Embarking on a new ATM course, Citibank announced an agreement Wednesday to install machines in up to 3,000 Blockbuster Video stores in 39 states.
The Citicorp unit, though long a leader in automated teller machine innovation and deployment, did not previously place the devices in states where it lacked retail branches. Virtually all the machines, called Citicard Banking Centers, have been on bank premises.
On top of an agreement an-nounced last week to test ATMs and other banking facilities in an initial eight Kinko's business service locations, the Blockbuster deal indicates a new direction in Citibank's convenience strategy.
Five Blockbuster Video ATMs are already installed, and the rest are to be in place by mid-1999.
"We teamed up with Blockbuster because of its strong national presence," said Steve Liguori, head of Citibank's U.S. branch banking business. "By placing Citibank machines in Blockbuster locations across the United States, we're making it much more convenient for our customers to do all of their financial business with us."
Blockbuster Entertainment chief executive officer John Antioco said he sees the Citibank arrangement as "the first in a series of strategic marketing partnerships ... to provide additional services for our members."
In going off-premises, Citibank joins a trend led by Banc One Corp., which has announced 2,000-machine deals with both the Rite-Aid drug store chain and Mail Boxes etc.
Citibank is playing catch-up in ATMs owned-with 2,002 at midyear 1997 it ranked ninth among U.S. banks-but it set a record with the one-shot deal for 3,000 Blockbuster locations. The collaboration between the companies began in Peru and Colombia last year and is also spreading to other Latin American countries.
Unlike the banks that deploy ATMs primarily to generate transaction fees and surcharges, Citibank says it mainly wants to reach customers where bricks and mortar do not. It has not imposed surcharges on customers of other banks and does not plan to charge at the Blockbuster sites.
Through technology the New York bank serves consumers in every state, but its ATMs are limited to nine states and the District of Columbia.
Further partnerships may be forthcoming. Citibank spokesman Mark Rodgers said the company is "looking for strategic alliances to increase touch points for our customers."
Referring to the merger with Travelers Group that it expects will be completed in the third quarter, Citicorp said the Blockbuster agreement represents a "major step forward" for customers of the new company, Citigroup.
Alanna Kellogg, a consultant and president of the Kellogg Group of St. Louis, said Citibank seems to be "trying to create a national consumer presence," and Blockbuster offers a number of locations that could be equaled only through multiple acquisitions of regional banks.
Citibank and Dallas-based Blockbuster-it is a subsidiary of Viacom Inc., the former employer of Citicorp's executive vice president of advanced development, Edward Horowitz-are studying store traffic patterns to decide which of the video chain's 4,000 U.S. locations should get full-service, deposit-taking ATMs. Others will get simpler cash dispensers that could be upgraded as demand warrants.
Michael A. Strada, president of Electronic Commerce Strategies Inc., Atlanta, questioned whether a video rental location attracts enough foot traffic to generate the 500 to 1,000 monthly ATM transactions needed to turn a profit.
"It seems to me there are way too many machines out there, and this is just going to add to that," Mr. Strada said.
The Latin American experience indicated customers "really enjoyed having a Citibank touch point in Blockbuster locations," said Mr. Rodgers of Citibank. "People going into Blockbuster are familiar with technology."
Ms. Kellogg said Blockbuster stores have the benefit of "highly repetitive traffic," which "helps generate volume."
She said, "It's easy to see how a Friday night stop-off for pizza and a movie could include getting cash, and how that could become part of a family's routine."