Small Business Credit Card 2007 Update

Small business credit, charge, and debit purchase volume is approaching an estimated $300 billion annually in the U.S., and the market offers the potential for above-average growth for issuers targeting the segment. In this desirable segment, intensified competition for small businesses is emerging on four fronts:

• Reward points programs
• Cash back and discounts
• Trade credit offers
• Vertical segment positioning

The potential combination among these four dimensions are nearly unlimited. Credit card issuers and other lenders may use them to offer segmented offerings to capture the attention of small businesses and engage them in using the product.

Highlights of the report include:

• The small business credit card market continues to offer above average growth opportunities to issuers.
• The complex segment structure of the small business universe is spawning segment-oriented products, with more such offerings to come.
• The value of trade credit to cash-flow-affected small businesses is significant, and lenders are increasingly offering trade terms in their programs.
• Future marketing directions are likely to pursue narrower segment interests, as well as offering user-selected trade terms.

Ken Paterson, Director of the Credit Advisory Service at Mercator Advisory Group and the author of this report comments that "there are some key product developments in the industry that may well cause small businesses and lenders to re-discover credit terms, and in particular business-oriented trade credit that is not just a re-packaged consumer offering. Trade credit terms in various incarnations are becoming available through small business programs, and may well make an impact on future product directions."