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Amex Acquisition of Revolution Money Marks New Fight for Remittance Space

American Express (New York) will acquire Revolution Money, the online person-to-person payments venture that was the brainchild of America Online founder Steve Case.

The online person-to-person payment accounts are FDIC insured and suited for social and instant messaging networks. Revolution Money also offers a prepaid card linked to those accounts that can be used for offline payments or to withdraw cash from ATMs throughout the United States. No names or account numbers appear on Revolution cards and transactions are authorized by using a PIN.

According to Amex chairman and CEO Kenneth Chenault, the purchase is part of the payments company's strategy of expanding its reach and finding innovative technologies to enable its services.

"New payments products and platforms are evolving rapidly and it's important for us to keep identifying cutting edge technologies that can extend our leadership beyond the traditional payments arena," said Chenault in a statement. "While Revolution Money is a young and relatively small company, we believe it has big potential. This is a smart, nimble business. It's run by an accomplished management team who have quickly developed some cutting edge e-payment offerings. Joining with American Express will help unlock their potential, while allowing us to deliver competitive online payment products more rapidly and efficiently."

Adil Moussa, an analyst with Boston-based Aite Group, says this news is yet another example of a major card network trying to gain a piece of the growing P2P and remittance market.

"The American Express acquisition of Revolution Money is going to open the doors (among other things) for American Express to take advantage of the increasing interest in P2P payments," Moussa told BS&T. "MasterCard just announced this week their P2P program. Instead of developing their own in-house system, American Express will benefit from the platform Revolution Money has built. Now three out of the four networks will be presenting a challenge to the other players in the remittance market (MoneyGram and Western Union). The demand for such a product has always existed but the case was not always clear. However, with the increased remittances in the world and the convenience of it, the market is ready for a card-to-card transfer."

Chenault emphasized that he wanted to maintain Revolution's culture and talent. Jason Hogg, founder and chief executive officer of Revolution Money, will continue as president and CEO. Ted Leonsis, a Revolution Money angel investor, major shareholder and chairman, will become a special advisor to American Express working with Chenault on overall digital and online payments strategy, a release said.

Initially, American Express will concentrate on three key areas as it brings Revolution Money into the fold:

  • Developing re-loadable, prepaid products for new segments of the market;
  • Introducing new products for cardmembers who currently use other alternative payment systems;
  • Creating payment alternatives designed for social media sites and allowing open APIs that can help developers distribute new product innovations;
  • Developing mobile payments solutions in the United States.

Other opportunities will include expanding Revolution Money payment solutions internationally, extending product offerings to banks that issue cards on the American Express network and creating new forms of PIN-based debit products.

The transaction is subject to regulatory review but is expected to close in the first quarter of 2010. The purchase price is expected to be approximately $300 million. Upon closing, Revolution Money would operate as a subsidiary of American Express and be the first component of its recently formed Enterprise Growth organization. Enterprise Growth was formed to leverage American Express' existing assets and capabilities to generate incremental fee revenue and to drive the company's entry into new payment areas and related businesses.

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