Revolution Card Faces Stiff Challenges: Report

Challenges in the U.S. economy, market saturation and little innovation in product design will keep the recently launched Revolution LLC from entering the ranks of the top 10 U.S. card issuers any time soon, according to a new report from TowerGroup.

In September the company launched Revolution Money, a payment platform, complete with new credit card and money transfer service designed to compete with major card companies Visa, MasterCard, Discover and American Express ("RevolutionCard Could Shake Up Visa, MasterCard," Sept. 27).

Revolution Money offers users an anonymous credit card. With no name or account number on their card, consumers’ identities remain anonymous, drastically reducing the risk of identity theft, fraudulent charges and other consequences of cards being lost or stolen, according to company officials.

Another advantage to the Revolution Money card will be lower interchange fees, the company said. Interchange fees, which average about 1.9 percent of total sales, according to Revolution have spurred numerous lawsuits against the incumbent card firms.

Yet those purported advantages aren’t enough to overcome the challenges facing the company, according to TowerGroup senior analyst Brian Riley, who said in the report, "Which Way to the Revolution? Or, the Cracks Are Showing in the Card Business", “the disclosed rates of the RevolutionCard do not offer consumers an advantage over conventional cards. In addition, the card lacks a rewards program, which can often return 1 percent to 5 percent of branded card purchases to the customer.”

With credit tight and the average U.S. consumer already holding seven cards, it’s a difficult time for any new issuer to enter the market, Riley adds.

Despite these challenges, “RevolutionCard shows one way to the future by turning the existing card model on its head; it adopts a debit card authorization system for a credit card product,” Riley said in the report. “Any network operator could emulate this product design, if they can find a financial services institution to stay in the background.”