Yahoo’s PayDirect Enters the Overseas Remittance Market

Yahoo Finance, whose PayDirect person-to-person payment service has been in operation domestically for three years, is now offering PayDirect International to allow electronic remittances from domestic users to recipients overseas. Announced this week, the new international payment service is an effort by Yahoo Finance, a unit of Sunnyvale, Calif.-based Yahoo Inc., to break into the burgeoning market for remittances to foreign shores. The market for such transfers out of the United States is estimated at $48 billion annually, with a growth rate of 20% to 25%, and is dominated currently by services such as First Data Corp.'s Western Union and Viad Corp.'s TravelersExpress/MoneyGram. “It's a huge market,” says Dickson Chu, general manager for PayDirect. Unlike PayDirect, the new international version does not require recipients to be enrolled in the service. It also allows payments to be delivered via wire or prepaid ATM card, so recipients also need not have bank accounts or access to the Internet. “We're bridging the online-offline divide,” says Chu. The World Card-branded ATM cards can be used at any of the 800,000 Cirrus-branded machines outside of the U.S. Wires can be sent to any of 60,000 foreign MoneyGram offices. Fees depend on payment method and destination. For the ATM option, senders pay a fee ranging from $5.95 to $8.95 per transaction, and the recipient pays a $1.50 withdrawal fee; for MoneyGram, they pay anywhere from $9.95 to $18.95 per payment. Senders enroll at the PayDirect Web site, giving account and identification information and setting up an encrypted password. The enrollment gives users access to both the domestic and international person-to-person payment services. Senders who choose the ATM option can fund the card by giving Yahoo a bank account or credit card number. HSBC Holdings PLC handles back-end settlement for ACH debits and credit card transactions. At the PayDirect Web site, users can recharge the prepaid ATM account, gving recipients what Chu calls “real-time” funds availability. For both the ATM and money-wire options, PayDirect sets up a prepaid calling-card account for senders with five free minutes each time senders initiate a transaction. Senders can use the account to notify recipients that money is coming. Yahoo will not divulge numbers on its current PayDirect user base or on what its expectations are for PayDirect International. The domestic product competes with heavyweight person-to-person processor PayPal, but, says Chu, “continues to grow nicely.” PayDirect International currently has no direct competitor, but, as Chu admits, that picture can change overnight. “We're cautiously optimistic it'll be a big hit,” he says.