Small Business Credit Card 2009 Update: Party's Over - When's The Next Party?

Small Business Credit Card 2009 Update:
Party's Over - When's The Next Party?

New Research Examines Developments in
Competitive Small Business Credit Card Marketplace

Boston, MA - November 30, 2009 -- Both 2008 and 2009 produced its own multiple crises of belief in financial services, and the small business credit card sector, seemingly immune to past growth disruptions, has had its confidence severely shaken. As the report title suggest, Small Business Credit Card 2009 Update: Party's Over - When's the Next Party, the party is over for now, but it is only a question of when the next surge in small business card issuing will be.

It is Mercator Advisory Group's expectation that the small business credit card segment will likely contract this year in terms of purchase volume, a first this decade.

But already there are some proverbial green shoots starting to show. The U.S. small business segment still has tremendous growth potential from both a payment perspective and a lending perspective. Today's challenge for issuers is when to call the bottom to the market decline and re-engage.

In spite of the market's disruptions this year, issuers have been developing initiatives in the areas of:

• New and revived charge (non-revolving) cards
• Relationship base credit underwriting, marketing and rewards programs
• Business debit card products

"The road ahead is certainly uneven, and as an industry, we are in new territory. UDAP reforms are still roiling the adjacent and overlapping consumer card segments, and may yet affect business cards as well. And credit management has increased the attention being paid to individual underwriting and relationship-based credit opportunities," comments Ken Paterson, VP for Research Operations at Mercator Advisory Group and the primary author of the report. "But in the end, small business credit cards, the dominant lending vehicle to firms with fewer than 100 employees, will be key to fueling the recovery."

Highlights of the report include:

*The small business credit card market continued to grow through year-end 2008 despite the major Q4 downturn.

*U.S. card purchase volumes suggest 2009 will end as a rare down year for small business credit products; debit may eke out increases.

*Despite the tight credit environment, the dramatic end to new lending by Advanta seemed to generate only modest displacement in the marketplace. A combination of opportunistic issuers, the flexibility of small businesses, and lowered demand for credit and payment services muted the shock waves.

*Charge-based products appear poised for a comeback, evidenced by Chase's Ink. family of cards, a revitalized American Express emphasis on charge products, and new issuer plans for 2010.

*2010 looks like a comeback year for small business cards, although the outlook is clouded by the pace of recovery for small businesses, and by the possibility of regulatory reforms for small business products.

One of the 8 Exhibits included in this report:

This report contains 31 pages and 8 exhibits.

Companies covered in this report include: American Express, Bill Me Later, Chase, Discover, Experian, MasterCard, Wells Fargo, Visa

Mercator Advisory Group members have access to these reports as well as the upcoming research for the year ahead, presentations, analyst access and other membership benefits.

Please visit us online at www.mercatoradvisorygroup.com.For more information, please call Mercator Advisory Group's main line: 781-419-1700 or send email to [email protected].

Mercator Advisory Group is the leading, independent research and advisory services firm exclusively focused on the payments and banking industries. We deliver pragmatic and timely research and advice designed to help our clients uncover the most lucrative opportunities to maximize revenue growth and contain costs. Our clients range from the world's largest payment issuers, acquirers, processors, merchants and associations to leading technology providers and investors.