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EcommerceBytes-NewsFlash, Number 1689 - December 20, 2007 - ISSN 1539-5065    2 of 3

BidPay Abruptly Closes Online-Payment Service

By Ina Steiner
EcommerceBytes.com
December 20, 2007




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December is an unlucky month for one online payment service. BidPay.com sent an email to users on Wednesday informing them it was discontinuing operations effective December 31, 2007, but gave no reason. It was 2 years ago this month that First Data Corporation abruptly closed BidPay before selling it to CyberSource Corporation.

A disappointed eBay seller wrote to AuctionBytes, "It's sad to see Bidpay leaving us out in the cold once again. We have used Bidpay on a daily basis for our international buyers and I am currently wondering what we will replace Bidpay with, and on top of that make sure that they new payment service should be a payment service that is not against eBay's policy."

BidPay President David Hansen told AuctionBytes it was a corporate decision to close the online payment service, and a major league disappointment. Hansen had also been President of BidPay under First Data Corporation's ownership.

CyberSource acquired BidPay from First Data for $1.8 million and changed it from a service that allowed buyers to purchase money orders online for their eBay purchases to a service that allowed eBay sellers to accept credit and debit cards without the need for a merchant account.

How well BidPay was able to compete on eBay against the online auction site's own PayPal payment service is questionable. eBay heavily promotes PayPal to its buyers and sellers and offers protection to buyers only for PayPal-funded transactions. According to SEC documents, CyberSource reported that BidPay.com's third-quarter revenue in 2007 was approximately $120,000 and generated losses.

This year, BidPay expanded its service beyond eBay into ecommerce storefronts, and just twelve weeks ago, it launched an API that allowed developers to integrate BidPay into their shopping carts and ecommerce platforms. But in November, CyberSource acquired a service called Authorize.net that already addressed the needs of small merchants, making BidPay's off-eBay service redundant and, likely, inconsequential.

BidPay was one of the few online payment services eBay allowed sellers to accept aside from its own PayPal service. For eBay sellers who don't want to accept PayPal and may be too small to get their own credit-card merchant account, this may be a major setback. Off-eBay merchants do have the choice of using services like Google Checkout, and, as of this month, Amazon Payments.

Some sellers posting on eBay boards expressed no surprise that BidPay did not survive, others expressed anger that so little notice was given to users. One seller who chooses not to accept PayPal called AuctionBytes and wondered what would happen to 10-day auctions that advertise BidPay, given the service will stop accepting payments in 6 days.

Another seller wrote to AuctionBytes stating his concern. "We're getting any outstanding funds out immediately just to be safe."

A press release issued by CyberSource on Wednesday said the company expects to incur one-time charges totaling approximately $1.7 million to $2.7 million in the fourth quarter of 2007 related to the shutdown, of which up to $300,000 will impact the company's future cash balance.

BidPay told users it will no longer accept new BidPay account registrations and said any attempts to add BidPay as a payment option in auctions would not be effective.

Effective 5:00 P.M. PST, December 25, 2007, BidPay will cease accepting payments. From January 1, 2008 through 11:59 P.M. PST, January 31, 2008, registered users will have read-only access to their BidPay account information, and customer support services will be available through January 31, 2008 by contacting support@bidbay.com.

Read what people are saying about BidPay on the AuctionBytes Blog:
http://tinyurl.com/2qmnaq

About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.

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