American Express to buy Revolution Money, created by AOL co-founder Case’s company, for $300M

American Express to buy Revolution Money for $300M

BOSTON — American Express Co. is buying Revolution Money for about $300 million to keep up with trends in electronic payments, where new security features and online transaction options are shaking up traditional models.

Wednesday’s deal pairs American Express, a credit card provider tracing its roots to 1850, with a four-year-old startup.

Revolution Money offers payments authorized at checkout counters with a PIN number, with about 1 million merchants participating in the service. To reduce potential for identity theft, Revolution Cards have no name, signature or account number.

St. Petersburg, Fla.-based Revolution also offers MoneyExchange, a person-to-person service to send and receive money among friends and family, and among people using social and instant messaging networks.

“Acquiring Revolution Money is one step in expanding our reach in emerging payments, and one of the many we expect to take, but an important one,” American Express Chairman and CEO Kenneth Chenault said in a conference call.

Revolution Money founder Jason Hogg said the acquisition by New York-based American Express will allow his company “to scale our technology and business years faster than we ever could on our own.”

Hogg will remain Revolution Money’s president and CEO once the transaction closes early next year, subject to regulatory approval. Revolution Money will become an American Express subsidiary, folded into its new Enterprise Growth unit.

Revolution Money’s majority shareholder and chairman, Ted Leonsis, will advise American Express on its strategy for expanding into payment products geared toward online use and mobile devices.

“We can drive this technology and set of applications to a mass consumer audience, as well as large and growing online merchant community,” Leonsis said.

Janney Capital Markets analyst Thomas McCrohan said in a research note that the acquisition allows American Express “to go into new markets with a lower-cost product without compromising the premium image associated with American Express-branded cards.”

Revolution Money’s products, McCrohan wrote, face a “chicken-or-egg” problem in which merchants wish to see broad consumer acceptance of the cards before they accept them for transactions, and vice versa.

The company was founded in 2005, and began offering payment services two years later, launched by AOL co-founder Steve Case’s Revolution LLC. Besides offering a new payment option, the company’s cards qualify customers for discounts and other incentives from participating merchants. Customers’ accounts on its MoneyExchange program are FDIC-insured. That program also offers a prepaid card linked to accounts that can be used for offline payments, or to withdraw cash from ATMs.

American Express’ Chenault said his company’s initial focus will be spreading Revolution Money’s offerings across the United States, with eventual hopes of taking products overseas. A key objective will include introducing existing American Express customers to alternative payment systems, rather than having them go outside the company’s payment network.

Shares of American Express rose 3 cents to $41.39 in afternoon trading.

(This version CORRECTS Corrects to show Revolution Money is a four-year-old, sted two-year-old, startup company; company was founded in 2005, service began in 2007. UPDATES trading.)