Knowing AXP, and their thirst for an entry into more mainstream credit, debit and prepaid solutions, I am not surprised by this deal in the slightest. In essence, they’ve been trying to expand their internal prepaid business (Travelers Cheques and Prepaid Services) into an almost alternative brand, which can allow for a separate discount rate for merchants, while sustaining the premium rate for their traditional charge card businesses. However, the prepaid business was difficult to decouple (particularly because of the longstanding Travelers Cheques business, associated with luxury travel), as has most GNS issuer business, simply because the branding has been the same, and the clientele have continued to fit the required profile. This has limited their entrance into lucrative prepaid markets, such as payroll, government benefits, etc., because having a mixed customer base would likely hurt their premium discount rate.

Enter Revolution Money, and you now have a 2nd brand that can finally allow AXP to compete in the lower rungs of the credit and debit card markets. As other commenters have suggested, I think Ken and Co. bought this company for the brand, and its affilation with low cost. If handled correctly, AXP can offer Revolution Money as its “Tiger Airways” to AXP’s “Singapore Airlines” (low-cost, no-frills brand and luxury-brand under the same parent). This can be a brilliant win for AXP, if they can execute and keep the brands separate.

I also agree with Derek that AXP should not squander the ‘open API’ element of the flexible payment system that Revolution built. I don’t think Paypal has cornered the market, since they only recently opened their API, so there should be room to maneuver. I think an AXP/RevolutionMoney offering could be compelling to the best developers, particularly if their pricing is comparable or lower to Paypal.

Dr. Pangloss I presume. Ken Chenault paid $300 million for some technology and a management team. There’s no business, no viable business model, no meaningful clients, and virtually no revenue.

I too am a great fan of Clayton Christiansen. In his Innovator’s Dilemma disruptive technology proves itself outside of dominant status quo players. Steve Case he can still create buzz, but he didn’t prove Revolution Money is disruptive. Inside Amex anything that might have been disruptive is likely to be smothered.

Eric

http://techdirt.com/articles/20091116/2307256958.shtml

Is this what Amex is up to with Revolution?

In listening to the conference call Q&A, there was a lot emphasis on using RM platform for reloadable prepaid card play, aimed presumably at Gen Y segments. Seems like the existing AmEx gift card could fill this void a lot more efficiently.

But AmEx is a rational company. While $300 mm seems like a lot for this platform, given the RM brand is virtually unknown (so far) and end-user numbers are tiny, it sounds like an IT decision. AmEx did a make vs. buy analysis on adding new features (mobile, P2P, pin-based card, etc), and it was cheaper to buy RM than build in house.

Anyway, looking forward to seeing what they do with it. I’ve been an AmEx fan for 20 years and have been hoping they’d become more innovative online.

a) What a shame! I had high hopes for Revolution, but they have taken a nominal payout and run for cover. I suspect that they found the work was too hard and the barriers to entry too high. The price may be okay for the recent valuations, but to a true entrepreneur, I suspect that they sold out waaaayyy to early and for a pittance of what it eventually could be. This company was on a track to be valued in the billions. RIP Revolution.

b) I suspect that Amex bought it to bury it as much as anything else. I do not believe their statements about their intent. BUT, even if they are honest about their intent, the net result will be the withering away of Revolution. This situation reminds me of the various times that Xerox bought exciting companies with exciting and valuable niche products, but NIH syndrome set in and the purchased companies withered away through neglect and/or intent. You just cannot take the “culture of a revolution” and get it to fluorish in one of the stuck-in-the-mud old-line companies.

I hope I am wrong, but I don’t think I am.

It is a sad day.

P.S. As long as I am shooting my mouth off, I predict that in the next few years, the eBay-PayPal rolls will reverse and PayPal will become the primary company. eBay is such a train wreck — if you don’t believe me, talk to 50 eBay sellers and see what they say — that PayPal will sell it off just to be rid of it and so they can focus on making the real money.