Steve Case’s startup Revolution Money announced a series C funding today of $42 million led by Goldman Sachs. Case and other existing investors (Citigroup, Morgan Stanley, former AOL vice chairman Ted Leonsis, former Charles Schwab CEO David Pottruck, and JP Morgan vie chairman David Golden). That is on top of $50 million the company raised is September, 2007.
The company is using the Internet to lower the cost of credit card charges and payment transfers, charging merchants only a 0.5 percent transaction fee instead of credit card fees which can be four to eight times as high. Revolution Money has done a good job signing up banks and merchants to accept its credit card and online payment service, but it is not so clear how good a job it is doing actually signing up customers. In tandem to its regular credit card, it also operates Revolution MoneyExchange, an online payment processing service that is trying to compete with Paypal. MoneyExchange is basically a loss leader to get people to sign up for the credit card. The problem is that nobody is really using MoneyExhange.
Only 33,000 people in the U.S. even visited the site in February, down from a marketing-fueled high of 742,000 a year before in March, 2008, according to comScore. Hopefully, it’s found another way to sign up customers, and I’m not talking about Washington Capitols hockey fans (Leonsis owns the hockey team and is trying to get fans to pay for tickets with Revolution Money credit cards). The company must be signing up tons of new cardholders through more traditional marketing techniques. Right? I have an e-mail into Revolution Money asking for more details.
Update: The company won’t disclose how many consumers have signed up for a card. The only number they will share is that MoneyExchange has signed up 400,000 registered users since inception, which doesn’t account for people who tried it once to never return again.
The only reason it spiked like that last year was from their free money promotion they were doing anyway. You got $25 from making an account, and $10 from each referral. Once that promotion ended, their traffic did as well
Same issue as Revolution Health, the target. Deep dive consumer segmentation including psychographic, emotional, and trend analysis. Also with this economy they should be doing a huge value push with advertising, “Revolution Money, your value alternative” etc.
I continue to look for an alternative to Paypal for clients to my consulting business, but this ain’t it.
A user can only transfer a maximum of $2500 per month. Sigh…
$2500 limit per month‽ That’s ridiculous.
I’m in the same position, thanks for the tip. As much as PayPal can frustrate me I’ve also been unable to find a workable alternative.
Check out http://www.noca.com, they claim to process check based payments for a fixed fee of 0.25% and no additional charges or so they claim
Maybe they’re not getting signups because the link on the main page to actually signup is broken (includes an extra “.”).
Traffic to their site is highly irrelevant. They are a CC processing company, not a content provider.
Unfortunately, it is the only proxy we have.
MoneyExchange was always presented as a major plank in its customer-acquisition strategy. If nobody is visiting MoneyExchange, then it calls into question how many customers it is actually acquiring.
I have personally worked for a company (during a Peoplesoft Vantive implementation) that had less than 20k monthly visitors to its public site.
That company was responsible for processing over $500 million in CC charges each month. Considering the fact that they were charging 0.5%-3.2% , it does not translate into a lot of profit, but being responsible for half a billion dollars in transactions each month makes them significantly more valuable than a company that depends on site visitors for cash flow.
I am quite certain that Boeing’s site visitor count is a poor indicator for their revenue stream.
Nice!
Anderson, what is your job title at RevolutionMoney?
The Boeing comparison is nonsensical. You don’t have to go to boeing.com to board a commercial airline. but you DO have to go to the revolutionmoney website as a consumer to initiate online money transfers. Like the article says, it’s highly possible RME is getting good traction with merchants and their offline cards, but the online money exchange component if this is a flop.
I have to agree with Anderson. Traffic metrics don’t say much for companies who aren’t using traffic to monetize.
Oracle’s site only sees 300-400k uniques a month… With ‘07 annual revs of $17B, they either monetized $44K per user, or they have another rev stream
It might not be a good inicator of the overall volume of business, but it does provide an upper bound on the number of new accounts that month.
I’ve used MoneyExchange a handful of times, and while the system has a better interface than Paypal it’s hard to find a compelling reason to use it. There are quite a few people out there looking for a Paypal alternative — mostly on the business side though. Revolution should consider targeting a niche to build their brand awareness, for instance Craigslist users or travel seekers.
Interestingly I’ve run across many more people in the real world who have used this or at least heard of it than Twitter.
Its a viable business idea. Yet it turned out to be not marketed well.
anything is better than paypal…I’ll try it.
The name of the hockey team is Capitals, not Capitols.
Paypal became the industry standard after their integration with eBay. BillMeLater provides an alternative to paying with credit cards online. What makes Revolution Money unique? Lower fees are great, but they’re five years late to the game. The only way this business grows is through partners who push their services.
True. Lower processing fees may sound nice but really don’t drive adoption. New payment methods only thrive if they can increase incremental sales or open up new places to pay.
This is pure and simple…CRAZY! $100M TO COMPETE AGAINST VISA, PAYPAL, MASTERCARD—IS NOTHING. These guys got nuthin,
This is a very compelling tool for SELLERS, but what is the incentive for buyers to get the card?
