Though miniature payment cards have been available for more than two years, the idea has failed to catch on with the general public, despite backing from two major financial services companies.
Now a smaller issuer, Clout Financial Services Inc., is diving into the market with a pilot test focusing on college students.
"Younger people tend not to carry wallets and purses, especially on the campus environment," Bernie Pasierb, Clout's president and chief executive officer, said Monday. The miniature cards it is testing, which measure just 1.5 by 2.5 inches and are designed to fit on a key chain, could be a natural fit for students who often go out with just their dorm keys, he said.
As part of the pilot test, the Madison, Wis., issuer is comparing the spending patterns of 10,000 cardholders who received a mini card and a normal-size card with the patterns of another 10,000 who received only a normal-size card. All the cards were sent in the past month.
Clout markets credit and phone cards primarily to college students. It has around 400,000 cardholders with around $200 million of receivables.
Discover Financial Services Inc., a Riverwoods, Ill., unit of Morgan Stanley, introduced the Discover 2Go card - a key-chain card with a hard plastic cover - in March 2002.
Bank of America Corp. followed suit that year with its Visa mini card, which does not have a cover but is available in both credit and debit varieties. The Charlotte banking company has said it has issued millions of mini cards.
The B of A and Discover products have a magnetic stripe. The two issuers have said the cards found an eager audience and have accomplished their primary objective: to increase customer usage by being more convenient than cards tucked away in a wallet.
Mr. Pasierb said that he has seen many college students carrying Discover's mini card, but that issuers have not made any particular efforts to pitch small cards specifically to students.
"People in youth marketing are focused on music and fashion, but I think there is an element among youth from a financial services standpoint that is still largely untapped," he said.
Young people are surprisingly savvy about their finances - more so than students of 20 years ago - so they would be receptive to new types of financial products, Mr. Pasierb said.
He did not say how long the pilot test would last, and he said it was too soon to offer any results.
"We don't think this will be something that will double [spending], but at the margin, if it provides incremental increases," the cards may be worthwhile, he said. The cards are sent out as a companion to a traditional card with the same account number; doing so costs between 30% and 50% more than mailing just a normal-size card.
College students may be more likely than the general population to take to the small card, Mr. Pasierb said. "If you talk to people who are nonstudents, they will say, 'Why would I want that?' but students are different."
Metavante Corp. is providing the cards and processing the transactions for Clout. The Milwaukee technology subsidiary of Marshall & Ilsley Corp. has more than 2,000 issuer customers, but none of them are issuing mini cards.
Frank D'Angelo, a Metavante senior executive vice president, said processing transactions from the miniature cards is no different than doing so for traditional-size cards. However, he said, manufacturing the miniature cards is more difficult than producing standard cards, because the miniature ones have to "snap off clean and crisp" from the accompanying standard card.
Mr. Pasierb said Clout is paying royalties to Visa for the right to issue the miniature cards.
When B of A started offering the mini Visa card, it said that it held a pair of patents for the concept, and that it would be owed royalties if other issuers offered such cards. B of A later retracted that claim.
A Philadelphia developer, Vanguard ID Systems Inc., challenged many of the claims on the two patents that B of A received for the cards. That challenge was still pending as of May. Vanguard did not return phone calls. A B of A spokeswoman said she did not have any information about the mini cards.
Mr. Pasierb is initially focusing on students, but he said he expects demand for the mini cards from other demographic groups.
"I think there is a broader market for this product, not limited to students, but I'm not exactly sure where the major issuers think they can go with this or what the potential is," he said. "There is probably a significant number of people who would welcome this."
