Check is in the email

With Debts Paid Online, Check Is in the E-Mail

The New York Times | Circuits section

By Jessica Seigel

THE check was not in the mail, not for the last 10 years. Serdar Danis, a Philadelphia salesman, had lent $15 to a walletless friend one night a decade ago but had never been paid back. As time passed, it just seemed too petty to mention. Until now.

When Mr. Danis, 29, recently began selling his old Star Trek memorabilia through Web auctions, he discovered online services that allow buyers and sellers to use e-mail to send and receive money from their bank and credit card accounts. That's how he got the idea of e-mailing his deadbeat buddy, directing him to, the largest of the new Web payment sites. "Within less than a minute, I got my money back," Mr. Danis said.

As sending money by e-mail spreads from the online auction world to everyday life, "the check is in the mail" already sounds quaint in some circles.

Instead, people are using person-to-person payment sites like,,, and to settle small personal debts, pay sports league dues or pass the hat for a bachelor party.

"I haven't written a check in over a year," said David McIntyre, 32, a marketing manager from Tempe, Ariz., who no longer even keeps stamps at home. Web-oriented and envelope-shy, he helped raise $2,800 through for Jimmy Welch, a 26-year-old friend with a rare cancer.

In the past, only businesses with merchant accounts could accept credit cards. But friends donated to the cancer fund through eMoneyMail, charging the donations to Visa cards or checking accounts, for a $1 transaction fee.

Mr. Welch was then able to use his A.T.M. card to withdraw the money from his bank account for travel expenses while undergoing chemotherapy in Los Angeles. "My friends are more computer-savvy than I am," Mr. Welch said. "I was hesitant at first. But then, it was, like, wow." Barely existing a year ago, the person-to-person online payment market has taken off in the last six months, catching the traditional banking world by surprise. "People are signing on in greater numbers than the analysts expected," said Kenneth Kerr, senior analyst at Gartner Financial Services, a research firm in Stamford, Conn. "No one knew how great demand would be."

Although none of these services works precisely the same way, each allows users to send and receive payments by e-mail, transferring money between physical-world bank or credit card accounts and using the Web site account as a conduit.

Typically with these services, users must first deposit money into their online accounts before sending out payment by e-mail. To make payments, customers tell the Web service to send a "you've got cash" type e-mail message to the other person, who must sign in, then collect the money by credit card, bank account or paper check. When credit-card account users send money, the amount appears as a charge on their monthly bill under the Web site's name.

Now one of the most popular financial Web sites, attracted 2.7 million users through an aggressive marketing campaign that pays $5 to new users and $5 for each referral.

PayMe, PayPlace and don't release how many users they have, but eMoneyMail says it has 20,000 registered members.

"We didn't pay for those customers," said Steve Dieringer, general manager for the service, which is based in Columbus, Ohio, taking a swipe at PayPal's referral reward.

To send or collect money through these sites, customers register by giving their names, addresses and telephone numbers. The confirmation e-mail from the company contains a numeric security code that is required to finish signing up at the Web site.

At, some people have reported trouble with the first step, including difficulty confirming their bank accounts. The security procedure involves calling their bank, learning the exact amounts PayPal has put into their account in two tiny deposits, then keying those figures into a PayPal form.

Ross Honey, a New York management consultant who is a PayPal enthusiast, said that he appreciated the extra security but that the service was "too complicated."

So when it came to finding a service his mother could use, Mr. Honey directed her to PayMe, which not only has a simpler sign-up but is also the only service that automatically deposits accumulating funds into a customer's bank account without charging an extra fee. With most other Web services, the money remains with the online account until users click the Withdraw or Receive button to move the money into their credit card or bank accounts. Some people simply prefer to leave some money in their online accounts, transferring payments back and forth like so much Monopoly money.

Because most sites do not automatically transfer money from the online account into the user's bank or credit card account, many people inadvertently leave cash in their Web accounts, which don't pay interest. (Several sites plan to offer interest, while eMoneyMail automatically cancels the transaction if the money is not collected in 21 days.)

"My money is still sitting in PayPal," said Laurel Touby, chief executive of, a New York-based Web community and job site. "I never could figure out how to get it."

There are other caveats and occasional glitches to bear in mind while using person-to-person payment systems. For example, the sites ask prospective customers to check a box confirming that they have read a Terms of Use agreement. To no one's surprise, many users don't slog through the turgid, repetitive legalese.

Here's the crux of those agreements: PayMe, PayPlace and ecount claim broad immunity from liability. Their terms also explicitly require customers to forfeit the right to dispute a person-to-person credit card charge run through these sites, except in cases of error or unauthorized use.

In other words, users give up certain basic protections against sales fraud that usually come with paying by plastic. The PayPlace agreement, which weighs in at an eye-glazing 16 pages, is particularly confusing and intimidating.

The deal has improved at PayPal, which recently revamped its terms to allow customers to dispute credit card charges and added Travelers's SafeWeb Remote Banking Insurance to cover unauthorized use, but not sales fraud. In a mercifully short five pages, eMoneyMail does not make customers sign away credit card protections and clearly explains how to pursue complaints about errors. And eMoneyMail is also one of the few payment services backed by a bricks-and-mortar bank. But that will probably change as more established financial institutions begin to jump into the market. Western Union is running a payment service called Moneyzap ( and AOL will offer Web payments this fall through an alliance with Citigroup.

Should potential Web payment users wait for more established players to enter the market?

Paul Hagen, a senior analyst in e-commerce technologies at Forrester Research, a marketing research firm in Cambridge, Mass., thinks consumers should look at the business behind the service. "The question is: How do you make money?" he said. "What's the business model? I think a lot of people will use these payment-to-payment schemes. But I would be skeptical of no-name companies with no-name backing."

Even PayPal, which is backed by large investors like Nokia Ventures, has had to revamp its business strategy. The Web site, run by the online financial services company X.Com, had planned to make money from interest on the funds left temporarily in customer accounts. The revamped plan involves charging fees for premium services like 24-hour customer phone service and automatic deposits into offline accounts.

And what's the next big thing in person-to-person payments? "Think about all those office pools," said Mr. Hagen, who recently lost $10 betting on college basketball in a friendly wager. "What a brilliant way to pay." He could ante up without ever walking over to the water cooler.

Circuits, July 27, 2000