Citigroup Closing Down Its Online Money Transfer Service
 

Citigroup Closing Online Money Service


NEW YORK - Citigroup Inc. is shuttering its c2it online money-transfer service as of Nov. 9, according to the c2it.com Web site.

The unit was launched three years ago to compete with PayPal, the online payment service owned by Web auction giant eBay Inc.

C2it didn't do enough business to justify the costs of running it, according to Citigroup.

"You needed critical mass to keep it as a standalone business, and we felt it wasn't profitable to do so," Citigroup spokeswoman Maria Mendler said Wednesday.

After it became clear that the domestic person-to-person payment market was largely limited to the online auction world, the bank decided to focus its efforts on marketing the service, housed within the credit-card unit, for global money transfers, the spokeswoman said. However, that never really took off, either. Money-transfers can still be done through the retail bank.

Gregory Smith, an analyst at Merrill Lynch, wrote that "The demise of c2it follows a string of failed online payment mechanisms, which have been unable to compete given PayPal's early success and dominance in online auction payments."

Smith said PayPal had only a handful of significant competitors left, including PayDirect, a cooperative effort between Yahoo! and HSBC; Western Union's BidPay; and CheckFree's Auction Payments.

Smith said he believes c2it had more than 350,000 accounts, but never truly gained traction with users, due to PayPal's dominance.

Good use of "critical mass" :thumbsup