Author Archives: mronan

Bank of America launches suite of small business charge cards

Earlier this week, Bank of America introduced of a suite of three small business charge cards. Up to now, Bank of America has only issued small business credit cards.

This new suite will compete in the small business charge card space with leader American Express, as well as Chase, which now issues an Ink Bold charge card as part of its Ink small business card suite.

This new charge card suite will also compete with small business credit cards.  Leading small business credit card issuers retrenched significantly following the financial crisis in the second half of 2008.  Since then, some leading issuers have returned to the market, but small business cards are now marketed less as sources of working capital, and more as payment vehicles.  And there is significant spending growth potential for small business credit and charge cards, as card’s share of overall small business spending is much lower than card’s share of consumer spending.

Marketing such cards also enables issuers to maintain relationships with small business customers, who can then be cross-sold additional products and services, including lending products as confidence returns to the market.

Leading U.S. banks maintain branch numbers

The emergence of electronic channels in the financial sector has led some commentators to predict the imminent demise of the branch channel. In a previous blog, EMI disputed this prediction, arguing that banks would maintain a significant physical presence, although there would be changes in branch activities.

U.S. banks’ ongoing commitment to their branch networks is seen in the latest quarterly financials.  Data is available for 8 of the top 10 branch networks in the U.S. (the exceptions are Wells Fargo and TD Bank).

  • These eight banks combined operated 23,152 branches in 1Q11, a decline of just 27 from 1Q10, and 7 from 4Q10.
  • Two of these banks (Chase and U.S. Bank) grew their branch networks in the most recent quarter.  And in April, Chase reported that it would open 100 branches in California and 37 branches in Florida in 2011.
  • Bank of America registered the largest decline, with a decline of 51 branches between 4Q10 and 1Q11.  Even after this decrease, it has more than 5,800 branches.

So, banks appeared committed to their branch networks for the foreseeable future.  Electronic channels are now very effective in handling everyday service transactions, and are increasingly important sales channels.  However, branches are still required for more complex and sensitive sales and service transactions, as well as for providing advice.  However, banks need to continue to invest in their branches (in both physical infrastructure and personnel) in order to optimize effectiveness.

Card networks report strong growth in credit and debit card spending

Visa and MasterCard both reported quarterly financials this week, which enables us to develop a picture of how the four main U.S. card networks (Visa, MasterCard, American Express and Discover) performed in terms of card volume.

See the table below for details on the card networks’ total U.S. card volume for 1Q11, with comparisons to 1Q10. Note:

  • Strong year-on-year (y/y) growth in both debit card (+12.0%) and credit card (+9.2%) spending.  Even though credit card spending growth continues to trail debit cards, growth rates have recovered in recent quarters, following significant declines in 2009.  This reflects the efforts of leading credit card issuers to promote spending, as outstandings continue to decline.
  • Strongest credit card volume performance came from American Express, which enjoyed double-digit growth in all customer segments (13% in consumer, 14% in small business, and 18% in corporate).  Its share of total credit card spend rose from 24.6% in 1Q10 to 25.9% in 1Q11
  • Discover reported 24% debit card growth through its Pulse PIN debit network.  Visa also reported double-digit debit volume growth.
  • Visa’s share of total (credit and debit) card spend among the four networks rose 46 bps y/y to 51.9% in 1Q11