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Marketing Credit and Debit Cards to Small Businesses - US - November 2009

This has been a difficult year for small businesses, with weakening sales demand at the same time that sources of financing and credit have dried up. The economic downturn has accelerated the reliance of some small business owners’ on their credit cards in funding their cash flow. However, as credit card issuers have seen their revenues plummet and defaults rise, credit terms in the small business market have worsened—with lower credit lines and higher interest rates. Some small business owners have even had credit card lines terminated even though they are making timely payments.

However, the small business market remains an attractive target for credit card issuers. As the economic picture begins to brighten even a little bit, card issuers are beginning to once again court the small business market, and have even begun offering new products targeted to this sector. This sector is also not impacted by the CARD Act due to be enacted later this year or in early 2010, making it even more attractive to issuers.

This report examines key questions facing the credit/debit card industry as it relates to the small business market:

  • While small businesses have widely adopted credit or debit card use for at least some portion of their business expenditures, many small business payments are still made using checks or even cash. What will be the impetus for small business purchasers to increase their usage of cards for a larger share of their business expenditures?
  • As small businesses emerge from the current financial crisis, what will be the impact on their use of different payment vehicles?
  • As card issuers focus more heavily on the small business space, how do they compete for customers, and what are some of the latest innovations in terms of product features and marketing approaches?
  • Given the very large size of the small business market, they do not constitute a monolithic segment; therefore, marketing to small business owners requires targeting to different small business segments. Who are small business owners/purchasers and what are some of the main ways in which they differ, especially in terms of characteristics that influence their needs regarding credit and debit cards?

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Scope of this report
        • Consumer survey data
          • Online surveys
            • Greenfield Online
              • Experian Simmons National Consumer Studies
                • Advertising Creative
                  • Abbreviations and terms
                    • Abbreviations
                      • Companies mentioned in this report:
                      • Executive Summary

                        • Industry overview
                          • Market size and forecast
                            • Competitive context
                              • Marketing channels
                                • Market drivers
                                  • Leading companies
                                    • Innovation and innovators
                                      • Advertising and promotion
                                        • The consumer
                                          • Cluster analysis
                                          • Insights and Opportunities

                                            • Regaining trust and confidence is imperative
                                              • New small business opportunities are emerging
                                                • Competition among card issuers is likely to become fiercer
                                                  • Increased penetration and innovation is key
                                                    • Card issuers can stimulate greater business card usage
                                                    • Inspire Insights

                                                        • Life After Debt
                                                          • Transparency
                                                          • Market Size

                                                            • Key points
                                                              • Small business lending
                                                                • Figure 1: SBA 7(a) top 15 lenders, by volume, through Q3 2009 (June 30, 2009)
                                                              • Small businesses rely heavily on credit cards
                                                                • Figure 2: Types of financing used within past 12 months, June 2009
                                                                • Figure 3: Small business credit card spending, 2002-09
                                                              • Card issuers are tightening the reins
                                                                • Debit card use is supplanting credit card volumes
                                                                  • Figure 4: Credit versus debit card U.S. volumes for Visa and MasterCard, 2008 versus 2007
                                                                  • Figure 5: Credit versus debit card transactions, by quarter, 2006-09
                                                                  • Figure 6: Visa small business check card revenues, 2002-05
                                                                  • Figure 7: Credit versus debit card volumes, by volume, 2006-09
                                                              • Competitive Context and Marketing Channels

                                                                • Key points
                                                                  • Credit card issuers sent out less direct mail than a year ago
                                                                      • Figure 8: Business credit card direct mail and print campaigns—comparison of August 2008-July 2009 and August 2007-July 2008
                                                                    • Several leading companies pulled back retention efforts recently
                                                                      • Debit card marketing activity has remained stable
                                                                        • Figure 9: Business debit card direct mail and print campaigns, August 2008-July 2009 and August 2007-July 2008
                                                                      • Overall adspend
                                                                        • Figure 10: Change in adspend, January-May 2008-January-May 2009
                                                                      • Credit card ad spending appears to be rebounding
                                                                        • Credit card issuers using other channels
                                                                          • Banks are using social media sites
                                                                          • Market Drivers

