Updated from 1:28 p.m. EDT

Recognizing the growing allure of the Internet for online transactions,

Citigroup

(C) - Get Report

said Tuesday that it had formed a partnership with

America Online

(AOL)

aimed at giving Internet users a broader array of financial options.

Users of AOL,

CompuServe

and other AOL brands who make purchases and auction transactions, as well as those who want to transfer money between accounts, will be able to take advantage of the payment and money transfer features beginning this fall.

"Financial services are becoming more and more critical to the online consumer," Sanford I. Weill, Citigroup's chairman and chief executive, said in a statement, "and AOL is an ideal partner to reach those consumers."

The multiyear pact will enable consumers to transfer money to friends' and family members' accounts and send online payments to merchants, the companies said. Citigroup, the New York-based financial services company, also will serve as a clearinghouse for Internet transactions across AOL media.

"By our own accounts, these sort of services do not currently exist," said Nina Das, a Citigroup spokeswoman. "Our goal is to create a standard used in the business, and this is the first step toward reaching that goal."

Citigroup said it would use the alliance as a vehicle to provide its banking, mortgage, loan and credit card services to its more Internet-savvy customers. Citigroup products and services will be promoted in the personal finance areas of AOL and several of the services it operates, including

Netscape

, CompuServe and

Digital Cities

.

In return, Citigroup would promote AOL products and services on the Web and through other channels, the companies said. AOL, based in Dulles, Va., has more than 23 million members, while CompuServe has about 2.7 million users in its fold.

AOL finished Tuesday regular trading down 2 3/4, or 4.4%, at 60 1/4. Citigroup finished up 5/16, or 0.55%, at 66 11/16.

The 1998 merger of

Citicorp

and

Travelers Group

melded

Citibank

,

Travelers

,

Salomon Smith Barney

,

CitiFinancial

and

Primerica

under Citigroup's roof.