Citigroup Launches Electronic-Cash Service

Financial services giant teams with AOL for co-marketing and branding

The 800-pound gorilla has finally jumped into the online payments marketplace. Make that two 800-pound gorillas holding hands.

Until recently, Corp.'s PayPal service has been the most popular technique for people to send money to one another via e-mail - a useful service for online auction users, small online businesses and parents of college students. To date, more than 4 million users have signed up for the Palo Alto, Calif.-based firm's service.

Last week, New York-based Citigroup Inc. jumped into the fray when it announced its c2it service, which will be heavily marketed and co-branded as AOL Quick Cash to Dulles, Va.-based America Online Inc.'s 28 million users.

How it Works

Citigroup isn't the first bank to offer electronic cash. Last spring, Bank One Corp. in Chicago rolled out eMoneyMail, while Wells Fargo & Co. in San Fracisco and eBay Inc. in San Jose teamed up to launch BillPoint Inc.

Customers can use these services by providing either their bank account or credit-card account information to the service providers. Recipients of the online payments receive an e-mail from the service provider to alert them that there's money waiting for them. The recipient then has two options: The money can be transferred electronically to his account or sent as a paper check.

C2it will be free to users for the first three months; after that it will cost $2 per transaction. By comparison, PayPal is free to people who use it occasionally (frequent users are asked to pay a fee) and Bank One charges $1 per eMoneyMail transaction.

That pricing model could be a disadvantage for Citigroup, analysts said.

The higher costs associated with Citigroup's service are "not going to be popular with customers," said George Barto, an analyst at Stamford, Conn.-based Gartner Group Inc.

According to James VanDyke, an analyst at New York-based Jupiter Communications Inc., c2it is a solution in search of a problem. "With person-to-person payments, you can't just launch a service," VanDyke said. "You have to figure out where the problems are; you have to figure out where the needs are."

VanDyke said PayPal is the dominant player among online auctions because it addresses the needs of customers who want to reduce the likelihood of fraud and delays associated with sending checks by mail.

Beginning in the first quarter of next year, Citigroup's service will be expanded to include international payments and bills.

Wireless applications will also be on the agenda for next year, said c2it Chief Operating Officer Antony Jenkins.

In addition, c2it will be integrated with Citigroup's current online offerings, including its aggregation site - myCiti - as well as the bank's Web site (

Copyright © 2000 IDG Communications, Inc.

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