

PayPal, Visa rival Revolution Money gets $42 mln from Goldman, others - ivankirigin
http://www.reuters.com/article/americasIpoNews/idUSN0536202620090406

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ShabbyDoo
I have a Revolution card. I got $50 off at Buy.com a year ago, so I signed up.
Haven't used it since. The rate was absurd -- about 27% for a guy with a good
credit score. So, I think they're just transferring the cost from merchant to
consumer, at least for those who keep a balance.

I don't use the card because I have other cards with good "rewards" equal to a
percent or two of purchases. If a merchant charges me the same price for a
widget no matter what card I use, why wouldn't I use the one with the bribe?
The obvious solution for merchants is to offer a percent or two off the normal
price, but the Visa/Mastercard cartel requires the same price to be charged to
consumers no matter if a Visa/MC is used or not (IIRC). So, Revolution would
have to have market penetration close to Visa/MC to convince merchants to opt
out of the cartel's grasp. Unlikely to happen without a lot more than $42M
spent in marketing.

So, while I hope somebody disrupts the current state of affairs, I don't
understand how Revolution thinks its going to pull it off.

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dminor
Actually, just being able to keep more of the transaction should be incentive
enough for merchants. All that's really needed is a high enough consumer buy-
in to make it worthwhile to deploy.

Credit card processing fees are ridiculously high given how much of the risk
is offloaded onto merchants and other parties.

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ShabbyDoo
Getting merchants to sign up should be really easy. But, how do you get them
to pull the plug on Visa/MC? They'd have to be sure that they wouldn't lose
too much revenue, and that would require a significant portion of the card-
holding population to have a revolution card. And, you'd have to deal with
corporations that only have one of Visa/MC/AmEx for corp purchases.

I suppose merchants could feature Revolution prominently to increase its use,
but they can't make it too hard to use other cards or they'll lose out. And,
given my 1%-2% bribe for using my Visa/MC, why wouldn't I look for the little
button down in the corner?

Discover (Sears) was able to introduce a new card, but they too the opposite
route -- they bribed consumers to use it. So, even though it has basically the
same fees as the others (IIRC), consumers could see an effectively lower price
through its use.

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dminor
The bribe in this case is free consumer to consumer transfers (and I don't
think this bribe should be underestimated), but you're right, savvy consumers
will still just use their rewards cards and continue to be subsidized by those
who don't have rewards cards.

I don't think anyone will pull the plug on Visa/MC any time soon, but more
competition would be nice.

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dylanmcd
In the article it mentioned that they will do user to user transfers for free.
That alone makes me want to sign up, and get my clients to sign up too.

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tipjoy
They use free p2p payments as a loss leader to up-sell their credit cards.
It's a pretty interesting model.

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breck
This is great news. PayPal and the Big Card companies really need some
competition.

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novis
wow, they charge no interchange fee and only 0.50% for transaction processing
and settlement. i have a similar idea (a new payment system/credit card) but
was thinking to charge about 1% processing fee... need to recalculate my fee
and rev. est.

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ShabbyDoo
You had better have a lot of capital. Introducing a a new product into a space
where network effects create barriers to entry requires significant cash.

