While more than 80% of small business owners use a credit card to pay for expenses, 33% of them are using their personal credit card, according to Visa research. The card network wants them to upgrade.
To entice those businesses, Visa recently introduced a product called SavingsEdge, which offers a choice of discounts that can be redeemed instantly at suppliers or applied toward future discounts. By its very nature, this is a perk that one can’t get on a consumer card.
“For many of our issuing clients, the reality is that the biggest competitor to their small business card program is likely their own consumer card program,” said Veronica Fernandez, senior vice president and North America Head of Business Solutions at Visa.
Visa is augmenting its services for small businesses as payment and technology companies battle to win customers in the segment. The payment companies are competing to gain a larger share of small businesses by combining transaction processing with other business functions.
More small business owners are worried about the economy, creating an opportunity for business cards and value-added services, Fernandez said.
According to Visa’s research, “inflation, economic uncertainty and market volatility were the top three macroeconomic concerns that small to-to-medium sized businesses were most worried about,” Fernandez said. “One of the consistent threads that runs through all of these concerns is costs or spending.”
Visa is attempting to boost its non-payment related revenue through its “network of networks” initiative, which uses the company’s vast international network as a base to cross-sell other products, such as security and technology consulting.
As part of its recent small business rollout, Visa is offering discounts for its automated bookkeeping, reporting and tax preparation services. It’s additionally offering discounts on software that improves personal computing performance and troubleshoots small businesses’ IT problems. Visa also offered temporary fee waivers to Authorize.net, the card network’s digital payment platform for small businesses.
Dozens of other financial companies are targeting the same small business market.
Mastercard, Visa’s chief rival, recently entered partnerships with Adobe, McAfee and Priority Pass, and extended partnerships with ShopRunner and Uber to provide cybersecurity, digitize insurance benefit programs for small businesses’ employees and streamline digital payments for small business transportation, among other services.
American Express recently launched Business Blueprint, a cash-flow management hub for small businesses, with access to business lines of credit, digital financial services and views of incoming and outgoing bills. Business Blueprint uses resources from small-business lender Kabbage, which Amex acquired in 2020.
PayPal and Venmo have added payroll services, among other products such as payment processing and short-term merchant credit. Stripe, which provides technology for small businesses through an application programming interface, is rolling out several new products including support for Tap to Pay for both Android and iOS. And Block has added technology to improve customer service, residing alongside Block’s menu of payments, business management and credit for small businesses.
The Visa product could help merchants who want to “eke out any savings they can,” said Jacob Morgan, a principal analyst at Forrester, adding that payment fintechs have a strong position in the small business space.
Firms such as Stripe and small business accounting company Xero, for example, enable tight integration between merchant functions, embedding payments within the accounting platform, or embedding invoices in the accounting program, said Morgan. “Any savings will be welcome to a small business and nothing stops the [card networks and fintechs] from coexisting,” said Morgan.
Small businesses are the “economic backbone” of most countries, according to Agustin Rubini, a director at Gartner. Small businesses are responsible for more than half of the jobs created in most markets and can make up 40% of GDP in emerging markets, Rubini said. In the U.S., more than 80% of recent job openings were at businesses with fewer than 250 employees, according to the U.S. Bureau of Labor Statistics.
“The financial needs of small to medium-sized businesses are generally not being serviced properly,” Rubini said. “And Visa and Mastercard want to do more than just payments.”
Like most legacy payment companies, Visa both competes with, and partners with, fintechs. Visa partnered with Thunes late last year to streamline international connections between banks, consumers and merchants to improve automation for cross-border transactions.
“Our clients span beyond traditional financial institutions offering small business solutions, and include partnering closely with fintechs as well,” Fernandez said. “Our partnership with fintechs is best seen in how we enable them to provide payment solutions directly to their customers.”