X.com ceases banking operations
The financial services site is walking away from its banking business to concentrate on its online payment service, PayPal.
X.com emailed customers Thursday saying that beginning Dec. 1, it was ceasing operations of X Finance, its unit that included Internet banking division First Western National Bank. At its peak, X Finance had about 200,000 account holders, most of whom have already switched to a PayPal account, said X.com spokesman Vince Sollitto.
The wind down of X.com's financial services had been planned since March, when the company acquired PayPal, Sollitto said.
"You go where your customers want you to go," he said. "They're telling us that they want payment services."
Indeed, before the PayPal acquisition there was little to distinguish privately held X.com from a slew of other Web banks. But since then, the Palo Alto, Calif.-based company has become the favored payment method on the Web, especially at auction sites such as eBay.
In the past 11 months, the number of PayPal customers has ballooned from 10,000 to 4 million, Sollitto said.
PayPal's success attracted a pack of competitors, including Citigroup, Paytrust, Bank of America and ProPay. Foremost among the challengers is eBay.
With PayPal thriving in eBay's backyard, the giant auction site this year launched its own payment service, Billpoint, with the help of Wells Fargo. But the service has lagged behind the better known and less expensive PayPal site.
X.com said it will keep at least one hand in financial services. Last week, it offered customers the ability to have the money in their PayPal accounts swept into a money-market service at the end of each business day, returning the money each morning to the PayPal account.
By offering customers a chance to earn a 5 percent return, X.com is hoping to entice them to keep more funds in their accounts. The company makes a small profit from its customers' money-market deposits as well, Sollitto said.