American Express takes aim at PayPal with Revolution

November 22, 2009 by Rob Lever
With its deal to buy Revolution Money, American Express is taking aim at the growing market for online and alternative payments, in a challenge to recognized leader PayPal, analysts say

With its deal to buy Revolution Money, American Express is taking aim at the growing market for online and alternative payments, in a challenge to recognized leader PayPal, analysts say.

The giant announced plans Wednesday to buy the Web payments firm started in 2005 by Internet firm AOL founder Steve Case, with the purchase price set at 300 million dollars.

Analysts say AmEx is most interested in the so-called peer-to-peer services of Revolution, which enables low-cost money transfers among individuals and businesses.

"I think it's a challenge to , but it's more than that," said Ed Kountz, an analyst who follows financial technologies at Forrester Research.

"AmEx is positioning themselves for more effective innovation, and for the next generation customer."

Kountz said a variety of new technologies are emerging for person-to-person and alternative payments, but that few companies have been able to get the critical mass with both consumers and merchants to gain a foothold.

PayPal, a unit of , has been able to dominate in this area but Checkout has struggled, say analysts.

Kountz said the market is growing with younger customers looking for convenient ways to make person-to-person transactions without cash, and with credit card usage hurt by the financial crisis.

"People are feeling greater comfort with cashless transactions," said Kountz.

Revolution also aims to compete against traditional credit card firms by handling payments at a lower fee.

Joe Weisenthal at the online analysis site Business Insider said Revolution is "frequently described as a PayPal killer," but has been unable to grow during the financial crisis.

The action by AmEx comes with PayPal expanding its offerings with new ways to transfer money using mobile phones or social networks like Facebook.

Revolution "offers a unique card that seems to blend the idea of traditional credit and debit cards with Internet-based payments along the lines of PayPal and Google's service," said Jim Kim of the financial technology website FierceFinanceIT. "We'll see how the other big boys react."

Kountz said AmEx and Revolution "looks like a good marriage, but the proof will be in the delivery."

Florida-based Revolution Money sprung from the venture capital group led by Case, with the mission "to drive transformative change by shifting power to consumers," according to the group.

American Express hopes to close the deal in early 2010 subject to regulatory approval.

"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 Kenneth Chenault, chairman and chief executive officer of American Express in announcing the deal.

"While Revolution Money is a young and relatively small company, we believe it has big potential," Chenault said.

"This is a smart, nimble business. It's run by an accomplished management team who have quickly developed some cutting edge e-payment offerings," he said. "Joining with American Express will help unlock their potential, while allowing us to deliver competitive online products more rapidly and efficiently."

(c) 2009 AFP

Explore further: A growing PayPal could soon overshadow parent eBay

Related Stories

A growing PayPal could soon overshadow parent eBay

November 4, 2009

(AP) -- Most people know eBay Inc. for its online marketplace, where deals abound on everything from gadgets to antique furniture. But soon, eBay's biggest business will likely be PayPal, the online payments service that ...

EBay's PayPal envisions doubling in size by 2011

March 11, 2009

(AP) -- EBay Inc.'s name may conjure images of online auctions, but the company is hoping to turn attention to its second-largest business - PayPal - which it expects to blossom significantly in the next few years.

PayPal opening doors to outside developers

October 21, 2009

PayPal plans to throw open the doors of its software platform to enable outside developers to build innovative tools using the online financial transaction service.

Amazon hopes to simplify Web shopping -- with words

October 29, 2009

(AP) -- You're probably used to typing your name, address and credit card number when you buy things online. is guessing you don't enjoy it, though, and wants to simplify the process by letting you purchase items ...

PayPal courts outside developers

November 4, 2009

PayPal has opened its software platform to outside developers in a move designed to unleash a flood of creative uses for the online financial transaction service.

Recommended for you

WhatsApp vulnerable to snooping: report

January 13, 2017

The Facebook-owned mobile messaging service WhatsApp is vulnerable to interception, the Guardian newspaper reported on Friday, sparking concern over an app advertised as putting an emphasis on privacy.

US gov't accuses Fiat Chrysler of cheating on emissions

January 12, 2017

The U.S. government accused Fiat Chrysler on Thursday of failing to disclose software in some of its pickups and SUVs with diesel engines that allows them to emit more pollution than allowed under the Clean Air Act.

1 comment

Adjust slider to filter visible comments by rank

Display comments: newest first

not rated yet Nov 22, 2009
Credit Card Bill of Rights, as it's unofficially known, but it means there are some new rules regarding credit card rates and fees. It doesn't cap credit card rates, but it does limit how quickly they can raise rates. No raises are permitted in the first 6 months, and 45 days notice MUST be given to the card holder. There are also new limits imposed on how they structure fees, and if they can raise rates on particular charges, and forbids double billing. This might mean higher credit card rates on average, but then again, no one is going to weep for the poor credit cards or the suits that run the companies.

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.