Thompson Loss Puts Yahoo In An Apparent Payments Bind

The abrupt end of Scott Thompson's short term as CEO of Yahoo Inc. calls the company's payments plans into question.

Thompson left the company under scrutiny for misstating his academic credentials (see story).

Payments are widely viewed as critical to turning Yahoo's fortunes around. Yahoo sits in the center of at least three converging channels, which are e-commerce, mobile commerce and digital transactions, experts say. But it lags such major competitors as Google INC. and Amazon.com in payments.

Yahoo's chief rival, Google, already has a prominent payment brand in Google Wallet, which last year absorbed the userbase of the earlier Google Checkout product (see story).  further extended its ambitions in April when it bought TxVia, a prepaid card technology company in New York (see story).

Yahoo also must compete with major ecommerce companies like Amazon.com and eBay Inc., parent of PayPal Inc., which Thompson led until he came to Yahoo in January (see story).

"Yahoo is stuck in a 1996 payments mindset, with other competitors a whole generation ahead," says Brian Riley, research manager in the cards and retail banking practice at CEB TowerGroup.

Yahoo did not immediately respond to an emailed inquiry.

Yahoo's interim chief executive, Ross Levinsohn, formerly Yahoo's global head of media, is by most accounts the polar opposite of Thompson. Levinsohn has plenty of media experience but almost no experience in payments. He previously was president of Fox Interactive Media, a unit of News Corp., and has held senior positions at the former search engine AltaVista and at HBO.

Sam Shrauger, who was PayPal's vice president of global product and experience, also left this year to join Yahoo. He may move on as well, experts say.

Shrauger helped build PayPal's merchant services business and helped integrate products like Bill Me Later, which enables consumers to pay for items online using a temporary credit. Bill Me Later's instant-credit system also provides a float for PayPal's wallet at the point of sale.

"If Yahoo's payment initiatives come to a standstill while they pick a new CEO, then there is little Shrauger can do despite his strengths and successes, and there is a risk to Yahoo that he might leave," says Andy Schmidt, the research director for global payments at CEB TowerGroup.

Yahoo has had a disjointed relationship with payments. In 2007, it discontinued its own bill-payment service, which used CheckFree on the backend (Fiserv bought CheckFree the same year). Yahoo also owns roughly 40% of Alibaba Group, which spun off its Alipay unit in 2010, citing the requirements of Chinese regulator.

The separation of Alipay, the largest third-party payments provider operating in China, distanced Yahoo from a prominent payments company (see story).

A longer version of this story is on AmericanBanker.com.

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