                                                                            • Key points
                                                                              • Small businesses are the largest segment of the business market
                                                                                • Figure 11: Employment size of employer and non-employer firms in U.S., 2006
                                                                              • New business formation remains strong despite the recession
                                                                                • Figure 12: Growth in number of firms, by employee size in U.S., 2004 vs. 2006
                                                                              • Small business owners are becoming more diverse
                                                                                • Optimism among small businesses at lowest level in March 2009
                                                                                  • Figure 13: Small business optimism index, January 2003-August 2009
                                                                                • Borrowing remains more difficult for small businesses
                                                                                  • Figure 14: Small business credit trends, January 2003-August 2009
                                                                                  • Figure 15: Small business credit trends, January-April versus May-August 2009
                                                                                • Debit card use is starting to catch on
                                                                                  • Why small businesses remain an attractive target
                                                                                  • Leading Companies

                                                                                    • Key points
                                                                                      • American Express remains active in the small business card arena
                                                                                        • Chase recently introduced a new small business card
                                                                                          • Chase is also promoting its Blueprint card to business cardholders
                                                                                            • Capital One touts looking out for the “little guy”
                                                                                              • Bank of America positions itself as easy to do business
                                                                                                • Other major credit card issuers are poised to become more active
                                                                                                  • Several business card issuers were casualties of the Great Recession
                                                                                                  • Innovation and Innovators

                                                                                                    • Key points
                                                                                                      • U.S. lags in mobile usage
                                                                                                        • Future of decoupled debit remains unclear
                                                                                                        • Advertising and Promotion

                                                                                                          • Key points
                                                                                                            • American Express is only major issuer to sustain TV advertising
                                                                                                                • Figure 16: American Express television advertisement, 2009
                                                                                                                • Figure 17: American Express television advertisement, 2009
                                                                                                                • Figure 18: American Express television advertisement, 2009
                                                                                                              • Chase launched multimedia campaign for its new InkSM business cards
                                                                                                                • Figure 19: Chase Ink print advertisement, 2009
                                                                                                                • Figure 20: Chase Ink direct mail advertisdement, 2009
                                                                                                            • The Consumer

                                                                                                              • Key points
                                                                                                                • Small business owners are still using checks and cash
                                                                                                                    • Figure 21: Small business payment methods for business expenses, by annual revenue and number of employees, August 2009
                                                                                                                    • Figure 22: Small business payment methods for business expenses, by annual revenue and number of employees, August 2009 vs. March 2008
                                                                                                                    • Figure 23: Profile of small business owners, August 2009 versus March 2008
                                                                                                                  • Small business owners use debit to buy online and for supplies
                                                                                                                    • Figure 24: Primary small business payment methods for categories of business expenses, August 2009
                                                                                                                  • Both debit and credit cards have room to grow
                                                                                                                    • Visa tops the list of primary credit cards used by small business owners
                                                                                                                        • Figure 25: Credit card usage, by number of employees, 2009
                                                                                                                        • Figure 26: Primary card used, by annual revenue and number of employees, August 2009
                                                                                                                      • Acceptance, no annual fees, and rewards are top reasons for card choice
                                                                                                                        • Figure 27: Reasons for using primary card, by annual revenue and number of employees, August 2009
                                                                                                                        • Figure 28: Factor considered most important in choosing a credit card, by annual revenue and number of employees, August 2009
                                                                                                                        • Figure 29: Three most important factors in choosing a credit card, by annual revenue and number of employees, August 2009
                                                                                                                      • Small business owners are more cautious about credit card use
                                                                                                                          • Figure 30: Effects of economic conditions on use of credit and debit cards, by annual revenue and number of employees, August 2009
                                                                                                                        • Small business owners report worsening terms on credit cards
                                                                                                                            • Figure 31: Credit card term changes in the past year, April 2009
                                                                                                                            • Figure 32: Types of financing used within past 12 months, 2009
                                                                                                                          • Debit card use is widespread among small business owners
                                                                                                                            • Figure 33: Debit card ownership among self-employed aged 18+, by number of employees, 2009
                                                                                                                        • Cluster Analysis

