintech To Work For Governments
February 07 2017 - 7:39AM
Dow Jones News
By Telis Demos
Citigroup Inc. this week is launching a joint effort with
software giants and startups to find ways to use new financial
technologies to combat fraud and bribery in government
services.
The initiative, called Citi Tech For Integrity Challenge, will
partner Citigroup's public-sector group with tech companies
including Facebook Inc., International Business Machines Corp., and
Microsoft Corp., and startups globally, the bank said. The aim is
to help programmers at tech firms to develop new applications using
Citigroup's and the partners' software for governments to do things
like detect and block illicit payments, protect financial data, or
help deliver aid to poor or crisis-hit regions.
The initiative is the latest example of broadening "fintech,"
which has so far focused largely on new tools for consumers, like
online loans or mobile payments. Banks also generate billions in
revenue from corporations and governments, so finding ways to apply
technology to those businesses would justify big investments.
That includes finding ways to apply technologies such as mobile
payments apps, photo-recognition software, blockchain -- the
networking system originally developed for bitcoin, but which banks
have spent hundreds of millions trying to apply to their own
businesses -- and artificial intelligence to government payments
systems. These systems often use technology to manage the
government's payment process, but ultimately then deliver funds in
cash that isn't trackable.
"Officials elected on anti-corruption platforms told us they
don't have the tools to change what's happening further down" the
payments system, said Julie Monaco, global head of Citigroup's
public-sector group in the bank's corporate and investment banking
unit, noting that about 70% of fintech spending currently goes
toward consumer usage. "We want them to talk to the fintech team
and figure out how to plug in."
Citigroup may invest in some of the new initiative's
applications, which could be sold to government clients, via its
venture group, or partner to use them for its own services. But the
bank says it is also hoping to spur investments by other partners
and independent development for activities like communicating with
citizens and reforming bureaucracies.
In a presentation on the initiative, Citigroup cited a Global
Financial Integrity study that African countries in 2011 lost $77
billion due to illicit financial flows.
Governments including the U.S. are among Citigroup's customers
in its business selling services to help move large volumes of
payments and other money transfers globally, known as Treasury and
Trade Solutions.
Citigroup doesn't disclose figures for government-client
revenue. Public-sector transaction services revenue grew "double
digits" last year, thanks in part to governments adding new
technologies to their payments systems, the bank said. Overall
Treasury and Trade Solutions revenue was $8.1 billion in 2016, up
4% from the prior year.
Banks are using technology to remake their businesses in the
wake of post-financial crisis rules restraining risk-taking. Some
firms like Goldman Sachs Group Inc. are seeking to emulate Apple
Inc.'s approach , by opening parts of their systems for outside
firms to build financial products.
Write to Telis Demos at telis.demos@wsj.com
(END) Dow Jones Newswires
February 07, 2017 07:24 ET (12:24 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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