Citicorp has hired NCR Corp. to make its automated teller machines.

The New York banking company, which historically did its own design and assembly, has decided that it can keep its costs down and its competitive edge sharp by relying on the prominent technology vendor.

Citicorp signed a five-year, nonexclusive contract with Dayton, Ohio- based NCR and plans to scale back and eventually end ATM production at the Citicorp Development Center in Los Angeles.

That center will continue its research on and development of consumer payment initiatives. "We expect in the future to be looking at a wide range of self-service devices around the world," said Jeroen Tas, head of the center's business development group. "We want to keep our options open."

Citibank, the company's lead subsidiary, plans to supplement its traditional wall ATMs with free-standing kiosks. NCR will distribute and support the new models, which will have the same "look and feel" as existing units when they begin rolling off assembly lines in mid-1998, said Mr. Tas.

NCR had previously made hardware that went into Citibank ATMs. Now it will take on full "life-cycle management," said Andrew M. Orent, self- service group vice president for the Americas.

Neither company would disclose terms of the deal. Citicorp said its ATMs cost $30,000 to $40,000 each. Based on its historical production of 200 to 300 machines a year, the contract could be worth $12 million or more.

Long regarded as a pioneer in the ATM business, Citibank kept its technology and other aspects of strategy to itself for decades. In the 1970s it touted a proprietary card-encoding system called Magic Middle and hoped it would take the place of magnetic stripes. But this ended up as the Betamax of card technology.

Not until 1990, almost a decade into the national ATM networking movement, did Citibank join Cirrus System Inc. In 1994, it went a step further, signing on with NYCE Corp.

"Citibank no longer believes that it needs to have products different from what their competitors are buying," said Alanna Kellogg, president of Kellogg Group, an electronic banking consulting firm in St. Louis. "The development being done by NCR meets their needs."

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