May 17, 2007  AOL founder Steve Case hopes to do for the loan business what he did for the Internet: give access to the masses.

Case's start-up, GratisCard, Inc., offers an alternative to the closed-loop payment transaction networks utilized by Visa and Mastercard. GratisCard's new payment transaction system and credit operating platform utilizes the Internet and proprietary technology lowering costs to merchants while assuring consumers and financial institutions of more secure transactions.

The uniquely-shaped Gratis Card, more resembling the infinity symbol rather than the traditional rounded-edge rectangle, displays no name or card number anywhere on the card. 

All GratisCard transactions are PIN based.  The company's website, www.gratiscard.com, states that their technology allows the merchant to avoid interchange fees and set-up charges.  Existing POS equipment can be used to access the GratisCard network.  To entice merchants to accept GratisCard, the company plans to charge 0.5% of the cost of a purchase, compared to an industry average of 2.2%.

Steve Cases' investment company, Revolution, is the largest shareholder in GratisCard, which is based in St. Petersburg, Fla. GratisCard began formal operations in April 2007. 

According to an article published by businessweek.com, (March 13, 2007*) the GratisCard passed a successful pilot sponsored by Comcast-Spectacor, a Philadelphia joint venture which owns the National Basketball Assn.'s Philadelphia 76ers and the National Hockey League's Flyers.  In a quiet test at recent games, Joe Croce, senior vice-president of sales for said "several hundred" customers per night signed up for GratisCard, enticed by 20% off their first purchase of food and beverages.

But the real attraction, Croce said, is slashing the nearly $2 million that the 76ers, Flyers, and their arena, the Wachovia Complex, paid Visa and Mastercard in interchange fees last year.  "If you save half of that and use it for ticket promotion, it's still a win-win," says Croce, adding that the company does not plan to stop accepting Visa and Mastercard.

According to the Gratis Card website, the company hopes to partner with banks serving the subprime market to gain a foothold in the credit card market.  Consumers with low income or bad credit who are often charged high interest rates and fees, or denied credit altogether by banks marketing traditional credit cards, they may welcome the GratisCard, which could carry a credit limit as low as $50.  Because of the lower transaction costs charged by GratisCard, retailers should find small purchases transactions more profitable.

* www.businessweek.com/bwdaily/dnflash/content/mar2007/db20070313_537730.htm