The new venture, Revolution Money, said it will let users transfer money to individuals and online merchants for free through its Revolution MoneyExchange service. The payment system is in a pilot stage.

Revolution Money will go up against popular online payment systems such as industry leader PayPal from eBay Inc and one offered by Web-based retailer Inc.

An initial partner will be AOL, which will let users make payments and fund transfers through its AIM instant messaging service for free, Revolution said.

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