Sunday, November 22, 2009

AmEx Take Aim at PayPal

From the Associated Press: With its deal to buy Revolution Money, American Express is taking aim at the growing market for online and alternative payments, in a challenge to recognized leader PayPal, analysts say.

AmEx announced plans Wednesday to buy the Web payments firm started in 2005 by Internet firm AOL founder Steve Case, with the purchase price set at $300 million.

Analysts say AmEx is most interested in the so-called peer-to-peer services of Revolution, which enables low-cost money transfers among individuals and businesses.

"I think it's a challenge to PayPal, but it's more than that," said Ed Kountz, an analyst who follows financial technologies at Forrester Research.

"AmEx is positioning themselves for more effective innovation, and for the next generation customer."

Kountz said a variety of new technologies are emerging for person-to-person and alternative payments, but that few companies have been able to get the critical mass with both consumers and merchants to gain a foothold.

Revolution also aims to compete against traditional credit card firms by handling payments at a lower fee.

Joe Weisenthal at the online analysis site Business Insider said Revolution is "frequently described as a PayPal killer," but has been unable to grow during the financial crisis.

The action by AmEx comes with PayPal expanding its offerings with new ways to transfer money using mobile phones or social networks like Facebook.

Revolution "offers a unique card that seems to blend the idea of traditional credit and debit cards with Internet-based payments along the lines of PayPal and Google's service," said Jim Kim of the financial technology website FierceFinanceIT. "We'll see how the other big boys react."

"New payments products and platforms are evolving rapidly and it's important for us to keep identifying cutting edge technologies that can extend our leadership beyond the traditional payments arena," said Kenneth Chenault, chairman and chief executive officer of American Express in announcing the deal.

"This is a smart, nimble business. It's run by an accomplished management team who have quickly developed some cutting edge e-payment offerings," he said. "Joining with American Express will help unlock their potential, while allowing us to deliver competitive online payment products more rapidly and efficiently."

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