Why small-business payment cards have big potential

Chad King of First State Community Bank says Alycia Burgess is better able to operate her business, Farmhouse Bakery in Farmington, Mo., thanks to the bank’s business payments technology. Photo: Megan Roussin

Research shows that use of dedicated small business credit cards is set for huge growth in the next few years, but what value do they offer community banks?

By Colleen Morrison

Imagine a relatively untapped market with the potential to balloon to $700 billion by 2022. According to Mercator Advisory Group, this may be the reality for small business credit card offerings.

This emerging opportunity opens the door for community banks, which already dole out more than 60% of all small business loans. In fact, only 3.3% of all businesses with fewer than 500 employees—99.7% of all employer firms in the U.S.—currently seek business credit cards to expand their organizations. With numbers like that, the potential for market growth is substantial.

But where is the value for the small business? Many community bankers will probably guess this one: It’s relationship banking that emerges as a primary consideration.

“Since community banks’ bread and butter is supporting small businesses, offering credit cards is yet another way that we provide valuable services to this important segment of our market,” says Damon Moorer, president and CEO of $300 million-asset TCM Bank, N.A., an ICBA Bancard subsidiary headquartered in Tampa, Fla. “Small businesses are able to leverage a tool to make it easy to account for their spending. If then they see an additional value proposition, such as cash back or some type of reward, it makes sense for them to use credit cards as a tool to manage their finances.”

Scale and efficiency

For Chad King, director of business services at $2.5 billion-asset First State Community Bank in Farmington, Mo., a significant part of a small business credit card program’s success lies in its ability to scale to a business’ requirements and help that business manage internal processes.

“By issuing our own credit cards, we have the ability to customize the program based on the specific customer’s needs,” King says. “For instance, we can adjust the billing cycle to match their preferred payment date. We can issue cards to employees that have different credit limits and different spending restrictions. We can set the business up with multiple online administrators that have the ability to make payments, change limits and add or remove cards.”

King shares an example of a business customer who, prior to joining First State Community Bank’s small business credit card program, had a business administrator managing three different business cards with three different organizations for three different purposes. It was time-consuming, inefficient and risky when considering potential fraud. Now, with the entire portfolio at one bank, the business administrator can run reports to monitor spending, change limits as needed, remove and add restrictions, and more—all from her online portal.

But First State Community Bank is also committed to offering high-tech, high-touch services. “It’s important to provide customers with the technology to do what they need, but also the access to assistance when they need it,” King says. “That’s why we have a dedicated support team that handles the customer service calls.”

Boosting income for banks

Beyond the benefits to the business, small business credit card programs drive value for community banks. Offering small business credit cards creates a new stream of noninterest income. It also offers treasury management benefits: When a community bank provides a credit card to a small business customer, there may be less of an immediate pull on that customer’s cash, allowing the bank to retain deposits for longer.

“Credit cards are still the highest-volume payments channel and still growing at a double-digit rate annually,” says Tina Giorgio, president and CEO of ICBA Bancard. “We find with small businesses, the ticket price is higher and the payback is better.”

And it may not be laborious to institute these offerings if banks capitalize on existing lending relationships and incoming applications. As a loan is moving through appropriate underwriting steps, so too can the small business candidate be evaluated for a business credit card. By incorporating the evaluation into a parallel track with a traditional loan due diligence effort, community banks can address two products for one client.

“We recommend keeping the small business credit card offering front of mind for everyone,” King says. “We help our loan officers know the benefits of recommending a small business credit card as they go through the loan finalization and approval process.”

With all of this opportunity, how can a community bank get started? For one, it may want to consider an agent issuer who could conduct a needs assessment and determine the product type that best aligns with its potential offerings.

“If community banks don’t have an unsecured lending person on staff, they should partner with someone to offer those products and services,” Giorgio says. “By partnering with an agent issuer, they’re able to offer competitive products and solutions that would be cost-prohibitive if they tried to do it themselves.”

How cards benefit small businesses

A 2018 study from Mercator Advisory Group found that the biggest card benefits reported by small businesses include:


No annual fee


Good customer service


A generous—usually more than $10,000—credit line



Colleen Morrison is a writer in Virginia.