Citigroup Inc. is blurring the lines between mobile and in-store shopping as it tries to forge stronger ties with its customers and boost cardholder spending.

The New York bank on Thursday unveiled a smartphone application that lets customers redeem their rewards points for purchases at Best Buy Co. Inc.'s retail stores and e-commerce website.

Citi and other major credit card issuers have introduced rewards features in recent months to make their programs more flexible as they compete for borrowers and encourage card use.

"We are dedicated to our customers," says Ralph Andretta, the head of loyalty and new product development for cards at Citi. "We listen to what they have to say. One of the things they told us they want is ease of redemption."

Citi's ThankYou Rewards app is available for Apple Inc.'s iPhone and iPod Touch and phones running Google Inc.'s Android operating system. With the app, Citi customers can search for Best Buy merchandise through the retailer's catalog or by using their phones' camera to scan product barcodes. The apps will say how many points a customer needs to redeem for a product, which can be held for pick-up at Best Buy stores or shipped to customers.

Currently customers must have the specific number of rewards points in order to redeem them for a product, though Andretta says Citi may look to add a split-tender function in the future that allows them to redeem a portion of their points for a product and pay the remainder of the balance with a card.

Card issuers in general have been adding new ways for customers to use their rewards points to drive customer loyalty.

For example, Citi is testing a special credit card developed by the vendor Dynamics that lets customers press a button to display rewards points and use those points to make purchases.

JPMorgan Chase & Co. in June started allowing customers with its Rewards Visa credit card to use their rewards points on purchases made on Amazon's website. Cardholders can use all of their points or a portion of their points on a purchase and charge the rest to their card.

American Express Co. offers the same capability to its own cardholders for purchases. Both Amex and JPMorgan Chase use a platform from Inc.

"I think we are definitely going to see more plays like this moving forward," says Madeline Aufseeser, a senior analyst with Aite Group LLC. "It's going to be a chance for all the card issuers to increase usage and retention on their cards."

Citigroup currently has an exclusive partnership with Best Buy, which is already a merchant partner for the bank's ThankYou program, on the mobile rewards feature. But Andretta did not rule out similar partnerships with other retailers in the future.

Best Buy is a "household brand," Andretta says, adding the merchant was an attractive partner for the mobile feature because of its large retail footprint and e-commerce website.

Drew Sievers, the chief executive of mobile banking software vendor mFoundry Inc., says bank clients have been pushing to add more capabilities to their mobile apps, such as deal-of-the-day style merchant offers.

"What we're doing with our clients is really enhancing the card services that are available to our banks and allowing them to deliver things like offers and rewards and loyalty integration like you're seeing here," Sievers says. "All those sorts of features that are tied to the card I think are the logical next step for mobile banking."

MFoundry, of Larkspur, Calif., did not work on Citi's application, Sievers says. Andretta would not say which vendor developed the program.

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