Credit unions have a long, successful history with consumer credit cards. And as more credit unions consider expanding into business credit card services, they’ll be thankful to find a number of ways to enter the field with a minimum of pain and fuss.
“Over the past two years we’ve seen a great opportunity for credit unions and small businesses to get into the credit card market,” says Catherine Yox, senior product manager at PSCU Financial Services. “For credit unions, it’s a matter of looking for a new revenue stream. For small businesses, besides being able to manage and leverage credit, this is a way to have a closer relationship with a financial institution they already trust.”
In fact, Yox says PSCU saw 10% growth last year in its clients’ business credit card portfolios. “The biggest atraction credit unions hold out as credit card issuers is their lower rates,” she says. “Their involvement with small-business credit card customers opens the door for them to cross-sell insurance, car loans, and other services.”
Many vendors that provide business card programs are facilitators, not underwriters. “We don’t do underwriting,” says Mitch Raymond, senior vice president of credit products for Vantiv. “Otherwise, we perform every other aspect: authorization, fraud management, incentives management, customer service—including disputes and charge backs—billing, and even collections.
“We handle all of the blocking and tackling,” he continues. “Our expertise is in setting up and managing a program.”
PSCU’s Small Business Payment Solution, a suite that includes credit and debit cards and online banking, is one program that offers a soup-to-nuts array of services.
“We offer it to businesses that have up to 100 employees, with either company or individual billing options, based on an overall credit line,” says Yox. “For instance, a company may issue 10 cards among employees, each with a $1,000 limit based on a company credit line of $10,000. Business members using the accounts can ask their credit unions to reallocate credit limits whenever necessary.”
Yox, like Raymond, stresses that PSCU isn’t the card issuer. “We’re the processor and provider that enables a credit union to get a small-business card program underway.”
Vantiv’s business card program offers all of the features of its consumer package, which 760 credit unions nationwide now use. “We bring expertise and scalability to the arena,” Raymond explains. “Most clients use us to set up both types of programs—consumer and business.”
He cites “commercial functionality” as a selling feature of business card programs. “That means shared credit lines. These [include] the ability to consolidate several employee accounts onto one bill, allow purchase control and tracking, and offer reporting on card activity.”
Raymond says proposing a custom-designed business card program often creates sticker shock for credit unions. Therefore, “we don’t start with a blank slate, so clients don’t pay for development expenses. We arrive with a proven modular system in place and keep costs to a minimum.”
The availability of ready-to-go business card programs is sparked by credit unions’ increasing interest in the commercial market. “Credit unions are asking how to serve the business credit card market and how deep to go into it,” he says.
To answer those questions, Vantiv offers “Portfolio Optimization Services,” a relationship management program that examines, among other things, what the client aims to accomplish.
“Once we understand what that is, we bring risk management expertise, marketing optimization, and portfolio management services to the table,” Raymond says. “The only learning curve that falls solely to the credit union is underwriting and ongoing monitoring.”
Next: Marketing business cards
Marketing business cards
Finding customers for business credit card services shouldn’t be too difficult, Raymond says. “Credit unions can leverage consumer members who own businesses.”
After that, says Yox, getting businesses to sign up for credit/debit card services isn’t a hard sell. “Some credit unions hold evening open houses where business members are invited to come in for coffee, cookies, and punch, and listen to an expert deliver an informal talk on business practices. It opens the door to selling those members a credit card program.”
One drawback, she adds, is that many credit unions lack business development staff. One way to get around that is with PSCU Financial Services’ marketing portal, which contains materials credit unions can download, customize, print, and use.
Yox cites one successful postcard campaign noted for both its succinctness and success. “The card simply asked, ‘Did you know your credit union offers business credit card services?’ ”
While people use business credit cards to avoid mixing business and personal expenses, credit unions still must offer incentives to use commercial cards, Yox advises. “A credit union must offer the same level and array of rewards on business cards as on its personal cards. Otherwise credit card users will gravitate to the card that offers the most rewards.”
One of the most crucial components in a business credit card marketing program is the link between members and tellers, she adds, citing a study that asked small-business owners to name their primary contacts at the credit union. In order of importance, respondents cited tellers, member service reps, and branch managers.
“When asked which of those people delivered the highest level of satisfaction, they named the same order of employees,” Yox says. “This tells you the teller is key to getting the news out about business programs.”
For example, a teller watching a member deposit a large number of checks into a personal account may ask, “I see you have a lot of checks. Do you have a business?” A positive answer opens the door to selling business services.
Yox says vendor assistance consists of far more than selling a program and sending the credit union on its way. “In 2009 we conducted a series of ‘small-business schools’ across the country, and offered a soup-to-nuts course for credit unions on how to start a small-business credit card program—qualifying, issuing, handling delinquencies, etc. We covered the opportunity, the risks, how to market, and how to find customers.”
Raymond says that while credit unions are becoming more active in seeking out commercial accounts, one common mistake is going after a business account that’s too big for its capacities. “Although we can offer a program with features that duplicate anything offered by large credit services, we can’t create capacity.”
For example, a credit union whose primary select employee group is a state university may decide to take on the university’s purchasing program.
“But the credit union may lack both the expertise and capability to do so,” Raymond explains.
For credit unions that are reluctant to drum up revenue from their business members, Yox says there’s no reason to be. “It’s important for credit unions to understand that selling is servicing. Members trust credit unions to offer products that help them, and they don’t see an offer for a product or service as an imposition.”
Beyond the Business Card
Credit unions that want to expand their business services offerings beyond credit cards can turn to The Small Business Authority, a CUNA Strategic Services alliance provider.
The Small Business Authority (thesba.com) is a portal for small-business owners seeking business lending, merchant processing, automated clearinghouse, and other services. The company—a nondepository institution—focuses solely on providing services to small and medium-size businesses, primarily through alliance relationships.
As such, The Small Business Authority works to preserve the relationship between members and their credit unions. A business services specialist answers business members’ questions and provides guidance.
In return, the credit union receives a one-time referral fee or an ongoing revenue share, depending on the service. And it can offer business services to members quickly with no up-front investment in staff or infrastructure.
The Small Business Authority provides marketing and training support. And NewTracker™—an online referral system—allows credit union staff to enter and track the status of member referrals online.
For more information, visit cunastrategicservices.com.