If there’s a single thread that connects virtually all Internet users, it is hatred for PayPal.

Seriously, even people who receive the bulk of their income via PayPal transactions and who’ve never had a single serious issue with them harbor a dark animosity.  Sometimes, a person can’t help to think that PayPal only continues marching on because it doesn’t have a major competitor.

The weird thing is that they DO have a competitor.  And it’s the biggest, nastiest rival one could have.  Google.  Google checkout was supposed to become the PayPal killer.  That didn’t happen.

Now there’s another hope for those who’d like to see PayPal die (or who would at least appreciate a widely-used alternative).  It’s Revolution Money Exchange.

RME was funded by some big names like Goldman Sachs and Citibank back before the days of TARP and recession.  It has well-known folks like Steve Case on the letterhead and it offers something that should be utterly irresistible–fee-free online transactions.

When you set up an account with RME, you’re really setting up a little checking account with an actual FDIC insured bank out of South Dakota.  We’re living the post 9/11 banking world, so that means you’re going to need to pony up identifying info, a Social Security Number, etc. to get started.  Once you have all of your ducks in a row and have gone through the account verification process, you can start buying, selling, and transfering money to other RME members online.

There’s an issue here, though.  Despite the fact that the system has been up and running for awhile, there aren’t that many people hopping aboard.  That’s the case even though Revolution Money Exchange shelled out big bucks in order to induce sign ups.  They offered free $25 credits and were paying referring affiliate $10 per new sign-up.

Why isn’t RME getting real traction?  

1.  It’s up against PayPal.  Everyone may have a grip about PayPal, but everyone also knows that they’re the real deal and won’t evaporate overnight.

2.  The eBay factor.  The biggest single online marketplace in the world is still eBay, and the auction site won’t back RME as a payment method.  It’s hard to overestimate the importance of that limitation with respect to widespread acceptance.

3.  Protection is lacking.  PayPal’s mehods of protecting buyers and sellers from deals gone sour are lousy, inconvenient and often hamfistedly applied.  But some protection is better than none.  The best I can tell, RME doesn’t have procedures in place to handle bum deals.

4.  Customer service issues.  I don’t know if anyone else is going through this kind of thing, but if they are…  Well, it doesn’t look good for RME.

So, is Revolution Money Exchange a PayPal killer?  It doesn’t look that way.  Absent finding an eBay foothold (fat chance) and taking care of some other significant issues, RME seems destined to fall far short of dethroning the big PP.  

With big names and big money behind it, however, it might find a niche in the marketplace.  I don’t know how excited RME would be to have a user roster consisting of people who’ve been banned by PayPal, but there is a definite market niche out there to service those who aren’t on good terms with the major player.  Even if only a few major sites latch on to RME as an exclusive payment service, it might be able to limp along indefinitely.