RevolutionCard, a new credit card brand, has decided against a direct-to-merchant sales effort and intends to work with ISOs through merchant-acquiring relationships.
In last week's ISO&Agent Weekly, the company said it was not working directly with ISOs but through acquirers to reach merchants.
"We saw the fastest way to get into the market and get the network up and running was to work through the acquiring space," says Dax Cummings, chief operating officer with St. Petersburg, Fla.-based Revolution Money, which owns RevolutionCard. ISOs indirectly will work with RevolutionCard through the company's merchant acquirers, he says, adding that he understands how ISOs may see RevolutionCard as a threat to their income because the company does not have a direct ISO program.
ISOs' "relationships with merchants are critical to how the acquiring side of the business works, and we want to support that," Cummings says, adding that ISOs also will help with RevolutionCard's long-term success. "Just like any other business they are bringing in through acquirers, we see ourselves fitting into that nicely."
Isos important to brand
In discussing how it intends to work with ISOs indirectly, RevolutionCard hopes to make clear the importance the company places on the ISO industry. "We are not currently working with ISOs, but it's not a reflection of our views" of them, says Cummings.
Some ISOs, which earn the bulk of their revenue from Visa Inc. and MasterCard Worldwide credit and debit card transactions, fear they may see decreased revenue if RevolutionCard succeeds in gaining enough merchants and consumers to compete with the established card brands. RevolutionCard is using an Internet-driven operating system and proprietary payment network (ISO&Agent Weekly, 7/10).
RevolutionCard has established several acquiring relationships, the first of which the company signed in February with Fifth Third Bank Processing Solutions, says Cummings. Under the Fifth Third deal, 156,000 retail locations accept the card through Fifth Third's Jeanie electronic funds transfer network.
chicken-and-egg problem
Working through acquirer agreements leads to a chicken-and-egg problem, says Ken Paterson, director of credit advisory service at Maynard, Mass.-based Mercator Advisory Group. "If I'm a merchant, why do I want to sign up if there is no consumer signed up," he asks.
RevolutionCard saw the same problem and is trying to solve the age-old riddle. The company has to win over merchants and "simultaneously" launch cobranded cards that attract consumers, says Cummings.
He pinpoints the agreement with Fifth Third as the first step toward convincing consumers to use the cards.
The acquirer relationship enabled the company to focus on consumer outreach, says Cummings. "Once that was up and running, we were able to start the sales cycle of cobranded programs," he says, adding that the company has "roughly" 12 cobranded cards.
monumental task for startup
Entering the credit card market as a startup brand presents a "monumental task," says David Fish, a Mercator senior analyst. "It seems like the barriers to entry in the plastic card market are extremely high," he says. "With the four major brands, it seems like a saturated market."
Gaining widespread merchant acceptance is one of the biggest hurdles for start-up payment systems, says Jim Avondet, senior vice president of sales at EZ Cash Capital, a Garden City, N.Y.-based provider of financial services for businesses.
Another difficult task is mass issuance to consumers, Paterson says. "It's easier to sign up merchants than to get cards in consumers' hands," he says.
RevolutionCard estimates it will reach 1 million merchants and 1 million cardholders by year-end. "We're well on target for both those plans," says Cummings.
By autumn, RevolutionCard intends to announce how ISOs can work with at least one of the company's acquirer relationships to support the upstart card brand, says Cummings.

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