07:35 AM EDT  By Phil Wahba

NEW YORK (Reuters) - Revolution Money, an online payment firm backed by AOL co-founder Steve Case, said on Monday it has received funding of $42 million from a group that includes a Goldman Sachs (GS.N) affiliate and earlier investors Citigroup (C.N) and Morgan Stanley (MS.N).

Revolution Money, part of Washington-based Revolution LLC, competes with EBay Inc's (EBAY.O) PayPal service in peer to peer money transfers, and offers a credit card. 

Editor's Note:  Did you know that HomeATM provides TRUE peer to peer money transfers...i.e. you don't have to "load" a card with money in order to send money. 

That's the problem I see all the time.  Let's use the recently announced TwitPay as an example.   In order to use "TwitPay" users must first "load" or "FUND" their TwitPay account, which is administered by Amazon.  But Why?  What a PITA.  In order to use a peer to peer money transfer program you first have to transfer money to an account that you'll use to transfer money?  Sounds redundant.  Am I alone or do you perceive that as an extra unnecessary step as well? 

We say why "load or fund" a third party card when you can use the card you already have...you know, the one you need in order to "load or fund" that "third party" card.   

With HomeATM's money transfer program, it's simple.  You use YOUR email and YOUR EXISTING bank card to do it.  Therefore HomATM eliminates the painstakingly unnecessary task of "using your bankcard" to "load another card." 

How EZ is HomeATM's methodology? Just go to our site: www.HomeRemittance.com,  enter the email of the individual you'd like to send money to, pull out "your"existing bankcard, (again, not a third party card, but "yours") swipe it in our SafeTPIN device and enter your PIN.  You're done! 

The recipient gets an email, takes out "their bankcard"  swipes it in their SafeTPIN device, enters "their" PIN and instantaneously..the money is moved from your account to their account in "REAL-TIME." 

Nothing competes!  Anyway, back to the revolution...

The company will use the money to beef up its technology and help retailers promote the credit card, with a view to reaching 3 million retailers by 2011 despite tumbling U.S. retail sales, chairman Ted Leonsis told Reuters.

"We see more rapid adoption of our service as merchants fight in this economy for more margin from sales," said Leonsis, who owns the National Hockey League's Washington Capitals.

Revolution Money estimated its RevolutionCard credit card is accepted at about 650,000 locations in the United States including those of bookseller Barnes & Noble Inc (BKS.N), upscale grocer Whole Foods Market Inc (WFMI.O) and department store chain Nordstrom (JWN.N).

Leonsis said Revolution competes with PayPal by letting users transfer funds to one another for free and with major credit card issuers, such as Visa Inc (V.N) MasterCard Inc (MA.N) and American Express Co (AXP.N) by offering competitive interchange fees for merchants.

Interchange fees are paid by merchants to a credit card company when a customer makes a purchase.

The new investment follows on a $50 million funding in 2007 from Citi, Morgan Stanley and Deutsche Bank (DBKGn.DE), Case and others.

Despite attracting these investments in a difficult capital market, Leonsis said Revolution Money would not consider an initial public offering or put itself up for sale before 2011.

"Right now, we are focused on the build-out of the platform, but at some point to really scale the business, we would have to go public," Leonsis said.

Still, Leonsis thinks the business will be large enough in two years to attract public investors or a possible acquirer.

(Reporting by Phil Wahba; editing by Mohammad Zargham)