RevolutionCard Could Shake Up Visa, MasterCard

Revolution LLC, the investment company created by Steve Case and other executives, this week launched a new subsidiary, Revolution Money, a new payment platform that it said will transform the payment industry through Internet-based technology.

Revolution Money’s first two offerings are Revolution MoneyExchange, a free money transfer service for online transactions, and RevolutionCard, an anonymous, PIN-protected credit card.

Case founded the online network AOL.

The RevolutionCard is a secure credit card, with no name or number on the card itself that instead provides an encrypted PIN for identification purposes.

The card is also designed to appeal to merchants, charging the retailer a lower interchange fee to accept the card. Merchants have complained bitterly about interchange fees paid to card issuers through the card network brands MasterCard and Visa.

Interchange rates are typically 1.9 percent of the price of the transaction, but the RevolutionCard will charge a so-called discount rate of about 0.50 percent in addition to a percentage of interest income, according to a spokesperson.

Revolution Money doesn’t have to pay the expenses of the Visa and MasterCard interchange network, allowing it to reduce its fee, the spokesperson said.

A merchant class action suit over interchange fees against MasterCard and Visa and several of the largest card issuers has been winding through the courts for several years.

Merchants contend that MasterCard and Visa worked together to set the interchange fees, and that the fees are too high.

Revolution Money appeals in its marketing materials to disgruntled merchants as it rolls out its card.

“Traditional, and even online, incumbents have been charging what adds up to billions of dollars of fees every year that ultimately comes out of consumers’ pockets,” Case, the chairman and CEO of the company, said in a statement. “So we have built an innovative Web 2.0 company based on the latest technology to disrupt the decades-old system with the goal of offering the industry’s most accessible, easy-to-use and secure payment system that puts money back where it belongs, in consumers’ pockets.”

Transactions are processed by Fifth Third Processing Solutions and the card is issued by First Bank and Trust in Brookings, S.D.

The card is accepted by 100,000 merchants and can be used at ATMs.

Revolution Money was formed by Case, Revolution Money chairman Ted Leonsis, former United States Treasury Secretary Larry Summers, former Charles Schwab CEO David Pottruck, and former MasterCard International President and CEO Russell Hogg, among others, and is backed by Citi, Morgan Stanley and Deutsche Bank.