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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