Small Business Focus: Credit Cards as Cash Management
A recent study commissioned by ICBA Bancard and Visa revealed that while community banks have low small business credit card market share overall, when the community bank is the small business card issuer, its cards enjoy top-of-wallet status.
“Eighty percent of businesses that have a credit card issued by a community bank consider that card to be their primary card for business expenses,” says Julie Hanson, ICBA Bancard senior vice president of card and payment products.
Hanson says this finding illustrates that community banks can successfully compete in this space and points to Grand Rapids-headquartered Mercantile Bank of Michigan as an example of a community bank that has made strategic investments in technology and human capital to deliver superior cash management products and services to its commercial clientele.
The bank’s commercial clients include automotive and technology firms, energy companies such as propane distributors, manufacturers, and more. Mercantile Bank is often going head-to-head with the likes of PNC Bank and Fifth Third Bank for these accounts, so to win these “upmarket” clients it has created a menu of products and services that is comparable, and in many cases, even better than the larger banks.
John Byl, senior vice president and product development manager for Mercantile Bank, works in the bank’s treasury management division and manages its small business credit card program. “In treasury management, our end goal is to create all possible efficiencies for the customer,” he says. “With our small business credit card, we took a product that already came with some pretty good bells and whistles and built it out to provide even greater convenience and functionality for our clients.”
In addition to a rebate program that offers between 0.25 percent to more than 1 percent back based on customer spend, Mercantile Bank has integrated a number of digital solutions that allow its customers to track and manage credit card spending, submit credit card expenses for reimbursement through an app, and find vendors and suppliers that accept Visa commercial payment products through a vendor matching program.
The bank’s small business card comes standard with EZBusiness Card Management, which allows customers to view all cardholder activity and make payments from an online portal. With EZBusiness customers can also manage employee card limits, close and open credit cards, and integrate into accounting applications for streamlined payment reconciliation.
Mercantile Bank also offers the Visa IntelliLink information management tool, which allows customers to optimize spend management by giving them a holistic view of their spending patterns with customizable reports and dashboards. IntelliLink simplifies expense reports and can also be used to ensure compliance with corporate policies.
Byl says that offering its commercial clients a robust small business credit card offering makes good sense from many perspectives. “Besides the additional income earned through higher interchange and bigger ticket purchases, our risk is relatively low. Most of these small business clients have commercial loans with the bank, so we’ve already done the due diligence and in some cases secured ourselves with collateral.” Equally important is the ability to be competitive in its marketplace and the bank’s commitment to enhancing business customers’ experiences through the delivery of products and services that meet their needs.
Community banks come in all shapes and sizes and not every community bank is going to want or need a small business card program as full-bodied as Mercantile’s, says ICBA Bancard’s Julie Hanson. For those banks she recommends, at a minimum, issuing from a true business card BIN. This ensures that the bank is receiving business-level interchange revenue, which is on average 50 basis points higher than consumer interchange. Additionally, the business BIN comes with core benefits such as travel and emergency assistance services, auto rental collision damage waiver, and purchase security and extended protection. Communicating these amenities along with the bank’s customer service and a rewards program of some form will help lenders easily cross sell their card when renewing a loan.
Community banks can also test the waters by starting small with a small business agent program like the one offered through ICBA Bancard’s subsidiary TCM Bank N.A., Hanson says. Functionalities like Mercantile’s EZBusiness Card Management tool and a competitive rebate program come standard and if down the road a bank decides that it wants to buy back the portfolio and become a direct issuer through ICBA Bancard it has that option.
Banking is about relationships, says Byl. “Fostering and nurturing these relationships over time allows us to help a business improve efficiency while they grow and expand. Mercantile Bank is committed to providing solutions that adapt to the client.”