November 7, 2007 (Computerworld) The recently launched RevolutionCard is the first credit card in the country that stores no cardholder name, account number or similar data. It's also the first credit card in the U.S. to require authentication based on personal identification numbers (PIN) for all credit transactions. The card was launched by Revolution Money Inc., a company backed by AOL LLC co-founder Steve Case and with several marquee board members, including former Treasury Secretary Lawrence Summers, former Charles Schwab & Co. CEO David Pottruck and former Fannie Mae CEO Franklin Raines.
In an interview with Computerworld, company CEO Jason Hogg talks about the decision to launch the new card, its consumer security features and why charging lower transaction fees than other payment brands is already making the RevolutionCard popular within the merchant community.
Why did you decide to launch the RevolutionCard? There's a payment vehicle fragmentation in the marketplace. Consumer transaction behavior -- the way they transact financially -- has changed, and it has done so dramatically over the past 10 years in particular.
I looked at the fact that there were some specific pressure points in the payment industry such as the ID theft issue, interchange [fees] and those things. What I realized is that associations like MasterCard, Visa, Discover, PayPal -- what they have essentially done is built little mini-Internets or private networks and controlled things.
What I wanted to do was create a payment platform that leveraged modern technology and the Internet essentially so that we could give the power of how to transact back into the consumer's hands and back into the merchant's hands. The opportunity to start clean with a whole new operating system and technology with 2007 solutions and architectures built in, it's just an advantage.
What does that mean, practically speaking? When you have stuff like the ability to eliminate interchange fees, you can work with your merchants to redeploy a good portion of those savings toward immediate consumer benefits.
For example, if you use your RevolutionCard to buy tickets, you can get a free autographed jersey from the [Philadelphia] Flyers. You can take that same card and get 10 cents off a gallon of gasoline; we are going to be announcing a partnership on that shortly. Or you could take that card and you could get free pay-per-view or free premium services from your cable provider if you use your RevolutionCard. So there's immediate gratification.
At the same time, you have greater security. I think there are opportunities for a better model, and an Internet-based payment platform affords us that opportunity.
How exactly has consumer transaction behavior changed? They do transactions online and they do transactions offline. They use anything from a credit card, to a debit card, to a gift card, to a stored value card, to a PayPal account in order to try and do their transactions. One of the things that we are looking to do is say 'Hey, we've got the ability to have a solution through one platform for all the different kinds of transaction types.'
Why should merchants care about the RevolutionCard? [Each transaction] only costs them half a percent and there's no static one-time transaction fee. So assume that you pay somewhere between 2% and 3%, maybe even up to 4% [in per transaction fees] to networks like MasterCard and Visa. We are reducing that to half a percent and there's a bunch of ancillary charges that we also don't charge.
It enables merchants to utilize a portion of that saving to developing loyalty programs for their consumer base. If you plowed back a portion of those savings to providing an incentive to your consumer to use their RevolutionCard over their other options, then you can create loyalty.
What is Revolution MoneyExchange? PayPal is to eBay what we want to be to social networks. People who are interacting in such networks are transacting information via Instant Messenger or their social networks. But if they want to add a financial aspect to that, they have to move off to a disparate system. They have to go to PayPal or use cash, checks, credit cards or some other means.
What we have done is create a solution that integrates and is geared toward social networks. So you can be on AIM and you and I could be IMing together and you could say 'You owe me 20 bucks.' I could right-click on MoneyExchange and shoot you 20 bucks while we were IMing. It's part of the interaction versus a separate transaction. We have a deal with AIM that we have announced; we are going to be announcing deals with a couple more social networks in the next six to eight weeks. This is PayPal meets MasterCard.
How is your card more secure than other payment cards? The [cardholder's] name doesn't appear on the card, and it is not encoded on the magnetic stripe at the back. The second thing is that it is PIN based. If you drop your card, no one else can use it -- there's no way. The other thing is we don't do signatures. We don't emboss the card.
Will PINs be needed for card-not-present transactions as well? For card-not-present transactions, you can either use your PIN or use a randomly generated, one-time PIN. You could go to Revolution Money, access your account and say, 'Hey, I am going shopping today for seven items,' and ask for seven randomly generated PINs. The system will serve up seven PINs that can only be used one time each.
This way, if for some reason I have given a transaction authorization to a phishing or fraudulent merchant site, I haven't given away the key to the castle. If I give my MasterCard or Visa number, I have given them my account number. With this, I have given them a card number and a PIN that is useless beyond that one transaction.
What kind of cardholder data would merchants be required to store for handling chargebacks and recurring charges? They retain the transaction and they retain the card number, but they don't retain who you are or the PIN because that is irrelevant to a chargeback transaction. The point is, they do retain information required to handle a chargeback, but it is not information that puts security at risk.
Do merchants need to implement new technology infrastructure to be able to accept RevolutionCard transactions? No. The key is that we are working with our acquiring [bank] partners such as Fifth Third, which we announced in September. That is one of several [partnerships] we are going to be announcing. We are working with our acquiring partners in order to work with the existing infrastructure of the merchants.
The point is ours is a software-based solution. One of the core underpinnings of the technology is that we'd like it to be as seamless as possible. In other words, [merchants] don't have any additional hardware requirements. From a consumer's perspective, it works like a credit card with a PIN. They don't have to go through some cockamamie processes or have some doohickey in their wallet in order to use this. It's a piece of plastic, you take it out of your pocket, you enter your PIN and you're out of there.
Who is your target audience? Well, you know, obviously we've got different segments. Online, obviously it's the social networking space and that varies according to the network. Offline, our consumer base is people who utilize their payment [cards] for recurring payments -- cable being one of them as an example, and energy being another. Because of our partnerships with Citigroup and CompuCredit, we have the ability to offer credit across the entire spectrum whether you are a prime holder or a subprime holder.
So this is not something that is meant mainly for the subprime market. That is a complete fallacy. People have tried to [characterize] us that way. Right now, the bulk of our customers [is] in the prime space.