American Express yesterday said it would purchase Revolution Money, an online payments business set up by former AOL chief Steve Case.
The $300m deal puts American Express, known as the premium credit card provider with the highest fees, in control of an upstart company whose focus has been on reducing costs for merchants and consumers.
Revolution Money was founded by Mr Case in 2007 and was designed to compete against Ebay's PayPal, the dominant player in online payments.
Mr Case sought to distinguish Revolution Money by offering lower fees to merchants, and offering a FDIC insured peer-to-peer payments network.
Revolution Money offers cards that are accepted by more than 1m merchants, link to an online account and are authorised with a PIN. No names or account numbers appear on Revolution cards, enhancing security.
But Revolution Money has failed to gain significant traction, attracting fewer than half a million customers.
For AmexCo, the largest US credit card issuer by purchases, the acquisition is relatively small. But the online payments industry is evolving rapidly as more people complete transactions online and from mobile devices.
In its announcement of the acquisition, AmexCo noted that Revolution Money's products were "ideally suited for social and instant messaging networks".
"New payments products and platforms are evolving rapidly and it's important for us to keep identifying cutting edge technologies," said Kenneth Chenault, AmexCo chief executive.
James Van Dyke, president of Javelin Research, said this could be the beginning of a two-tiered strategy for AmexCo.
"Amex wants to go beyond the affluent marketplace," he said. "They want to be a mainstream provider."
The sale also represents a minor win for Mr Case, who was at the centre of what many regarded as one of the worst deals in history. In 2001, with Mr Case at the helm, AOL bought Time Warner for $164bn. But the promised synergies never materialised, and the company suffered enormous writedowns.
This week AOL announced that it would spin off from Time Warner in early December.
AOL is today valued at about $3bn, down from the $200bn range at its high point before the buy-out of Time Warner.
Investors have poured more than $90m into Revolution Money, including a $42m round led by Goldman Sachs in April of this year.
The deal is expected to close in the first quarter of next year. Revolution Money will become a subsidiary of AmexCo.
