American Express Company
) said on Wednesday that it will acquire Internet payment platform Revolution Money for about $300 million
The deal is expected to close in early 2010. Following the closure of the deal, Revolution Money would operate as a subsidiary of AmEx. The founder and chief executive of Revolution Money, Jason Hogg, will continue as president and chief executive.
St. Petersburg-based Revolution Money was founded by AOL co-founder Steve Case's Revolution LLC in 2007. Revolution Money provides payments through an internet-based platform and issues prepaid cards that can be used for offline payments or to withdraw cash from ATMs in the U.S. Additionally, Revolution Money offers MoneyExchange, a service to remit money by people using social and instant messaging networks.
According to AmEx management, this acquisition would keep AmEx at the cutting edge in terms of new payments products and platforms. The company seeks to attract young customers who want to pay for goods and services using new technologies. Revolution Money will help expand AmEx's reach to a young generation of consumers as they are more comfortable transferring money online, than using card products. Also, the internet-based payment system under Revolution Money cuts costs for merchants who pay billions of dollars in fees each year for traditional credit-card transactions.
American Express Company initially intends to focus on rolling out Revolution Money products across the U.S. , with the ultimate goal of expanding overseas. The company is also trying to integrate its existing customers into this alternative payment system.
AmEx's third quarter earnings of $0.44 per share were well ahead of the Zacks Consensus Estimate of $0.36, driven primarily by its re-engineering efforts and a diversified business model. We also noticed signs of improvement in credit trends. Charge-card losses have moderated in the U.S. and worldwide while past-due trends have improved. However, we expect the recovery to be sluggish thereby, restricting significant expansion of its top line in the near term.