The technology will allow customers visiting Passport-enabled Citigroup sites to be identified automatically after signing into Passport. They will then be authenticated by Citigroup using the bank's passwords before being granted access to personal information or financial transactions.
Customers will also be able to use other Passport-enabled sites operated by third parties without having to enter any further user identification or passwords.
"It is an interesting move," Christine Axton, senior analyst at Ovum told CW360.com, but she added, "There are still significant security issues with Web Services to be addressed."
Citi Cards, the largest US provider of credit cards, will be the first Citigroup business to use Passport. Citi Card customers will also be able to use .net Alerts, the instant messaging service, to receive account information.
The deal builds on the alliance formed between the banking and software giant 11 months ago, which saw Microsoft offer Citigroup's online payment service as an MSN-branded online payment service for transferring funds across the net. Citigroup also had a similar arrangement with Internet media giant AOL Time Warner.
Citi Cards will become a preferred payments provider for Microsoft, with the deal including promotion in key areas on the MSN Internet site.
Microsoft's Citigroup deal follows an agreement last week with Deutsche Telecom to provide XML based Web services to its customers.
"Microsoft initially struggled to work out a commercial model for Web Services," said Axton, "but these third-party agreements make real sense."
Read more on IT risk management
Citigroup hit by second data breach in four months
Citigroup Bank confirms only US customers affected by data breach but raises estimate
US authorities demand Citigroup Bank details as hack sparks fears over finance sector
Citigroup Bank the latest organisation to fall foul of hackers in data breach incident