More on P2P from american banker. It looks like the web portals want P2P as a way to pay for recurring services such as music subscriptions, club dues, research reports and per-use software. These recurring rvenues are at the heart of MSFT's future stategy and I would guess AOL's and Yahoo's. I might guess that AOL's involvement with eCom is because of their desire to bill users via ACH debits.
Noise
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Yahoo Asks-- Can P2P Fund Itself?
Tuesday, December 11, 2001
By Deborah Bach
Yahoo Inc., further muddying the issue of fee policies in online person-to-person payments, plans to impose fees on its PayDirect service starting Dec. 17 - almost a month to the day that Citigroup Inc. dropped fees from its c2it P-to-P service.
The Sunnyvale, Calif., company's planned fee schedule is similar to those of competitors Billpoint, an eBay unit, and PayPal Inc., the category leader. But there's a twist: the two parties of a PayDirect transaction will be able to determine who should pay the fee. Other P-to-P providers dictate the paying party, with some sticking the burden on sellers and at least one putting it on buyers.
This uncertainty and inconsistency surrounding who pays what to whom is a common growing pain with emerging payment schemes. Systems revolving around credit/debit card underwent similar experimentation in their early days, as did those using automated teller machines.
And with the volume of P-to-P transactions expected to increase rapidly, there is more pressure on providers to strike the right balance. TowerGroup estimates that the market will grow from 42 million transactions in 2000 to more than four billion in 2005.
MasterCard International seemed to lend credence to those projections in announcing Monday that it would let its cardholders send e-mail payments to other people. MasterCard brings the weight of its financial institution membership to bear on what it calls "some of today's fastest-growing transaction segments, including online auctions and other P-to-P transactions," said Carl Stefanelli, vice president of e-commerce product development at the card company.
MasterCard plans to gain share in the market by persuading its financial institution members to offer its forthcoming service. It has struck an alliance with CertaPay, of Toronto, to develop a platform that would let consumers access a bank-branded service to e-mail money from their financial institution accounts.
Besides fee structures, P-to-P pioneers are having a hard time discerning the most likely users of their services. Yahoo, which introduced PayDirect in July 2000, differs from other players by remaining squarely focused on person-to-person payments. Most of the transactions executed by PayPal, in contrast, are between two trading partners of an online auction and thus considered business payments.
Though commercial transactions are expected to make up the majority of online payments over the next few years, Yahoo is confident it can capture a substantial portion of the P-to-P market by incorporating PayDirect across its network of communities, said Rich Godwin, senior brand manager for Yahoo Auctions and PayDirect. Consumers can use the service to attach money to a card sent through Yahoo Greetings, he said, or to pay membership dues for one of the many clubs accessible through Yahoo's site.
"Our 218 million monthly users around the world come to Yahoo for more things than commerce," Mr. Godwin said. "They come to the clubs, to communicate through e-mail, for the messenger boards. What we're starting to do now is integrate PayDirect right into these properties.
"We feel we are unique going forward, in that Yahoo has a network that no one else has, and tools and properties we can integrate with and really deliver on what the promise of person-to-person payment can be."
Yahoo's new fees - 30 cents plus 2.5% of the value of each transaction - are necessary to offset the costs of a planned international expansion for PayDirect, Mr. Godwin said. It hopes to advance that goal with a hand from HSBC Holdings PLC of London, which in July replaced Canadian Imperial Bank of Commerce as the bank supporting PayDirect.
Though Yahoo is struggling financially - in mid-November it said it would lay off about 300 employees, or 10% of its staff - the new fees are intended to cover the costs of PayDirect's global expansion, not to make up for revenue shortfalls in other areas, Mr. Godwin said.
He added that Yahoo is "always looking for ways" to diversify revenues. Another plan is to license its PayDirect technology to other companies that would market it to their customers.
"We're an international company," Mr. Godwin said. "We have 24 worldwide properties, we're in 12 languages, and as we work with HSBC to get PayDirect integrated across our network, we think we're really well positioned in the long run."
Yahoo will introduce PayDirect in the United Kingdom in early 2002 and then in Hong Kong, Mr. Godwin said, but he did not say how many countries PayDirect is expected to serve. The service will be available through HSBC's Web site and Yahoo's.
Beth Robertson, a senior analyst at TowerGroup, a Needham, Mass., consulting firm, said Yahoo's approach could give online payment a boost it sorely needs.
"Anybody that's operating in that space has not seen significant transaction volume," she said. "If you can find other ways to build usage, that kind of exposure may be helpful in getting consumers more aware of this as a transaction vehicle, and then starting to use it for other transactions."
Yahoo's HSBC partnership gives it a valuable new distribution channel and access to a known - and hence less risky - customer base, Ms. Robertson said. And she said HSBC's strength in Asia, combined with the popularity of wireless among Asian consumers, opens up the possibility of offering PayDirect on mobile devices.
Avivah Litan, vice president of payment services at Gartner Inc., a consulting firm in Stamford, Conn., is skeptical about Yahoo's chances for success in P-to-P payments. Consumer uptake of online payments has been slow. Meanwhile, companies such as PayPal have identified business-to-business transactions as the most viable market, she said.
"PayPal has really just become an alternative to credit card payments for small business and mom-and-pop shops, and they've concluded through their experience that there's very little P-to-P market," she said. "Why would it work for Yahoo if it hasn't worked for PayPal?"
It is believed that PayDirect has about 20,000 customers, Ms. Litan said; PayPal has more than 10 million. Mr. Godwin would not confirm the number, saying only that consumer uptake is on target and has been rising since Yahoo's November unveiling of a revamped PayDirect site that has faster registration, more tools, and a user-friendlier interface.
Yahoo's plan to market its PayDirect technology to other companies is "a desperate move to leverage their investment," Ms. Litan said. "They're obviously looking at the fact that they've got almost no market share. They've reached a fork in the road where they know there's no revenue in their current strategy, so they're trying everything they can before they call it quits." |
