A new report from Aite Group, LLC identifies the opportunity that exists for financial institutions interested in pursuing small-business credit cards. Based on a July 2009 Aite Group survey of 283 U.S. small businesses generating less than US$10 million in annual revenues, the report analyzes small businesses’ current usage of credit cards, and discusses the opportunity for growth.
The U.S. small-business segment, comprised of more than 20 million businesses, represents a large opportunity for financial institutions. While most banks recognize this, the main challenges for many institutions are determining how to win business from this group, and which products will result in the greatest return on investment. Aite Group believes that small-business credit cards offer significant return to financial institutions. In fact, if small-business credit card spending increased from its current 4% market share to 14%, Aite Group estimates that interchange revenues from small-business credit card usage would increase more than 300%, or to more than US$10 billion.
“Small businesses have long fallen into a middle ground between retail and commercial banking,” says Judson Murchie, analyst with Aite Group and author of this report. “While small businesses often mimic the personal banking habits of their owners, much of their payment behavior reflects their nature as a business, resulting in high check volumes. The increasing conversion of small-business check use to other payment vehicles is one of several reasons Aite Group believes small-business credit cards are primed for growth, and a definite opportunity for financial institutions.”
D.C.