Fresh off raising another $42 million of star-studded (Goldman Sachs this time) venture capital, Steve Case and Jason Hogg came to the NACHA Payments 2009 conference today to tell the banking world about their payments “Revolution”.
Apart from reiterating last week’s deal with Chase Paymentech (bringing potential acceptance to 650,000 merchant locations and websites), not much about the RevolutionMoney story has changed; it remains in many ways the Swiss Army Knife of retail payments, combining many of the features of existing payments methods with a low-cost proposition for merchants.
The consumer proposition revolves (no pun intended) mainly around security features such as having no card number or name embossed on the card (an identification number is printed on the card for card-not-present transactions) and requiring a PIN, in lieu of a signature, for both card-present and card-not-present transactions. Credit and stored value purses are supported, and free person-to-person money transfers are offered. Additional third-party lenders are being recruited, as Revolution will not be holding credit receivables.
Merchants are offered a flat discount rate of 0.50%, giving them a solid reason to consider accepting it. And leading acquirers including Fifth Third, RBS WorldPay, and now Chase Paymentech are offering Revolution Card to their merchants with a relatively easy implementation given that Revolution can be processed basically like a PIN debit card. We suspect that like other alternative payments providers, Revolution is offering acquirers a margin that is at least as profitable for them as bankcard acquiring.
The critical question remains the consumer proposition. Security features will hold sway with certain consumers, but a powerful rewards program will likely be required to drive widespread adoption. However, rewards are left up to individual merchants who are asked to invest some of their fee savings to provide consumer rewards and discounts, sometimes acting as co-brand partners. Revolution stresses rewards that are immediately redeemed (e.g., cents off promotions on gasoline) rather than point-accumulation schemes. A few early merchants have signed on; but much work remains to be done on this side of the proposition.
A company with good industry expertise, a modern technology platform, and so much funding cannot be dismissed, but we are maintaining a healthy skepticism about RevolutionMoney. A merchant-by-merchant reward program is difficult to describe to the consumer and could deliver a rather variable and less than coherent value proposition. While the development of the acceptance network is noteworthy, we have seen examples before of merchants who aggressive line up to accept a low-cost payment method but go strangely passive when asked to recruit cardholders. Debitman, a private-label ACH card network and the precursor to today’s Tempo Payments, comes to mind. And, unlike PayPal, which mounted a textbook “below the radar” assault on the payment system, Revolution regularly announces itself to the industry, giving incumbents ample warning and time to respond.
This company will be fun to watch. The only thing that is clear at this stage is that whether Revolution succeeds or fails, it will end with bang, not a whimper.