American Express Company is acquiring Revolution Money, which was launched by AOL co-founder Steve Case's Revolution LLC in 2007. Revolution Money is an online person-to-person payment whose accounts are FDIC insured and targeted at social and instant messaging networks. It also offers a prepaid card linked to those accounts that can be used for offline payments or to withdraw cash from ATMs throughout the United States.

Interestingly, online payment services are dominated by Internet firms, such as PayPal, Google Checkout and Amazon Payments as well as international firms such as PayMate, ProPay and Moneybookers, while financial services firms such as Western Union (MoneyZap) and Citi (C2it) were unable to sustain their online payment services.

Revolution MoneyExchange has a plug-in for AIM, AOL's Instant Messaging service. Users can send money through the instant messaging service to people on their "Buddy list" using a screen that Revolution Money manages.

Kenneth I. Chenault, Chairman and CEO of American Express, said in the press announcement, "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. While Revolution Money is a young and relatively small company, we believe it has big potential. This is a smart, nimble business. It's run by an accomplished management team who have quickly developed some cutting edge e-payment offerings. Joining with American Express will help unlock their potential, while allowing us to deliver competitive online payment products more rapidly and efficiently."

Jason Hogg will continue as President and CEO. Ted Leonsis, a Revolution Money angel investor, major shareholder and chairman, will become a special advisor to American Express working with Mr. Chenault on overall digital and online payments strategy.

"We have built a next-generation payments platform that will enable American Express to compete even more effectively, especially against online competitors," said Mr. Leonsis. "Revolution Money’s technology brings together the online and offline worlds in a way that can transform the way consumers securely transact. And with the low cost structure enabled by internet technology, American Express is now even better positioned to scale their online presence over time."

The transaction, which is subject to regulatory review, is expected to close in the first quarter of 2010. The purchase price is expected to be approximately $300 million. Upon closing, Revolution Money would operate as a subsidiary of American Express and be the first component of its recently formed Enterprise Growth organization. Enterprise Growth was formed to leverage American Express' existing assets and capabilities to generate incremental fee revenue and to drive the company's entry into new payment areas and related businesses. Initial areas of focus will include:

• Developing re-loadable, prepaid products for new segments of the market
• Introducing new products for cardmembers who currently use other alternative payment systems
• Creating payment alternatives designed for social media sites and allowing open APIs that can help developers distribute new product innovations
• Developing mobile payments solutions in the United States

Other opportunities will include expanding Revolution Money payment solutions internationally, extending product offerings to banks that issue cards on the American Express network and creating new forms of PIN-based debit products.