My company processes a very significant amount of CC payments and if you can provide me with processing for .5%, rather than 2% etc…I’m in…but why would one of my clients care?
Payment processing is more like a service that should be charged on a monthly basis. All a payment processor does it subtract a number from one account and add the number on another. That shouldn’t cost a lot, let alone charging a percentage of each transaction.
I think a fair pricing would be a monthly charge of $20/mo.
Someone needs to come in to break this market up. Make paypal bleed for money.
It may surprise you but people do try to steal money.
What’s really interesting to me is that the MONEY is still there – for the right kinds of investments. 42 million dollars is a lot of money – but of course, for the right service.
Revolution Money should encourage merchant to give customer discounts for adopting their card. It is basically sharing the cash savings from the lower transaction fee. Once customer adopt the card they can begin to wee customers off the discounts.
I signed up with Revolution Money Exchange when they were doing the free money promotion. However, I was unable to *transfer* that money to anybody else on the service–it gave me an error ever time I tried. I sent a help request, got a response *days later* that promised someone would get back to me within 2-3 *more* days, and then *never* heard from them again. I attempted to follow up twice more, but to this day have never received another response from them (although I get the Generated Monthly Statements.
Terrible customer service, terrible responsiveness.
Because Goldman Sachs, Citigroup, Morgan Stanley and others are known for their excellent investment sense recently.
there so good at signing up merchants i’ve never heard of them; i’m a merchant and process credit cards.
this is a another good-ol-boys pissing money away cause they know each other; and if it doesn’t work, who cares, it’s the banks money.
i’ve been in the business for 20 years and anytime gold sach, citi, morgan, etc try to create some financial payment system to change/rule the world… it fails, just dies in silence.
i wonder if any TARP money was involved?
Steve Case (who is also involved with this) was on CNBC today talking about Revolution Money, and although it’s a good idea he hit the nail on the head when said outright that they’ve run into the classic chicken and egg problem. In their case – you can’t get merchants to accept a form of payment their customers don’t use, and their cusomers won’t use it if the merchants don’t accept it.
If they can make it work with 1/5% fee, then all the power to them. With all those big name investors, how will they make their money back and when?
How are they securing people’s data? What protection is there for the consumer using the card against identity theft, etc? How easy is it to deal with them when a Business Owner has a challenge? How much will it cost to swipe these new types of cards for a Business Owner? New hardware, new costs.
I’m a former “Revolutionary”. On one hand, I’m glad to see that got some more funding – there are some good people there doing some good things.
On the other hand, they should have never been in this position. They threw away a bunch of money creating a new technology direction when their old one was working fine, spent countless hours on the AIM plugin no one could use, and in general acted more like a company that had money to burn then a lean organization looking to grow and survive.
Knowing how many people they’ve laid off now (I’ve heard 70-100 people over the past year) hopefully that changes their direction and has made them a leaner organization that they’ll be able to take this money and run. Run to growth that is.
As far as signing up – Money Exchange was always the route to bring people in. It’s no different than Paypal – get them exchanging money online, and then why not have a credit card too. But the chicken and egg problem was an issue – it was big news everytime we got a power seller to use Money Exchange on Ebay. But I never used the thing – and I worked there!
Regarding the costs – for the most part, the cards run on the existing merchant rails, so there was not a lot of costs for the merchants. For securing data – they are a credit card company, and are under the same regulations as the other credit card companies for privacy and securing of data.
And regarding customer discounts – that was always the plan. The merchants had a built in marketing budget because of the money they were saving on fees.
Anyway, I wish them the best – it will be interesting to see how they choose their next strategy with the economy.
How can the card “run on the existing merchant rails” if they don’t use Interchange? What network do they use to check the account balance when someone goes to a store to make a purchase?
I’m not surprised they’re having problems. There doesn’t appear to be any way to apply for the card on their website. If there is, it’s not displayed right up front where you can find it. Horrible design.
I understand that Leonsis’ big marketing plan is to send out millions of CDs which give users a trial membership to the service. Seriously, this guy was running a little company in Florida (Redbook?), got bought out, ascended the ranks and then took on the position as head of innovation at AOL. That was a joke – the wrong man for the job who was dismissive of ideas which utilized too much bandwidth. Let’s home Ted and Steve Case can crack the code on this latest startup. They both ran AOL into the ground, even though part of it was the stiff collars at Time Warner who would not play ball to marry their high speed cable properties with AOL’s critical need to migrate customers to high speed Internet.
Do you think its gonna successful?
Larry Summers was involved with this company. Lots of money came in from some big banks that got bailout money. Front?
I use RME. I never had a problem with them yet. You can use RME with the Abundant Living System providing the inviter accepts RME. I love RME despite the 2500 monthly limit. It’s not a bad thing to actually have a limit in place, as I have heard horror stories from those who had been fxxked from using paypal and how some people had thousands of dollars stolen from paypal via false complaints from buyers on sites like ebay and such.