AOL co-founder Steve Case and other financial and technology industry leaders have launched a new online credit card company they say will transform the payment industry.
Case's investment company Revolution yesterday launched a new subsidiary, Revolution Money, an Internet-based payment company with a credit card that offers U.S. consumers added security while offering merchants lower fees, according to a statement.
Formerly called GratisCard, Revolution Money has launched its first two products: Revolution MoneyExchange, a free PayPal-like money transfer service for online transactions, and RevolutionCard, an offline, PIN-protected credit card that does not have the user's name or account number on it, to keep the user anonymous to avoid identity theft, the company said.
Revolution MoneyExchange, available by invitation only, will be offered to all consumers later this year, the company said. The credit card is available.
Revolution Money was formed by Case, former AOL vice chairman Ted Leonsis, who is Revolution Money chairman, former U.S. Treasury Secretary and former Harvard University President Larry Summers, former Charles Schwab CEO David Pottruck, and former MasterCard International President and CEO Russell Hogg. The company has partnered with four prime and sub-prime lenders: First Bank and Trust, Citi, CompuCredit and Union State Bank.
Unlike traditional credit-card companies that require merchants to pay an average of 1.9% of a consumer's total sale, Revolution Money is charging merchants a 0.5% fee, the company said.
A company spokeswoman said Revolution Money can reduce merchants' fees because the new system relies on Internet technology, which is more cost efficient than traditional credit-card systems.
"So we're saving money," she said, adding merchants will be able to pass on their savings to consumers in the form of immediate rewards and/or loyalty programs.
"Traditional, and even online, incumbents have been charging what adds up to billions of dollars of fees every year that ultimately comes out of consumers' pockets," said Case, chairman and CEO of Revolution, in the statement. "So we have built an innovative Web 2.0 company based on the latest technology to disrupt the decades-old system with the goal of offering the industry's most accessible, easy-to-use and secure payment system that puts money back where it belongs, in consumers' pockets."