Banks Look to Local Marketing to Build Small Business Engagement

Banks looking to build awareness and engagement with small business owners should look to leverage strengths in specific markets and develop targeted marketing campaigns and other outreach programs.  The following are some of the most popular ways that banks see to engage with small businesses at the local market level.

Leverage the branch network.

  • Small businesses continue to be among the heaviest users of bank branches, and leading banks deploy dedicated small business bankers in branches to provide expert advice and support. This past January, as part of a broader commitment to its brand network, Chase announced plans to hire 500 small business bankers.
  • Banks use their branch network to bring small business campaigns to life. Last month, Santander Bank rolled out its Small Business Month campaign, which featured in-branch merchandising and in-branch events across its network of more than 600 branches.
  • Some banks even allocate space in their branches for small businesses to use. Citizens Bank recently created open space in its Chestnut Hill, Massachusetts, branch that small business clients can use to conduct meetings with customers and business partners.

Target campaigns at local markets.

  • Capital One launched its We Work as One campaign, designed to promote and empower local businesses in select markets (New York City, Chicago, San Francisco, Denver and Boston) where it operates local Capital One Cafes.

Foster small business entrepreneurship.

  • Some banks include small business entrepreneurship as part of their broader community outreach. For example, Santander Bank’s Cultivate Small Business initiative promotes small business ownership in underserved communities in Greater Boston.
  • Banks also recognize small business achievement with contests and awards. In May 2018, Citizens Bank announced Small Business Community Champion Award winners in Boston, Philadelphia and Pittsburgh.

Partner with local groups that promote small businesses.

  • Banks look to develop partnership with a host of local organizations that represent small business interests.  Prominent among these organizations are the more than 3,000 chambers of commerce located through the U.S.  Many banks team up with local chambers to carry out joint initiatives, such as hosting member events and carrying out surveys. Last November, Webster Bank hosted a cybersecurity event in partnership with Greater Boston Chamber of Commerce.

Publish market-specific versions of small business surveys. 

  • These surveys enable banks to highlight their presence in and commitment to particular markets.  In addition, market-specific findings can be leveraged by small business bankers to engage with small business owners in these markets.  Banks that have recently published market-specific versions of small business surveys include Bank of America, PNC and U.S. Bank.

To develop and implement an effective small business-focused local market strategy, banks need to:

  • Identify and profile key local markets (including the bank’s in-market presence and competitive environment, as well as the size and composition of the small business market)
  • Prioritize the markets for targeting
  • Tailor marketing programs based on goals and local market conditions
  • Gain input and buy-in from key local stakeholders, including branch managers and in-branch small business specialists
  • Track campaign performance, and distill learnings for use in other local markets and future campaigns

Issuers Report Strong Credit Card Loan Growth Across FICO Segments in 2017

According to the latest FDIC Quarterly Banking Profile, U.S. credit card loan growth accelerated in 4Q17, rising 8.2% to $865 billion.

Given the strong overall growth in credit card receivables, are issuers focusing their growth ambitions on particular FICO Score categories? To address this question, EMI analyzed 10K SEC filings for leading credit card issuers.  Overall, we found that issuers reported strong credit card loan growth across their FICO Score segments. We also studied trends in different issuer categories.

  • In the aftermath of the Financial Crisis, the three leading issuersChase, Bank of America and Citi—focused attention away from near-prime and sub-prime segments and towards superprime consumers.  This led to significant declines in both outstandings and charge-off rates.  More recently, as economic growth and consumer confidence returned, these issuers have refocused on loan growth and are once again targeting lower FICO Score segments.  This is seen in the chart below that shows changes in outstandings by FICO Score segment between end-2016 and end-2017.  As these issuers are pursuing loan growth, their credit card net charge-off rates have also increased (+26 bps y/y at Bank of America, +30 bps to at Chase, +59 bps at Citi-Branded Cards North America).  However, charge-off rates remained below 3% for each of these issuers in 4Q17, and issuers should continue to focus on loan growth while charge-off rates continue at these low levels.

  • Second-tier national credit card issuers—Discover, Capital One and Synchrony—reported relatively strong growth, but with different FICO Score segment trends.  Discover reported 9% y/y growth, with no y/y change in share of outstandings for the <660 and 600+ segments.  Capital One had a similar overall growth rate (8%), but this was driven in part by the acquisition of the Cabela’s card portfolio, which boosted the >660 FICO segment’s share of outstandings.  It is also worth noting that the <660 FICO segment accounted for 34% of Capital One’s credit card portfolio at the end of 2017, compared to 25% of Synchrony’s portfolio, and 18% at Discover.

  • Regional credit card issuers present a mixed picture when it comes to the FICO Score segment composition of their credit card portfolios. This is driven by a number of factors, including a large variation in portfolio sizes, as well as their credit card underwriting standards.  Most issuers report growth across their portfolios, with strong growth rates in the low FICO Score segments.  Fifth Third reported very strong growth for its <660 segment, but this segment only accounts for 3% of its portfolio.  Regions’ 20% growth in its <620 FICO segment was driven by its launch of a credit secured card in July 2017.

Finally, as most issuers reported strong growth in their credit card portfolios in 2017, charge-off rates are also on the rise, growing 45 bps y/y to 3.61% at the end of 2017.  While the overall charge-off rate has risen from a low of 2.19% in 3Q15, it is down both from post-recessionary highs of 13.13% in 1Q10, and even the 4% levels in 2007, prior to the Financial Crisis.  With charge-off rates still below 4%, the leading issuers continue to be comfortable with promoting credit card loan growth.

Banks Use Surveys to Cover Small Business Topics of Interest

In May 2017, EMI published a blog that discusses how banks use surveys to build small business engagement.  In that blog we reported that many leading banks publish recurring surveys that track general business optimism as well as key challenges and opportunities.  In addition, banks also carry surveys that cover specific topics on a one-off basis.  The following table looks at the topics covered over the past six months:

The banks cover these topics of interest to achieve a number of objectives, including:

  • Raising general awareness of the bank and affinity among small businesses
  • Positioning the bank as a small business banking thought leader
  • Communicating their understanding of the changing issues impacting small businesses
  • Highlighting their areas of strength
  • Differentiating the bank from its competitors

In fact, the desire for differentiation is leading banks to conduct surveys on specific small business sub-segments or on specific product areas.  Recent standalone surveys of this type include:

  • U.S. Bank surveys of Asian-American small business owners (October 2017) and Hispanic small business owners (October 2017)
  • Surveys by both Bank of America (September 2017) and American Express (November 2017) on women-owned businesses
  • Bank of America Small Business Payments Spotlight (October 2017)
  • American Express Small Business Saturday Consumer Insights Survey (November 2017)

The proliferation of small business surveys that cover specific topics of interest indicate that they are effective tools in helping banks build awareness and engagement with their small business clients and prospects.