In the wake of Citicorp's decision last week to drop most fees for retail electronic transactions, industry observers said others would soon follow suit.

Citi's closest New York rivals in consumer banking, Chase Manhattan Corp. and Chemical Banking Corp., are expected to feel the most immediate impact - perhaps losing some customers to Citi's new pricing strategy.

If the move does indeed change market share, observers believe that institutions beyond the competitive reach of the nation's largest financial institution are likely to employ similar strategies in their own markets.

Citicorp's new pricing removed monthly charges and transaction fees from virtually every electronic delivery service, including PC-based banking, electronic bill payment, and screen-phone banking. "Foreign" automated teller machine transactions, in which customers use ATMs owned by other institutions, are the one type of electronic transaction for which Citicorp will still charge a fee .

"If Citibank is the only player doing it, I think in order to compete the other large players will have to do the same thing," said Alan Bergstrom, a managing director at Dove Associates, a Boston-based bank consulting firm.

Mac Jordan, an executive vice president at Atlanta-based consultant Speer & Associates, agreed. "Chemical and Chase will have to be consistent with whatever Citibank is doing," he said.

Chase and Chemical declined to talk about their strategic response to Citi's new pricing.

John A. Russell, chief communications officer at Banc One Corp., Columbus, Ohio, said, "I think it's a big shot at Chase and Chemical and will force the hand of other banks that are charging for their services."

Mr. Russell noted, however, that pricing at New York's money-center banks is not representative of retail banking nationwide. "West of New York, almost no one pays transaction fees for ATMs unless they use an interchange machine," he said.

However, several observers said they believe such a high-profile move could have a positive effect industrywide.

Banks have been struggling for years to correct pricing schemes that absurdly encourage consumers to use branches, which are the most costly of delivery channels.

And since Citi is not the only institution working to correct this situation - First Chicago Corp., for one, is taking another road to the same destination, opting to charge certain consumers for excessive use of branches - many believe that a trend toward saner pricing may be in the making.

Though some bankers applauded Citicorp's effort to encourage use of electronic services, many were surprised at, and perhaps a bit envious of, the favorable press the move received.

"It's a good publicity coup," said David J. Totaro, chief marketing officer at Dime Bancorp. And he admitted, "If you are trying to develop that business, then it does make sense to reduce or eliminate fees."

William M. Randle, director of marketing and strategic planning at Huntington Bancshares, Columbus, was also surprised at the attention given Citicorp.

He noted that the bank's move was similar in scope to Huntington's own attempts to get more customers accustomed to using "less expensive, more convenient" electronic banking applications.

"The difference is that the only usages of the ATM that are free are the ones that (Citicorp) owns, while we are allowing customers to use any ATM for free, which is different," he said.

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