Bob Dylan surely never thought he would be the inspiration for the name of a company that specializes in credit card marketing.
But the songwriter was, and two ardent fans are enjoying the irony of their creation.
Back Pages Inc., named after the song "My Back Pages," was formed nine months ago by Donald I. Auriemma and his son Matthew. Its role is that of a think tank, its output credit card creativity.
The venture already has generated a number of ideas, including a patent that Banc One Corp. has licensed. The principals say another potential patent, which has been filed with the U.S. Patent and Trademark Office, is the subject of negotiations with one of the top 10 card players.
The Auriemmas said they expect to shake up the bank card business, seeking out the sorts of deals that might make Mr. Dylan smile simply because they do not conform to conventional practices.
"One of the real challenges isn't so much coming up with the ideas," said Donald Auriemma, "as convincing the marketplace to take a little bit of risk."
Patents fall under the risk-taking category because there are few issued to American financial service companies and even fewer issued to companies that specialize in credit card lending.
Mark K. Tonnesen, president of Banc One Credit Card Services Co., Columbus, Ohio, quickly embraced Back Pages' proposal to buy exclusive rights to a patent for a credit card linked to a 401(k) retirement account. Mr. Tonnesen said the product will be launched later this month.
"I think it is wise for any banker to be thinking about the issuesregarding patent protection and financial products," said Mr. Tonnesen. Banc One gained experience on this frontier as the processor for the Merrill Lynch Cash Management Account. Including payment cards and checks linked to a brokerage account, it was one of the first financial products to be awarded a U.S. patent.
Mr. Tonnesen said Banc One is pursuing other patentable opportunities, but not necessarily in the credit card business. "Banc One wants to surround a broader technology base" than just credit cards, he said.
The Auriemmas also emphasize the importance of patent protection, particularly because the other major project in Back Pages' arsenal is an idea Matthew originated and submitted for patent protection.
Matthew, 25, whom Donald describes as Back Pages' "creative force," envisions a bank card that rewards people for paying down their credit card debt with state lottery coupons.
"No programs that we are aware of reward repayment of debt," said Donald.
In an interview at the Auriemmas' Westbury, N.Y., offices, Matthew and Donald described the past nine months as a "roller- coaster ride" in which they have considered thousands of ideas that led nowhere.
The new venture evolved out of the Auriemma Consulting Group, which Donald, 53, founded nearly 12 years ago. Donald's other son, Michael, 31, is now president of that firm, which specializes in credit card research and marketing.
To both entities Donald brought 21 years of experience in the bank card business, including 17 years as a senior officer of consumer lending at Chemical Bank and at European American Bank. At the latter he soaked up some "ancient history" - European American's predecessor, Franklin National Bank, is widely seen as the inventor of the modern bank credit card.
Matthew's career to date includes a stint as a service representative for Discover Card Services and two years as an associate in the family business. He studied fine arts at Pratt Institute in Brooklyn, N.Y.
The partners said they had received enough calls over the years from inventors, querying about the feasibility of their ideas, to convince them that Back Pages made sense.
"We will never be characterized as guys who don't have time to listen," said Donald.
In fact, one inventor, Francis M. Vitagliano, jokes now about Donald's having squeezed him between two appointments, believing that his idea wouldn't amount to much.
Mr. Vitagliano, a compliance officer at the mutual fund company Scudder, Stevens & Clark, spent 14 years pondering a potential marriage between the pension and credit card systems. In his research of patent law libraries, he was surprised to learn how few companies in the United States had patent departments.
He approached Franco Modigliani, the Nobel Prize-winning economist, and together they took credit for the 401(k) card that Banc One plans to issue shortly.
A pension attorney introduced the inventors to the Auriemmas, who in turn sold Mr. Tonnesen on the idea. Mr. Tonnesen said he was immediately interested precisely because of the patent, which "gives us a good position in the market, especially in what might be a small market."
Everyone involved in the project is sensitive and almost defensive about the implications of Americans tapping into their retirement savings with a credit card. In fact, initial consumer press about this product has focused on the potential downside of a 401(k) card.
"In our view, this isn't a question of what this is going to do to retirement savings," Donald said. "Borrowing from 401(k) plans is an established practice. It is a question of whether a bank card is a better idea than an installment loan."
Loan default is the ultimate risk, and the protagonists argue that this threat is virtually nonexistent, since people would be repaying themselves.
Moreover, they maintain that people with 401(k) plans - such accounts hold nearly $3 trillion - are financially savvy and would be unlikely to abuse this type of credit.
Details about the product's pricing have not been disclosed, but the Auriemmas said there will be caps on the percentages and dollar amounts people may borrow from their 401(k) balances. The dollar ceiling will be $10,000. A greater portion of the overall interest rate, will go back to the cardholder rather than to Banc One.
For example, said Mr. Vitagliano, if the interest rate is 12%, perhaps 8% would go back to the account and Banc One would keep the rest. By contrast, a traditional 401(k) installment loan typically costs a one-time administrative fee, while all interest payments go back into the account.
The 401(k) card will be marketed directly to employers, mutual fund companies, and consumers. According to the Auriemmas, 25% of credit card holders have 401(k) accounts.
The possible state lottery tie-in is not as advanced as the 401(k) card. The Auriemmas are waiting for the green light from the patent office, but in the meantime they are doing their homework on the gaming market and lining up a bank partner.
They have met with each of the 37 state lottery directors, attended their conferences, and subscribed to trade publications in the field.
Lottery sales reached $31 billion last year. Typically 80% of the people in a lottery state play at least sometimes, and about half of the population plays regularly.
Lottery cardholders would receive coupons in their billing statements that can be redeemed for lottery tickets at local merchants.
The coupons would have bar codes and expiration dates to control their distribution. A typical customer with a credit card balance of $2,100 would receive about 21 such coupons annually, or one per $100.
The Auriemmas boldly assert that the lottery card has a philanthropic angle. The issuing bank should be able to cite the product in its community reinvestment statement because it represents a form of voluntary taxation, said Donald. "It pours billions of dollars into state treasuries forhousing, welfare, building roads, and prisons," he added.
Like all process patents, the one for the lottery bank card was written broadly. Conceivably, it could cover transactions not related to lottery sales, but Matthew insisted, "first and foremost we want to launch a lottery bank card."
Not all of Back Pages' projects can be patented. Matthew and Donald are working on at least six other ideas that will probably not carry patents, including one that is not necessarily industry specific.
Because the inventor, a New York-based executive in the warranty business, believes his idea could be reproduced, the Auriemmas divulged little about it, except to say that any organization or company with a large membership or customer base would be targets for the product.
Donald called it "an improvement on the double warranty," and said, "One year from today every bank card issuer will have this on the shelf along with (loss-protection) registration and travel accident insurance."
It is not uncommon for Donald to make such sweeping statements. He even predicts that one day Back Pages will be to the card industry what Bell Laboratories is to AT&T.
But as he progresses toward retirement, Back Pages will become mostly Matthew's responsibility, just as Michael took over the Auriemma Consulting Group after about five years.
"The vast majority of capital is going to be sweat equity," said Donald. But clearly that is not distasteful to him or Matthew, because Back Pages represents the "exciting aspects of the business," concluded Donald.