Launched in 2007, Revolution Money - a subsidiary of Revolution, an investment firm formed by AOL founder Steve Case - runs an online payments platform for free peer to peer payments that competes with PayPal.

The firm is also taking on MasterCard and Visa by offering a credit card which it claims virtually eliminates costly interchange fees for merchants by using proprietary operating technology that takes advantage of the Internet to circumvent the traditional system.

Revolution Money's chairman, Ted Leonsis, told Reuters the money will be spent on improving technology and helping retailers to promote the credit card, which is accepted at about 650,000 US locations at present. He says the company aims to reach three million retailers by 2011.

The latest funding follows a $50 million round in 2007 led by Citi, Morgan Stanley, Deutsche Bank and Leonsis.

Leonsis says that, despite raising the money in a tough market, the firm will not consider going public or putting itself up for sale for at least two years.

"In one of the toughest funding environments in history, this investment is a big endorsement of Revolution Money's business model," says Jason Hogg, founder and CEO, Revolution Money. "As merchants and consumers search for savings at every turn, Revolution Money is seen as a welcome alternative to the traditional high-cost credit card companies and PayPal."