Citibank Debuts Online Person-to-Person Payment System

Citibank this week launched its own online person-to-person payment system in an attempt to rival popular services such as PayPal.

The new system, called C2it, allows people to transfer funds to others by using the Internet. Such services have proved popular among online auction users, small businesses that don’t accept credit cards and people who want to pay bills to vendors that can’t receive other electronic payments.

C2it users can move funds from any bank account, brokerage account or credit card in their name at any financial institution and have those funds credited to any credit card, deposited into any bank account or issued in the form of a check, said Sami Siddiqui, head of the new service.

Like other person-to-person payment services, C2it is available to anyone who has e-mail, even if he or she is not a Citibank customer, Siddiqui said.

Each transaction costs $2. The minimum transaction amount is $5, and the maximum is $500 per day.

Citibank joins BankOne Corp. which launched eMoneyMail.com last year, and X.com, a Palo Alto, Calif., company that offers PayPal. Smaller companies that offer online person-to-person payment include Billpoint.com, Ecount.com and GMoney.com.

Analysts predict that the popularity of such personal payments will continue to grow as larger financial institutions introduce customers to the convenience of the electronic transactions.

“The person-to-person business is hot right now, and many financial institutions are looking at it,” said Theodore Iacobuzio, an analyst at TowerGroup in Needham, Mass.

Iacobuzio said the online strategy will probably catch on with other banks. Financial institutions will use it as a centerpiece and arrange a variety of other payment technologies around it, he predicted.