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Citigroup, Microsoft ring up Net-pay pact

As the online-payment industry strives to make money, the financial-services giant turns to the software maker to extend the reach of its Net payment service.

As the online-payment industry strives to make money, Citigroup on Tuesday joined forces with Microsoft to extend its Net payment service to a larger audience.

Under the agreement, Microsoft will offer Citigroup's online payment service, c2it, via its MSN Internet services. The financial-services giant launched c2it last fall, allowing customers to transfer cash online from a bank, brokerage or credit card account to a recipient's account.

Microsoft will feature c2it as an MSN-branded online payment service for transferring money over the Web. MSN customers, who now can access the service through the software maker's Money Central page, will be able to use their e-mail accounts to send payments via credit card, debit card, checking account or savings account from any bank.

The agreement marks Citigroup fortifying partnerships in a lean time that has some other Internet-payment players struggling. The company also on Tuesday inked a similar agreement with Auction Watch, which provides companies with tools to conduct online bids.

Services that allow people to send money via e-mail have grown popular over the last year as more individuals and businesses conduct transactions online. Large financial institutions such as Citigroup and Wells Fargo have joined niche start-ups PayPal and CheckFree in the burgeoning arena.

Still, the overall industry has struggled to generate revenue. To meet its revenue goals, PayPal has had to forge alliances, including a partnership with Providian Financial in February to create a cobranded credit card. In March, PayPal nabbed $90 million in its latest financing round.

With the MSN deal, Citigroup's goal is to capture the interest of some 230 million monthly MSN visitors for the c2it service. Eventually, the service will be available through other MSN properties including MSN Auctions, MSN eShop and Hotmail e-mail.

The agreement between Citigroup and Auction Watch will let customers use the c2it service as a payment option in making purchases. If buyers choose c2it to settle a bid, the transaction will be processed immediately, the companies said. Auction Watch will begin offering c2it starting next month.

Citigroup, which already has a similar agreement with Internet media giant AOL Time Warner, recently revised pricing for the c2it service, charging senders a fee of 50 cents or up to a maximum of 2.2 percent of the amount of the transaction. Previously, senders were charged a fee of $2 per transaction. Online sellers use the service at no cost. The company plans to expand the service overseas by the end of 2001.