Revolution Online Money Transfer Service Pits Itself Against PayPal

Startup Revolution Money, an online payment service that's up against EBay's popular PayPal, launched on Thursday as a new alternative money-transfer service.

The company's Revolution Money Exchange service enables subscribes to transfer money from their bank accounts to each other. People interested in the service, which is available at no charge, must sign up through the company's Web site.

Revolution Money is a subsidiary of Revolution LLC, an investment company formed by Steve Case, AOL co-founder and former chairman and CEO. The subsidiary hopes to reach young adults on the Web who are active in social networks and other online communities.

"We want to become for social networks what PayPal is for EBay," Ted Leonsis, chairman for Revolution Money, said last month at the Web 2.0 Summit in San Francisco.

The company has recently launched a RevolutionCard credit card that the payment service is marketing as a more secure option to traditional credit cards from MasterCard or Visa.

"First, the card itself is anonymous, so it doesn't have the cardholder's name on the card," Jason Hogg, CEO and founder of Revolution Money, told InformationWeek in a recent interview. "Nor does it contain any information about the cardholder in the magnetic stripe."

In addition, the card cannot be used without knowing the user's personal identification number, and it displays what the company calls a "disassociated account number," which means that the number on the card is not the actual account number.

Revolution Money hopes to interest merchants with an interchange fee of 0.5%, which is considerably less than the 1.9% charged to merchants by other credit card companies. The company's initial distribution platform is AOL's instant messaging server AIM. A link to Revolution Money is available through the AIM client.

In trying to grab a piece of the online payment market, Revolution Money is competing against far larger players. EBay-owned PayPal is the dominant service with 143 million user accounts worldwide.

Google has an online payment service called Google Checkout, launched about a year ago. That service, however, has yet to make any headway against PayPal.

In addition, Google has filed an application with the U.S. Patent and Trademark Office for a mobile payments service that would allow users to make payments at retail shops using their mobile phones.

InformationWeek editor at large Thomas Claburn contributed to this story.