Things are tough in the credit card marketing arena these days. Issuers blitz the mail in hopes of stealing customers through come-on packages and bonus rates for transferred balances. The most promising co-branding partners have been spoken for, Affinity programs, meanwhile, have exhausted virtually every known group except left-handed lepidopterists.

How can an issuer build business? Well, by looking at business. Taking a clue from their lending departments, who have redoubled their pursuit of small businesses, bank card issuers are aiming new messages at commercial customers. A slew of programs are coming out, often under the broad umbrella of Visa or MasterCard, which are actively hawking them to members.

The new cards promise businesses not just convenience but frequently new levels of information--such as categorized spending summaries--and improved spending control. Cards can be restricted to selected employees, with customized limits put on the types of transactions, dollar amounts and participating merchants.

Both Visa International and MasterCard International have launched separate divisions for what are being called corporate, business and purchasing cards. Corporate cards are travel and entertainment cards issued to Fortune 1000 companies, similar in concept to those issued for years by American Express Co. and Diners Club International; essentially, the card associations are basing their competitive posture on broader acceptance and a variety of vendor discount programs.

"Business cards" have been targeted at smaller businesses with less than $10 million in annual sales or fewer than 100 employees, says Tracy Hinds, director, Visa Business. The cards are designed to offer worldwide discounts on hotels and insurance programs at rates businesses couldn't get on their own.

Purchasing cards, sometimes known as procurement cards, are designed to save corporations time and offer better control over minor purchases and superior recordkeeping. Through them, issuing banks will provide a gateway for electronic payment and reporting features,

"Corporate purchasing cards were introduced as the third major form of credit card payment," following travel and entertainment and consumer credit, says Kevin C. Shea, executive vice president at National Data Corp. in Atlanta. "They were designed as a management tool rather than as a spending device."

"Companies use the Purchasing Card because it speeds the buying process," and "suppliers are glad to accept it because they receive faster payments and lower their collection risk," says Dave Kurrasch, senior vice president for wholesale product development at Wells Fargo Bank.

The division of the commercial card market into these three distinct parts tracks with card issuers' attempts to segment huge markets and to create as much customization as possible. The distinctions are logical, and top-drawer banks like Wachovia Corp. are adhering to them: This quarter, Wachovia announced it is bringing out Visa Purchasing, Visa Corporate and Visa Business cards. And while the vast majority of the cards are credit products, a couple of banks have introduced business-related debit cards.

Not surprisingly, the least inviting niche is the corporate card, aimed at medium-sized and large companies as a travel and entertainment payment mechanism. Some 93% of big corporations already use them, according to consultant Runzheimer International of Rochester, WI. To make inroads, banks would have to elbow aside Amex and Diners Club, not exactly featherweight competitors. And because such balances typically don't revolve, issuers' revenue opportunities don't match those of conventional credit cards.

One bank that has carved out a big role here is Minneapolis-based First Bank System. First Bank had issued some 900,000 corporate cards by year-end 1994, leaving all other bank issuers in the dust, according to Faulkner & Gray's Credit Card News. The closest pursuer was Household Credit Services, with 126,000; Wells Fargo was third with a little under 100,000.

First Bank officials attribute their success to scale and their ability to leverage fixed costs and establish profitability. The bank has eschewed direct mail, using a dedicated sales force to sign up corporations for the cards.

Far more intriguing--and faster growing--is the business card targeted at small, usually local businesses, who traditionally had fallen under a consumer marketing strategy. Now banks are stumbling over each other to offer them cards. Wachovia's new Business cards, for instance, offer preset spending limits and purchasing authorizations, as well as "simplified bookkeeping and recordkeeping through categorized spending and summary reports."

Visa USA, which began rolling out its Business Card program two years ago, has more than 240 issuers and some 700,000 cards outstanding, says Hinds. The market is dominated by national issuers, but "we're seeing a lot more activity with regional efforts," she adds. And with good reason: "Small businesses are responsible for $170 billion in spending annually. It looks pretty attractive when compared to the large corporate market. It's a huge opportunity," Hinds says.

Visa is supplying processing services for banks who need it, and has even developed scorecards based on pooled credit card loans. "We want it to be more cost-effective for them to get into the business and stay in the business, and we want the product to evolve beyond the traditional card values," Hinds says. With that in mind, Visa has created Instant Visa Rewards for Business Card holders--quarterly statement inserts with "six to eight exclusive, high-value offers."

Hinds says that small businesses might, for instance, get inserts offering hundreds of dollars in savings from suppliers like Peachtree Software, Avis, Continental Airlines, and David's, the mail-order food goods firm.

Co-branding, Too

Banks can co-brand a business card just as they do consumer cards. First Bank System added the Visa Business Card to its WorldPerks program for Northwest Airline--creating the first co-branded Visa Business Card with frequent flyer mileage benefits. Holders get one WorldPerks mile for each dollar charged-though mileage will accrue to the cardholder, not the company. Enhancements include free primary car rental insurance and travel accident insurance. The card carries a $75 annual fee, with finance charge of prime plus 9.75%.

