As I have read through the press clippings and blog postings on Revolution Money and our launch of last week, it is apparent that some of the media and some in the blogosphere have not internalized that we are a consumer company NOT a business to business company. Let me explain.
The basic premise for the founding of this company was to answer this question: "Why in a world of decreasing prices for computing power, storage, transport, network and software are interchange charges going up?" A payments platform – whether online for consumers or offline – in the real world for merchants is basically a private Internet and with the driving theorem of Moore’s Law, interchange costs should be going DOWN until they are eliminated totally. That is the world that many of us have lived in on the web over the last 15 years. So, traditionally, if you conduct a transaction online and you wish to take your money out, you are charged a tax in terms of the number of days it takes for you to get your cash as the provider usually plays the float and sends you a check 21 to 30 days later. Then they take a fee out of your cash for processing and at times those fees can span from 2 percent to 8 percent. We want to make person to person money exchange as ubiquitous as instant messaging or social networks. And to stimulate it, we aren
Ted,
I am a major web merchant who has never accepted Paypal and only reluctantly accepted the credit cards for two reasons: 1)excessive fees and 2)fraudulent chargebacks.
Your .5% average rate for web merchants takes care of #1.
I will enthusiastically market the Revolution card to our customers based on #1, to try to get them to use it instead of credit cards.
Have you thought about how to handle to epidemic of fraudulent chargebacks which is increasingly hobbling internet commerce.
In this scam, thieves with a legitimate credit card purchase expensive items from an internet merchant. 2-3 months after receiving the item, the thief goes to her bank and clains a) she never received it (not her signature on postal form); or b) it was not authorized by her; c) etc.
Visa and Mastercharge issuing banks always side with the cardholder, so the fraud works.
How will Revolution Money safeguard web merchants from the epidemic of fraudulent chargebacks?
Ted: I am wondering how you are going to address the following challenges.
A significant long-term challenge the Revolution Money business model will need to address is that as transaction fees move closer and closer to zero, so will profit margins. The question will then be if the margins will be enough to keep your operations viable. At present you seem focused on the core businesses of money transfer and credit card authorization. It will be interesting to see if you can extend into higher margin value added services.
Another major challenge is Issuers ability to get enough cards into consumer’s hands to make acceptance worthwhile for merchants. You are addressing this by providing RevolutionCard’s centralized application system to increase immediate consumer credit approval rates, on terms appropriate for each consumer to rapidly build up the base of issued cards. How many cards have been issued and what are the growth rates?
You could also run into technical problems if the implementation/integration of your platform is not as easy for merchants as initially advertised. The large retailers are managing complex technical infrastructures with multiple systems upgrades and release cycles – it may take them up to a year or more to get RevolutionCard acceptance implemented. Revolution Money could consider using the services of a gateway to accelerate establishment of acceptance with large merchants.
I’d be interested in knowing how you are addressing these challenges, and what you think are the greatest threats to the success of Revolution Money.