The solution to keyloggers is not partial passwords. The solution is requiring two factors! In Norway there is a shared authentication infrastructure used by banks and other services called BankID: https://www.bankid.no/en/private/ They facilitate second factor auth either with an OTP device or via your cell phone's sim card. It just works.

All Norwegian banks use a password + second factor. And these days I think most of them have liberal password rules, in that you are allowed quite long passwords. Schemes like the one described in the post seems like a poor attempt at improving security.