Talkin' 'bout a Revolution in transferring money online
The entrepreneur and vice chairman emeritus of AOL has teamed with AOL founder Steve Case in a venture called Revolution Money, a kind of combination credit/debit card and online payment system. It's a unit of Case's Revolution, which has launched several other companies.
The RevolutionCard launched in September. Today, Revolution MoneyExchange launches, aiming to take on online payment leader PayPal by offering free money transfers online at revolutionmoney.com.
The concept is similar to what Google tried with Google Checkout, without great success.
But there's a twist: Revolution is tied to a next-generation credit and debit card that promises to be more secure and less expensive than current cards.
Revolution's target market is the millions of young people who spend hours online at social networks.
"We want to be to social networking what PayPal is to eBay," says Leonsis, chairman of Revolution Money.
Later this month, Revolution will launch on AOL's AIM instant-messaging service. AIM "buddies" will be able to transfer money to each other or to participating merchants via an instant-message window. From there, Revolution hopes to be on Facebook, MySpace and anywhere else young people gather online.
To use the service, like PayPal, you sign up and type in your bank account information. Revolution transfers the money from your bank to the vendors, at no cost to merchants.
However, if consumers want to pay with a credit card, their only option is the RevolutionCard. Merchants will pay 0.5 percent of the sale, with no monthly fees.
When consumers buy goods via PayPal, they can use a variety of credit cards, and merchants pay fees of typically 2 percent to 3 percent. Google Checkout - which also accepts credit cards - is free to merchants through the end of the year. Google hasn't said what its plans are for 2008.
Greg Sterling, an analyst at Sterling Market Intelligence, says Revolution will find it very slow to wean customers away from PayPal.
"Google Checkout has clearly underperformed," he says. "People have inertia. They may not love PayPal, but they also don't seem to want to switch."
Leonsis says Revolution MoneyExchange will do it the same way AOL slowly picked up customers for AIM, the instant-messaging juggernaut that launched in 1995. "I send you a message, and if you don't have AIM and want to hear from me, you have to click to get AIM," he says. "As you fill out these forms to virally accept money from your buddies on Revolution, it's not us marketing the service. It's me sending you money."
AOL Vice President Andy Spillane calls Revolution a "new and novel" extension of what AIM was originally designed for.
"Suppose I forgot to pay my pizza bill in my fraternity, but I'm on spring break," he says. "If I can use AIM and log in, know who my buddy is, and send him the $9.99 I owe him for the pizza - fine, I've solved a problem that we never really intended AIM to be used for. That's great."
Leonsis predicts the service will have 1 million merchants and 1 million customers signed up within a year.
While the Revolution credit card is available now, just a few merchants are accepting it, including Northwest Airlines and Shipley Energy, which operates a Pennsylvania chain of convenience stores.
Case knows it will take time to sign up a large customer base.
"It's chicken and egg," he says. "But that's why it's called Revolution. Because it is hard. I wouldn't want to do this if it was easy."
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