Category Archives: Small Business Banking

Key Features in the Latest Crop of Small Business Credit Cards

In spite of the emergence of new electronic business-to-business payment forms, and the continued popularity of checks, U.S. small business owners continue to grow their small business credit card usage.  According to The Nilson Report, U.S. Visa and MasterCard small business credit card volume rose 15% in 2017 to $223 billion.  And American Express also reported that its Global Small Business Services loans rose 13% to $12.3 billion in 2018.

In order to capture their share of small business card spend, leading U.S. banks have launched a range of new small business credit cards over the past year.  These credit card launches are summarized in the table at the end of this blog.  The following are the key trends and features that stand out for these new cards:

Pricing:

  • There is a mix of 0% purchase-only and purchase-and-balance-transfer introductory offers, with durations of 9 or 12 months. 
  • Most cards have an APR range.  The only exception is U.S. Bank’s Business Leverage Visa Signature Card, which features a non-tiered go-to APR of 18.74%. 
  • As demonstrated by both M&T Bank and BB&T, there tends to be a 200 basis-point gap between rewards and non-rewards business card versions.
  • Business credit card APRs tend to be lower than their consumer card counterparts.  BB&T launched Spectrum Cash Rewards (consumer) and Spectrum Cash Rewards for Business at the same time: the business card’s lower tier was priced 300 bps less than the consumer card (and the business card’s upper tier is 100 bps less than the consumer card).

Rewards:

  • New business cards offer either a 1.5% earn rate for all purchases with no limits or a tiered earn rate. 
  • For tiered programs, the business cards either offer higher earnings on specified spending categories (such as at restaurants and gas stations) or on the top spending categories during the month (U.S. Bank Business Leverage Visa Signature).

Bonus Offers:

  • Issuers are now deploying different approaches to incentivize business card usage. 
    • We continue to see acquisition-and-activation offers for reaching a spending threshold within the critical 90-day initial period.  However, new American Express Amazon Business Card cardholders receive a $100 Amazon gift card on approval.
    • To promote relationships, some business cards now offer bonus earnings on cumulative spending over the first year.  Recent examples include Discover it Business Card and U.S. Bank Business Leverage Visa Signature.  Furthermore, the new U.S. Bank card also enables cardholders to earn rewards for accepting credit card payments.

Fees:

Most business cards launched over the past year have no annual fee, the exceptions were BB&T’s Spectrum Travel Rewards for Business and U.S. Bank’s Business Leverage Visa Signature.

New business credit cards show significant variation in the percentage (3-5%) and minimum fees ($5-$15) for both cash advance and balance transfer fees.  However, some new cards deviated from the standard approach:

The Discover it Business Card carries a 5% balance transfer fee with no minimum.

The U.S. Bank Business Leverage Visa Signature Card has a different fee for balances transferred with the card application vs. the ongoing BT fee.

Mirroring consumer cards, many new business cards now come with no foreign transaction fee.  This include non-travel cards, such as the American Express Amazon Business Card and the two new M&T business credit cards.

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

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.