                                                                                                                          • Key points
                                                                                                                            • Responders
                                                                                                                              • Consistants
                                                                                                                                • Cluster characteristics
                                                                                                                                  • Figure 34: Small business credit and debit card clusters, August 2009
                                                                                                                                  • Figure 35: Payment methods used, by small business credit and debit card clusters, August 2009
                                                                                                                                  • Figure 36: Effects of economic conditions on use of credit and debit cards, by small business credit and debit card clusters, August 2009
                                                                                                                                • Cluster demographics
                                                                                                                                  • Figure 37: Small business credit and debit card clusters, by gender, August 2009
                                                                                                                                  • Figure 38: Small business credit and debit card clusters, by age, August 2009
                                                                                                                                  • Figure 39: Small business credit and debit card clusters, by revenue, August 2009
                                                                                                                                • Cluster methodology
                                                                                                                                • Appendix: Trade Associations

                                                                                                                                  Companies Covered

                                                                                                                                  • Advanta Corp.
                                                                                                                                  • Alaska Air Group Inc.
                                                                                                                                  • America's Community Bankers (ACB)
                                                                                                                                  • American Express Company (The)
                                                                                                                                  • AMR Corporation (American Airlines)
                                                                                                                                  • Asiana Airlines, Inc.
                                                                                                                                  • Banco Popular North America
                                                                                                                                  • Bank of America Corporation
                                                                                                                                  • Barclays Bank Delaware
                                                                                                                                  • Barnes & Noble, Inc
                                                                                                                                  • BB&T Corporation
                                                                                                                                  • BITS
                                                                                                                                  • Capital One Financial Corporation
                                                                                                                                  • Chase Home Finance
                                                                                                                                  • CIT Small Business Lending Corporation
                                                                                                                                  • Citibank
                                                                                                                                  • Citigroup Inc.
                                                                                                                                  • Consumer Bankers Association
                                                                                                                                  • Costco Wholesale Corporation
                                                                                                                                  • Credit Union National Association
                                                                                                                                  • Diners Club International Ltd
                                                                                                                                  • Discover Financial Services Inc.
                                                                                                                                  • Facebook, Inc.
                                                                                                                                  • Federal Deposit Insurance Corporation
                                                                                                                                  • Federal Reserve System
                                                                                                                                  • FedEx Corporation
                                                                                                                                  • Gallup Organization, The
                                                                                                                                  • Goldman Sachs Group, Inc., The
                                                                                                                                  • Greenfield Online
                                                                                                                                  • Hawaiian Holdings Inc.
                                                                                                                                  • HSBC USA Inc.
                                                                                                                                  • Hyatt Corporation
                                                                                                                                  • Independent Community Bankers of America
                                                                                                                                  • Intuit Inc.
                                                                                                                                  • J C Penney Company, Inc
                                                                                                                                  • JetBlue Airways Corporation
                                                                                                                                  • JPMorgan Chase & Co
                                                                                                                                  • MasterCard Incorporated
                                                                                                                                  • National Federation of Independent Businesses
                                                                                                                                  • PayPal Inc.
                                                                                                                                  • Sears Holdings Corporation
                                                                                                                                  • Starwood Hotels & Resorts Worldwide, Inc.
                                                                                                                                  • SunTrust Banks Inc.
                                                                                                                                  • The American Bankers Association
                                                                                                                                  • The American Financial Services Association
                                                                                                                                  • The Anti-Phishing Working Group
                                                                                                                                  • The Financial Services Roundtable
                                                                                                                                  • The Hertz Corporation
                                                                                                                                  • TowerGroup
                                                                                                                                  • Turner Broadcasting System, Inc.
                                                                                                                                  • U.S. Bureau of Labor Statistics
                                                                                                                                  • U.S. Bureau of the Census
                                                                                                                                  • USA Today
                                                                                                                                  • Visa U.S.A. Inc.
                                                                                                                                  • Wachovia Corporation
                                                                                                                                  • Washington Mutual Inc
                                                                                                                                  • Wells Fargo & Company
                                                                                                                                  • Zions Bank

                                                                                                                                  Marketing Credit and Debit Cards to Small Businesses - US - November 2009

                                                                                                                                  £3,174.67 (Excl.Tax)