Exclusive: Citi's new retail head talks rewards, fintechs

Gabby Jones/Bloomberg

Kate Luft, who's traveled around the globe working for Citigroup , finds inspiration for improving the bank's retail strategy from the companies that transported her to those faraway places: airlines.

Last year, the megabank revamped its U.S. retail banking blueprint with the launch of a "simplified banking" plan that reduced the number of customer checking accounts and introduced "relationship tiers" in which customers receive more benefits — such as waived monthly service fees — when they meet certain monthly balance requirements.

Similar to the travel industry, Citi rewards customers with more perks, such as waived fees, as their account balances grow. Luft, in her prior role as head of consumer bank operations, led the overhaul of that business.

"I think of it like an airline," Luft told American Banker. "The more you do with us, the more we recognize you, and the more you'll continue to rise among our relationship tiers."

Luft is Citi's new head of U.S. retail banking. She oversees Citi's 644 retail branches across its six key markets — Chicago, Los Angeles, Miami, New York, San Francisco and Washington, D.C. — as well as digital banking, small business, payments and mortgages.

Luft took over the retail banking head job when longtime Citi executive Craig Vallorano retired in late April. Her 17-year career at the bank includes five years as Citi CEO Jane Fraser's chief of staff, including the period when Fraser led Citi's Latin American unit.

Citigroup

Despite the fact that Fraser had much more experience when they were working together, Citi's CEO has referred to Luft as her mentor when it comes to technology advancements and connecting with millennials.

After college, Luft joined Citi and worked on the sales and trading floor, starting amid the financial crisis in 2008. She went on to serve in chief of staff roles that supported Citi's mortgage and consumer businesses before working alongside Fraser on divestitures in Argentina, Brazil and Colombia and digital technology upgrades at Banamex, Citi's subsidiary in Mexico.

From Latin America, she went to Australia, where she ran Citi's retail and wealth businesses. She came back to the U.S. in 2020 as the head of segments and products for U.S. retail banking before being named head of operations for the consumer bank.

In the latter job, Luft oversaw Citi's call centers, collections, ATMs, back-office operations and credit operations. The transformation of retail, which has come alongside Citi's broader business revamp led by Fraser, included streamlining the variety of checking accounts and introducing family linking, in which members of the same household can pool their money in order to move into relationship tiers, and thus get access to more perks.

"Really what we did was redefine our products and value [propositions]," said Luft, who grew up in New Jersey. "Our mandate was, how do we make it super-simple for our clients?"

In her new role, which does not include Citi's credit cards, Luft continues to report to Gonzalo Luchetti, head of U.S. Personal Banking, which is one of Citi's five core businesses.

Read more about Citigroup here: https://www.americanbanker.com/organization/citigroup

In her first on-the-record media interview since the promotion, Luft talked about Citi's approach to retail banking, whether its branch network is large enough to compete with big-bank peers and how Citi's preference for simplicity helps it compete with fintechs and other traditional banks.

The following Q&A has been edited for length and clarity.

What role do branches play in Citi's post-simplified retail banking business?

When you think about physical locations, I would say we are where we exactly want to be. We're in six core markets. We show up as "one Citi." We show up as our retail business, our wealth business, our commercial business. … Not only are we [operating] in our core markets … we really try to embed ourselves [in those communities], and we try to continue to outpace competitors on our digital capabilities. So it's that perfect sweet spot of physical, but also digital.

I thought it was interesting that you said, 'We're exactly where we want to be' in terms of locations. Does Citi have enough branches to compete with JPMorganChase and Bank of America, which have national branch footprints and intend to enter new markets?

I would say the biggest thing is, even when you look at our branch footprint, Citi still stands out. We are No. 1 in [overall deposits divided by the number of branches], so when I say we're where we want to be. … We're continuing to lead on that, even if we don't have the largest branch network.

The other thing I would say … branch traffic is not what it used to be. … So actually what we're seeing a lot more in our branches is our basic branch transactions going down and a lot more time for bankers to do more outreach.

Where we're actually really focused on is … 'how do we use our branch staff, who are fantastic, to actually do more outreach?' … calling clients, making sure they're checking in on things like, 'Hey, your CD's expiring. What do you want to do next?' or 'You just got your bonus. How do we help you?' It's a much different conversation.

Any changes to the branch network that you foresee?

We always do the [business as usual] relocations. We have natural lease expirations. But no, no major shifts to our branch count and actually, you're seeing us open up a lot of de novos this year. [Since November, Citi has opened 12 new branches in its existing markets, including one that's due to open this month in South Florida, according to a company spokesperson.]

Any changes in the strategy compared to your predecessor?

So [the transformation] was a big thing that now we're really kind of through. We have the foundations we're focused on. We've just made our product simpler than any of the larger banks. When you think about what the fintechs have and why the fintechs were so competitive in the past, it was because the banks made it too complicated. Like, we all had legacy products and so on, and didn't take the time to actually make that simpler.

I get super-excited about it because it looks so much different than our competitors. As we listen to our clients, they're asking for things like rewards. So, how do we do more rewarding? We just launched debit-card merchant offers. We're seeing an immediate uptick in that because clients are just looking for more from their bank now.

You mentioned fintechs and the fact that some of their success has to do with being simpler than how traditional banks operate. How do you compete with that space?

When I think about the fintechs, we're at par, if not ahead now, with our offering and the simplicity of it.

We have not only the branch network, we also have 65,000 ATMs across the U.S. The fintechs haven't cracked that, and I think that will still be a deterrent for them in the States.

Are you working on any fintech partnerships?

Yeah, we are partnering with fintechs again. … It's not full-value chain integration. It's really specialized value they can help us with, in our rewards. I would say, more to come. But really, we're looking at, How do we sweeten the reward space and give more to our clients?

What was it about the trading floor at Citi that was appealing and why stay with banking?

It was 2008, and every day was different. Everything you were doing was in the news … and on the trading floor, it was a very fascinating time, a scary time as well, but you saw the rebuild of the financial industry. And I think I've stayed with banking for the last 17 years because it's so purposeful. I've stayed on the consumer side because we all need bank accounts, and my goal is to make it easier for our clients and our employees to really be passionate about the client experience. And everything we do, every decision we make, we really focus on that.

I geek out on it a bit because you can see and you can measure the impact in such scale, and you know when you get things wrong, too. So I think that's a fascinating and fulfilling career.