Plenty of credit card issuers offer small business cards. Many businesses use them, but some prefer to use their consumer credit cards because the protections are better. For instance, a consumer credit card can not dynamically change your pricing, thanks to the CARD Act of 2009. The same protection does not hold if the card is in the name of your business. Go a day late on a small business credit card, and the issuer has the right to invoke; it is not as easy with the consumer card.
American Express is using their recent acquisition of Kabbage to differentiate their small business offering. What is interesting about the strategy is that it takes American Express beyond the focus of a small business credit card. Amex certainly has a strong play when it comes to the daily business needs of a small business, and numerous card options.
But what American Express is doing broadens the net, and will make their card even more attractive when the firm manages the full relationship.
Similar to how fintechs address the SME market – such as Amazon’s small business lending marketplace which includes Goldman Sachs, or PayPal’s working capital – merchants will have access to credit lines between $1,000 and $150,000. Merchants can also open a Kabbage Checking account. Says CNBC:
“We have great cards, we’re an industry leader for small business cards,” AmEx president of global commercial services Anna Marrs said last month at a conference. “It’s when you try to go beyond that that we don’t always have the skills in-house, we don’t always have the products on the shelf.”
Competitors, in particular the Silicon Valley firm Brex, have seen surging growth by providing more credit to start-ups than traditional competitors dared and quickly rolling out new products beyond its corporate charge card.
What makes sense about American Express’ strategy is that it ties together a wide array of small business needs that go beyond the transactional needs that credit cards provide.
The program is a few steps beyond American Express’ legendary “Shop Small” Small Business Saturday, and is certain to fill a void in the market. Shop Small is a well-received program intended to spark sales and typically comes the day after Black Friday.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group