Wells, Fargo & Co. has rolled out a frequent flyer program with even wider ramifications. Scheduled to be offered nationally last month, it will be a Mastercard BusinessCard designed specifically for small business owners, who also get one mile for each dollar they or their employees spend on the card. Cardholders can use the miles for travel on most commercial airlines to all 50 states, Mexico and the Caribbean, and the awards can be assigned to others or used as part of other frequent flyer programs.

Wells developed the Business-Miles program "because small business owners work hard, they take all the risks, and we believe they deserve to be rewarded and have a little fun," says Lucy Reid, senior vice president in the business banking group.

Like the business card, potential for the purchasing card market is huge--though whether it's at the $400-billion level that's been widely reported is debatable (two years ago, when the cards were brand new, the market was pegged at $300 billion). Convenience aside, the cards are viewed as relationship-builders for issuers, who can link them to credit lines and cash management programs.

Comerica Inc., the $40-billion-asset Detroit bank, last spring launched a business card pilot internally. David DenBaas, vice president and purchasing director, said the bank would be distributing the card not only to its buyers, but to areas like transportation and real estate for items such as gas and off, hardware and maintenance items, and small office supply and office equipment.

One still relatively untapped area of the commercial card market is debit cards. Pennsylvania's Meridian Bancorp issued the nation's first Visa debit-check card for business in October 1994 as part of its Business Advantage package, which also includes specialized checking and savings accounts, equipment leasing, simplified employee benefit programs and banking by phone. Meridian says its targets are "community businesses" with sales under $1 million a year, though it plans to expand the program before year-end to include companies with sales up to $2 million.

[Expanded Picture]The Advantage debit card can be used simply as a cash card at an ATM or customized to allow access to a business checking account at the point of sale, paring the need for cash advances or petty cash. The card fits a perception that local businesses "generally don't want complicated, analyzed checking accounts and intricate cash management services" but "more familiar, predictable consumer-oriented products and services," says James H. Klahr, vice president of community business banking administration at Meridian.

Klahr says initial research wasn't too auspicious, but Meridian officials thought the card made a lot of sense for community businesses who could create their own information fields and control precisely who would use the cards--bookkeepers, executives, etc. And like business credit cards, they allow business owners to segregate personal from company expenses. "The last thing a small business guy wants to worry about is, 'Did it come out of my left pocket or my light pocket?'" Klahr says.

He allows that one reason Meridian is pushing debit is that it is no longer a direct issuer of credit cards, but says that small businesses already banking with Meridian don't need to go through a separate credit check for a debit card and don't have to worry about limits, as they would on credit cards. And since grace periods don't apply if the holder already has charges on the card, many business owners were finding they weren't getting much grace.

Boatmen's Bancshares, the St. Louis-based superregional, in May launched an odd wrinkle even for the debit card arena. The Exclusively Yours MasterCard, a co-branded debit card, is designed for a somewhat esoteric use: to replace paper checks or certificates in employee incentive programs. The co-branding partner, Maritz Inc., provides incentive, marketing, travel and performance improvement services to Fortune 500 companies. The card offers potential for "tremendous processing revenue opportunities," says D. Mark Jackson, vice president of electronic banking at Boatmen's.

Processing, in fact, offers another strong potential revenue stream for those banks equipped to go after it. Wells Fargo is offering a software product to merchants whose customers buy supplies with Wells' MasterCard Purchasing Card. The software, which sells for less than $400, enables merchants to give buyers an array of purchasing information, including such "line-,item" details as sales taxes, freight and minority vendor status.

Merchants can enhance their relationships with customers by entering purchase information along with the credit card authorization, then supplying the buyer with the appropriate purchasing and accounting data. And there's another big plus for merchants: they ordinarily receive funds in one to three days, instead of the 30-60 days common in paper-based billing cycles.

For banks that elect to hand off the processing, third-party vendors and the card associations stand ready to step in. EDS Corp., which has a number of bank processing clients, is handling the work for Wachovia's commercial cards. Total System Services and SynapQuest are working with Visa, and ProCard--a Denver-based firm headed by former card processing and ATM pioneer D. Dale Browning--is focused squarely on the purchasing card market, offering software and technical support to issuers.

Earlier this year, MasteCard required hotel and car rental merchants to supply BusinessCard issuers with comprehensive data on point-of-purchase transactions. In 1993, it had stipulated that airlines document such POP transactions as ticket changes, sites of flight connections and flight numbers.

MasteCard is touting this added level of data to issuers. "For the first time, they will have the information necessary to support disputed claims, thereby greatly reducing the costs associated with corporate inquiries, retrieval requests and chargebacks."

That will be a boon, certainly. There's no question that both MasteCard and Visa see a licensing and processing bonanza in commercial cards--and still more competitive advantage over American Express, Discover and Diners Club. For bank issuers, the cards--especially those aimed at small business--offer a relatively untrodden field and a rationale for calling off the search for that last creditworthy individual who hasn't yet maxed out on plastic.

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