What Recession? PayPal Competitor Revolution Money Nabs Another $42 Million in Funding

Revolution Money, a St. Petersburg, Fla.-based startup that centers around both a new credit card and a person-to-person payment system a la PayPal, has just raised $42 million from the unlikely TARP triumvirate Goldman Sachs, CitiGroup, and Morgan Stanley, bringing total funding for the company to nearly $100 million.

In 2007 — the company, a unit of AOL cofounder Steve Case’s Revolution LLC in Washington, D.C. — raised $50 million from Goldman, CitiGroup, Deutsche Bank, and Case.

The company’s credit card is trying to distinguish itself from the likes of the largest networks, Visa and Mastercard, by ostensibly offering customers greater security, particularly when shopping online. The RevolutionCard doesn’t bear the holder’s name or account number (nothing for a thief to copy down), and transactions are authorized with a PIN rather than a signature. It’s also far cheaper to use than its giant competitors, costing merchants just .5 percent per transaction, instead of the standard 2.5 percent.

Revolution Money had signed up several hundred thousand merchants as of last fall (compared with the 7 million merchants that accept Visa and Mastercard); it hasn’t disclosed how many cardholders it has.

Its other main offering, MoneyExchange, which lets people send each other money online for free, seems to be, at this point, less of a priority for the company, maybe because of the stiff competition it faces in the online payments arena (and that the credit card market is a hard enough nut to crack).
In addition to PayPal, competing online payment services include Google’s Checkout, and Checkout by Amazon.

Our colleagues at Reuters have more here.