Citigroup Extends Payment System to MSN Customers

Citigroup Inc. signed a deal last week to provide its person-to-person payment system, dubbed c2it, to subscribers of Microsoft Corp.'s MSN Internet service. But analysts say such ventures rarely turn a profit and aren't garnering a critical mass of users.

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More Coming

Other upcoming enhancements of Citigroup’s online payment system include the following:

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The ability for U.S. residents to send money from their desktops to recipients in 30 countries, scheduled for mid-May

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An account-based card, scheduled for the third quarter

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Expanded international use of the service, planned for the end of the year

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A line of credit linked to the account-based card, also planned for year’s end

Citigroup's agreement with Microsoft will open the payment service to MSN users, allowing them to send and receive cash via e-mail.

The New York-based financial services provider said the agreement with Microsoft is part of a strategy to reach new audiences through "target-focused partnerships" with online brand-name companies.

In October, Citigroup agreed to offer its online-payment system to America Online Inc.'s 26 million subscribers.

The person-to-person payment system works via an e-mail service that allows users to send messages instructing banks to transfer money from their accounts, such as a credit card or debit card account, to another person's or institution's account. Recipients of the money are notified via e-mail that money is waiting for them, and they can obtain it through an electronic account or a paper check.

Citigroup announced that it's doing away with a fee of $2 per transaction for its electronic-payment service. The service is free of charge for the first three months in which a member is signed up; thereafter, there is a minimum fee of 50 cents per transaction, up to a maximum of 2.2% of the amount of the transaction. The fee depends on the type of transaction—whether it's a transfer from a savings account, a transfer from a checking account or a credit card payment, for example—and on the type of credit card used.

Ken Kerr, a payment systems analyst at Gartner Inc. in Stamford, Conn., said the introduction of the service on MSN is insignificant to the marketplace because e-mail payment systems have yet to gain mass popularity or return profits. But Citigroup's lower pricing, he said, is strategically smart because it shows that the financial services firm recognizes that the value in online payment systems lies in its "sticky factor," or the ability to keep customers around by offering added services.

"There just isn't a lot of money to be made in parents sending money to kids at school," Kerr said. "I think it's an attempt to create a live transaction mechanism, with some realistic hope that someone will use it."

Chris Jolley, director of marketing for MoneyCentral, the MSN Web page on which the c2it service is located, said the service will bring Microsoft additional advertising from "very targeted placement and sponsorship." Jolley also disagreed with analysts' predictions of slow adoption, noting that online payment technology is still in its infancy. "We believe . . . there is incredible potential for it in the everyday financial activity arena," he said.

Other electronic services include Palo Alto, Calif.-based X.com Corp.'s PayPal, a service that's popular with online auction users and small online businesses, and Columbus, Ohio-based Bank One Corp.'s eMoneyMail.

Wells Fargo & Co. and eBay Inc. recently announced a similar agreement to offer Billpoint Inc.'s payment service.

Copyright © 2001 IDG Communications, Inc.

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