Yahoo to close online payment service

Yahoo Inc. in November will close PayDirect, its online payments service that aimed to compete with eBay Inc.'s PayPal, the company said Friday.

Yahoo's decision to shutter four-year-old PayDirect comes about a year after financial services giant Citigroup turned off its c2it online payments service, citing too few accounts to justify its operation.

"Without the large user base to support PayDirect, the business doesn't scale," a Yahoo spokesman told Reuters.

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PayPal, aided by its affiliation with Web marketplace provider eBay, has come to dominate the online payments market.

PayPal reported 56.7 million accounts at the end of the third quarter, a 61 percent increase from the year-earlier period.

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Yahoo launched PayDirect in July 2000 with partner CIBC National Bank. HSBC Holdings Plc replaced CIBC as Yahoo's joint venture partner in November 2001.

Yahoo said PayDirect will be available until Nov. 22, but that users will not be able to create new accounts or send or receive money from people who are not current PayDirect customers.

Users will be permitted to view account records and withdraw remaining balances until Feb. 15. After that date, PayDirect customers will only have the option of viewing past transactions or closing their accounts.