Small business credit cards: Needed by small businesses, opportunity for community banks

According to the 2017 Visa/A.T. Kearney Small Business Credit Card Study1 findings, community banks have a largely untapped opportunity in the small business credit card space.

The good news: Business credit cards are an important product for small businesses. Almost 70% of small businesses use credit cards in a typical month and over 50% designate a business credit card as their primary card for business expenses.

The wake-up call: While 26% of small businesses with a primary small business credit card report having a relationship with a community bank, only 2.9% have a business card with a community bank.

The opportunity:

  1. Small businesses actively shop for business credit cards, creating an opening for community banks to gain share: 38% of small businesses that have credit cards for business expenses shopped for a new or additional business credit card in the past two years. Moreover, 69% say they are at least somewhat likely to shop in the next two years.
  2. Demand for small business credit cards can be created: Shopping is triggered and informed by receiving offers/promotions from credit card providers
  3. Many businesses are receptive to getting a business credit card from a Community Bank: 26% of businesses likely to shop in the next two years say they would consider a community bank as the small business credit card provider. That number reaches 48% among those that already have a banking relationship with a community bank
  4. Community banks show higher success rates… if they are in the consideration set: Among small businesses that shopped for a business credit card in the past two years, two-thirds of those that considered a community bank ended up selecting one. Moreover, 80% of small businesses that have a small business credit card with a community bank consider that card to be primary.
  5. When it comes to community banks, small businesses value more than just the card offering: When considering a community bank as a credit card provider, small businesses tend to focus on a very different set of priorities. The top reasons for considering a community bank were attributes of the bank itself, including personalized service, convenience, and local presence and involvement, as opposed to offering characteristics (e.g., rewards program, pricing, line of credit).

What measures should community banks consider adopting to help generate success in the small business credit card space?

To help take advantage of the large small business credit card opportunity, community banks should take a more proactive approach to the business. By doing so, they will not only benefit from the direct economics associated with the credit card itself, but from the relationship that helps the deepening and stickiness benefits that credit cards provide.

Community banks should consider:

  • Developing and deploying a more competitive offering (i.e., pricing, rewards)
  • Establishing appropriate underwriting standards (e.g., take into account broad relationship and business information)
  • Marketing the offering(s) to drive shopping, awareness, and consideration (e.g., direct marketing, in-branch promotion, branch personnel education)
  • Offering basic digital capabilities (i.e., online/mobile application, card information integrated into online banking)
  • Developing product management strategies (e.g., activation and usage programs, line of credit management programs)

1 Study conducted in October 2017 with a nationally representative sample of US small businesses (i.e., businesses with 2016 annual revenue between $50,000 and $10 million)