Launched in 2007, Revolution Money provides secure peer-to-peer payments through an Internet based platform. It also offers a prepaid card linked to those accounts that can be used for offline payments or to withdraw cash from ATMs throughout the US.

The proposed acquisition comes just seven months after Revolution Money raised $42 million in funding from a group including a Goldman Sachs affiliate and existing investors Citi and Morgan Stanley. At the time the Revolution Money card was accepted at about 650,000 US retail locations, although the biggest hurdle to acceptance for the company has been at the consumer end.

American Express has provisionally agreed a $300 million purchase price for the fledgling business and the transaction is expected to close in the first quarter of 2010.

The card scheme says Revolution Money will be the first component of its recently formed Enterprise Growth organisation, which has been created to generate incremental fee revenue and to drive the company's entry into new payment areas and related businesses.

Kenneth Chenault, chairman and chief executive officer of American Express, comments: "While Revolution Money is a young and relatively small company, we believe it has big potential. Joining with American Express will help unlock their potential, while allowing us to deliver competitive online payment products more rapidly and efficiently."

He says that the initial areas of focus will include:

• Developing re-loadable, prepaid products for new segments of the market;
• Introducing new products for cardmembers who currently use other alternative payment systems;
• Creating payment alternatives designed for social media sites and allowing open APIs that can help developers distribute new product innovations; and
• Developing mobile payments solutions in the United States.

Other opportunities will include expanding Revolution Money internationally, extending product offerings to banks that issue cards on the American Express network and creating new forms of PIN-based debit products.

"Revolution Money has a lot of room to grow as it competes head-to-head with other online and person-to-person payment providers," says Chenault. "We are committed to using our global brand recognition, marketing reach and network expertise to help reach a critical mass of customers."

Jason Hogg, founder and chief executive officer of Revolution Money, will continue as president and chief executive officer. Ted Leonsis, a Revolution Money angel investor, major shareholder and chairman, will become a special advisor to American Express working with Chenault on overall digital and online payments strategy.

Finextra verdict Revolution has sought to capitalise on retailers' discontent with traditional credit cards by charging a flat transaction fee of half a percent. This severely undercuts the merchant fees typically charged by Visa, MasterCard, and, yes, American express. Curiously, there is no mention of this aspect of the company's business on the American Express release announcing the deal. Instead, American Express has chosen to emphasise Revolution Money's prospects in the online space, and as a pre-paid card. While we admire Amex's chutzpah in pulling off the deal - and for its money it gets a bunch of technology that catapults it into new e-payments territory - we can't help but wonder whether the interchange disparity will be quietly 'retired' from Revolution Money's future go-to-market strategy.