Small business card issuers offering big incentives to drive spending

July 6, 2011

BBVA Compass recently promoted its new Visa Business Rewards credit card on its Facebook page. The card offers 5,000 points in each of the first 6 months if the new cardholder spends at least $500 on the card in that month, so a total of 30,000 points.

This is consistent with a wider trend among leading small business card issuers to offer bonuses of 10,000+ points to encourage small business cardholders in order to activate and continue to use their cards. Small business cards still have a relatively small share of small business spending, and issuers see significant growth opportunities.

Other small business cards that feature with aggressive bonus offers include:

Latest Nilson Report highlights recovery in small business credit card spending

July 1, 2011

The Nilson Report has published its annual rankings of the leading U.S. commercial card issuers (by spending volume). These ranking are broken out into various commercial card categories, such as purchasing cards and small business credit cards. A quick analysis of The Nilson Report data by EMI uncovered the following trends in small business credit card and small business debit card volume:

Small business credit card volume rose 6% in 2010, following a decline of 9% in 2009
Of the 20 leading small business credit card issuers, only one (Bank of America) reported a decline in volume between 2009 and 2010
Small business debit card volume grew by 16% in 2010, compared to a rise of just 4% in 2009
Of the top 20 small business debit card issuers, only one (TD Bank) reported a decline in volume in 2010, and 10 of the top 20 reported annual increases of more than 20%

Is the Fed’s new debit card interchange rate a good deal for banks?

June 30, 2011

Yesterday, the Federal Reserve published a new proposed debit card interchange rate of at least 21 cents (would be 24 cents on an average $38 transaction), with this rate to come into effect from October. Is this a good for banks? This depends on where the banks are starting from? They now enjoy an average debit card transaction fee of 44 cents, so this is a significant decline. On the other hand, the Fed had previously proposed cutting the fee to 12 cents, so this new proposed fee structure is nearly double that.

Eeven with the latest rate proposal, banks will lose significant interchange income. Some banks have already reacted by ending free checking and debit rewards. We believe that there could be a re-emergence of debit rewards programs, albeit with different structures and pricing. So what we may see are:

Debit rewards programs that carry program fees, but with waivers for “high-value” customers
Inclusion of debit spend in relationship rewards programs
Continued focus on developing new rewards programs that are at least partially funded by merchants