Citigroup Inc.'s acquisition of a remittance outsourcer underscores the company's aspirations to expand its role as a global facilitator of transactions between financial institutions.
Citi said Wednesday that it had acquired PayQuik Inc., a Philadelphia outfit that runs online and retail remittance platforms for banks and other financial services companies, last month.
Citi is rolling out the white-label service at its global network of 3,000 correspondent banks. The company estimates that 90% of the world's cash management business comes from small banks, corporations and governments.
PayQuik's service has been renamed QuikRemit and is now offered by Citi's global transaction services unit, which is part of its markets and banking group.
Citi said the QuikRemit service will give the unit a leg up in serving 65,000 corporate, government, and financial services clients that use Citi to transfer and process international payments.
"The largest clients, who are my bread and butter, want a global network that enables them to transact in real time, control profit and business flows in real time, and have a level of efficiency brought to them," said Paul Galant, the transaction services unit's chief executive.
He said QuikRemit would allow Citi to expand its already sizable payments business, which processes close to $3 trillion in payroll, consumer bill payment, and commercial vendor payment transactions daily.
"Rather than having to own every single end client myself … we can empower a local bank with the greatest capacity and scale and lower operating costs, using our pipes to effect payments and do collections and reporting," he said.
Susan Feinberg, the research director for wholesale banking at TowerGroup, an independent research firm owned by MasterCard Inc., said "one of the things Citi has done for a very long time … is position itself as a provider of services to other financial institutions to help them have more of a global reach."
She said she sees the acquisition of PayQuik as "the next evolution of" this strategy.
The service has been rolled out for corporate clients and correspondent banks only. It has been offered to Citi's consumer banks worldwide, but the company said none had signed on for the service so far, though the banks have been exploring the option.
The remittance service is ultimately aimed at enabling banks to reach consumers, however, Mr. Galant said.
"This is a very good way for banks to reach the underbanked," he said.
The transaction services unit has already made several forays into the growing global remittance market, which, according to a report last year from the Boston market research firm Aite Group, is expected to grow 42% by 2010 to reach half a trillion in annual volume.
Last year the $2.4 trillion-asset Citi entered an agreement with Vodafone Holdings PLC and DiGi Telecommunications Sdn Bhd, a Malaysian company, to provide global remittances through mobile phones.
In 2006, Citi started a similar remittance platform with VocaLink Ltd., a payments processor in the United Kingdom.
Citi also has a partnership with World-Link Inc. to provide global funds transfers between banks and other financial institutions.
Alenka Grealish, senior vice president of banking at the market research firm Celent LLC, said QuikRemit "rounds out" Citi's payments business by establishing a solid presence in the remittance market.
"This is just the final step to say 'We have tested this and see it as being an important part of global payments,' " Ms. Grealish said.
Unlike Citi's investment banking business — which contributed mightily to the company's $9.8 billion net loss in the fourth quarter — the transactions services unit has enjoyed robust growth for more than four years.
Ms. Grealish said the payments sector offered safer, more promising investing opportunities than the capital markets.
"Regardless of market vicissitudes … payments still have to be made," she said. "Global transactions continue to grow. It is not recession-proof, but it is subprime-meltdown-proof to many degrees."
Citi did not say how much it paid for PayQuik, whose 50 employees it retained.
