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Yahoo Says So Long to PayDirect

Yahoo gave users 30 days' notice that it will shut down PayDirect, its person-to-person payment service.

On Friday, users of the service received an e-mail saying, "We regret to notify you that we are closing the Yahoo! PayDirect from HSBC service, effective November 22, 2004."

"Send money" transactions initiated before that date can be completed, but recipients must accept the funds within 30 days, or they'll be canceled. Users can review their accounts and withdraw funds until February 15, 2005. After that date, they'll only be able to review past transactions or close the account, Yahoo said.

"This is part of the company's ongoing commitment to focus on the businesses that are core to our future growth," said Yahoo spokesperson Brian Nelson.

Mountain View, Calif.-based Yahoo launched PayDirect in March 2000, via the purchase of Athas, a provider of electronic billing services. Athas' dotBank.com service let individuals exchange money or pay bills online. The accounts were most recently managed by international bank HSBC.

In 2000, Yahoo extended the service to mobile phones, as part of its Yahoo Everywhere initiative.

Yahoo has also made PayPal, a wholly owned subsidiary of auction rival eBay , available as a payment option to Yahoo Auction users for some time, Nelson said. The company doesn't break out the volume of transactions handled by the individual payment platforms.

"PayPal just owns the space," said Jupiter Research analyst Bruce Cundiff. (Jupiter Research and internetnews.com are owned by the same corporation.) Cundiff said such decisions are simple. "Is this profitable? Are we getting the transaction volume we want? If not, cut your losses."

Cundiff said PayDirect follows a rash of failed person-to-person payment initiatives that includes eBay's own BillPoint.

Jupiter estimates that in 2004, PayPal will handle 66.4 percent of all consumer-to-consumer auction transactions, with all other online payment platforms -- including PayDirect -- accounting for just 5.6 percent combined. While Jupiter does see a rising trend for other online payment services, it expects their combined share of the market to rise to only 12.5 percent by 2010, with PayPal holding 62 percent of the market.