Here’s the secret to a super sticky business relationship

I’ve never been a huge fan of suspense, so I’m going to let the cat out of the bag right here in the first paragraph. The secret to establishing (and maintaining) high levels of engagement with member small business owners is… a great business credit card product.

Chances are, your credit union has set its member business lending goals higher for 2018. If you haven’t, you may want to consider it. That’s because the business owner is becoming an increasingly important prospective member for the nation’s cooperatives. One reason for this is the younger generation’s ambitions. Nearly half (49 percent) of Millennials intend to start their own business in the next three years, and they’d be willing to do it in the next 6 months if they had the right tools and resources (i.e., credit).

There are myriad other reasons credit unions are interested in courting businesses to membership. Well-aligned with the local nature of credit unions, small- and mid-sized businesses can create tremendous revenue and growth for the financial cooperatives that support them. It’s why community banks have so aggressively pursued them in the past. Credit unions see the potential, and they are going after like-minded, local business owners with gusto.

To have a fighting chance with this segment, however, credit unions will need a product capable of delivering ongoing value in new and relevant ways to the business owner. Yes, there is a place for a small business loan in the business owner’s toolkit,  and although it may address temporary cash flow needs, it does not facilitate purchasing and spending controls. The business credit card is uniquely positioned for meeting those needs – when it’s built correctly.

So, what does it take to launch and sustain a great business credit card?

1. Acquire small business underwriting expertise – When issuers evaluate the creditworthiness of a small business, in most cases they underwrite based on the credit qualifications of a personal guarantor, usually the business owner. That does not always make sense for larger businesses. Therefore, an underwriting team experienced in analyzing company financial statements, as well as the credit quality of a personal guarantor, will be an important asset to nail down ahead of a business credit card launch.

2. Understand profitability drivers; design around business segment needs – Business credit card portfolios tend to be composed of a higher percentage of Transactors compared to consumer card portfolios. Transactors, or cardmembers who pay off their balances each month, generate revenue via interchange as opposed to generating interest revenue as is the case when a cardmember revolves a balance. Consider the impact the interchange/interest revenue mix may have on product profitability. At the same time, design your product around the specific needs of the business segments within your membership base.

To attract and retain established businesses , card teams will want to focus their energies on things like rewards programs, recurring payments, and expense management tools  If you find a significant number of entrepreneurs and new businesses within your membership, focus on low APRs and balance transfer campaigns.

3. Include customizable features that grow with the business – The goal of nearly every small business is to grow. As your business members do so, the features they will need from their business credit card will change. The importance of free employee cards or the ability to add multiple authorized business representatives could become important over time, especially when that business begins to experience things like accelerated hiring cycles. Another thing to consider is the back-end platform supporting the card. Can credit card transactions be easily imported to the business member’s expense management system, for instance?

4. Develop strong communications / marketing plans – The business credit card often must be marketed to two distinct audiences: the business owner and its employee cardmembers. Communicating only with the business owner misses a lot of opportunities to talk about perks like automatic rebate programs (Mastercard® Easy Savings or Visa® SavingsEdge) or mobile-first features.

Uncertainty is probably the biggest hurdle to launching a business credit card. Some credit union cards teams are hesitant to launch a business credit card product because they are unsure how successful (or sustainable) such a portfolio could be. They are also unsure of its ability to attract new members to the credit union. But, what if you challenged that last goal? Instead of burdening your new product with the hefty weight of member acquisition, assign it the goal of improving your existing member experience.

It’s not uncommon for business owners to rely on their consumer credit card for corporate expenses, especially when they are first starting out. But as their business grows, so does the need for financial products to support that growth. The opportunity to better serve your existing members carries a much lower risk than launching a product for the objective of gaining new members. Do a little digging and see what you find. You may have your own set of young businesses hiding within your consumer credit card portfolio.