Mercator Blog

Small Business Credit Cards Have Plenty of Growth Potential in the U.S.
Date: March 14, 2018
Brian Riley
Director, Credit Advisory Service
Small business credit cards are special-purpose transaction products intended to serve enterprises with roughly $10 million in revenue and fewer than 200 employees. The contingent for a small business card is well defined at the low end of the small business spectrum but cloudy at the top end. Very small, sole operator businesses without employees can qualify for small business cards. At the high end, the line is fuzzy as to when a business owner should shift from a small business card to a corporate card. Business needs and banking relationships define the segment.

The small business credit card market in the U.S. stalled during the economic downturn but has rebounded with continuous growth. Mercator Advisory Group estimates that purchase volume will have advanced from $493 billion in 2017 to $686 billion in 2022.

Growth opportunities exist for small business credit card programs, but they face headwinds. Many small business owners still use personal cards, whether it be the owner’s primary household credit card or a secondary consumer card reserved for business expenses. Resistance to small business cards is based on various concerns, ranging from the fact that the cards lack protections from rate increases to the dual liability of the business and the cardholder. Consumer credit cards are highly competitive and individuals can often find better offers as issuers retool their consumer offerings, whereas small business cards tend to be static.

Small business cards typically have specialized account controls and product enhancements that focus on business purchasing. Some issuers, such as Chase and Capital One, have built specific lines of business to market their cards (Ink and Spark, respectively). American Express has a comprehensive market view, with small business co-brands, an array of small business cards, and legacy charge cards. Citi uses a limited approach, with a single offering wrapped around a co-brand. Mastercard and Visa, which franchise their products to issuing partners, provide turnkey programs, and some issuers, such as US Bank, offer specialized custom business card management programs.

Overall, the small business card market in the U.S. is healthy. Infrastructure is suitable to support small businesses inclined to use specialized cards to facilitate their trade. Growth will likely continue, although as the number of accounts increases, cannibalization of spend activity on consumer cards will occur.

The market players are stable. American Express is the largest single small business card provider, but most progressive issuers play active roles in the small business card market. Combined branded network volume exceeds American Express volume. Financial technology (fintech) firms that focus more on small business lending outside the payments scheme are unlikely threats to card issuers unless they find partners among financial institutions given that network regulations require issuers be insured financial institutions.

The research report, U.S. Small Business Credit Card Forecast, 2017–2022: Healthy Market, Room for Improvement, explains trends in the small business card market, examines existing strategies by top issuers, and presents a view on best industry practices. This research focuses solely on credit products for small businesses and does not consider the many small business debit products that offer access to demand deposit or business checking accounts.