As community banks and credit unions explore new ways to grow revenue, business credit card programs offer a way to diversify revenue streams. Fee income helps provide a steady stream, providing more stability and improving financial resilience. Subscriptions can produce additional revenue and upsell opportunities.
Even small business owners who already have business cards have an opportunity for growth. 88% of businesses applying for cards already have three cards, and nearly half have four or more.
Here we explore how you can grow revenue and optimize customer relationships using a white-label business credit card program.
Benefits of Fee Income Programs for Banks and Credit Unions
Fee-based revenue models help with your diversification strategy, reducing your reliance on interest income and diversifying your lending makeup.
Fees are less susceptible to interest rate fluctuations that can impact revenue, enabling you to offset potential losses from non-performing loans or unfavorable interest rate movements.
Enhancing Customer Relationships
Beyond the direct financial benefits, fee-based services also play a pivotal role in enhancing customer relationships and loyalty. By offering value-added services that cater to the specific needs of your customers, you can strengthen your relationships and build lasting loyalty.
Our 2024 Community Banking Outlook study shows that 93.2% of community banks identify delivering exceptional customer experience as a key focus for 2024. Fee-based services contribute significantly to this goal, as they enable banks and credit unions to provide personalized and relevant solutions that enhance the overall customer experience.
By offering a comprehensive suite of services, you can strengthen your bond with existing customers, which has long-term benefits. Community banks and credit unions that have high levels of customer loyalty see a higher:
- Return on assets
- Net income per customer/member
- Customer/member growth
- Fewer charge offs
- Lower operating expenses
Developing New Revenue Streams
Fee programs also create cross-selling opportunities, enabling financial institutions to introduce complementary products and services.
This synergistic approach unlocks new revenue streams and maximizes the potential of existing relationships. For example, you can generate revenue from customers that might not otherwise qualify for loans. About 25% of small businesses use credit cards to fund business operations because they do not qualify for conventional financing options.
The Role of Interchange Fees
At the heart of business credit card programs lies the concept of interchange fees — a critical source of fee income for card-issuing banks. These per-transaction fees merchants pay to credit card issuers can add up quickly. The average business credit card user has about twice the credit card limit of personal cardholders.
You can capitalize on the revenue generated from interchange fees by offering business credit card programs. As commercial customers utilize their credit cards for purchases and transactions, the issuing bank earns a portion of the interchange fee, providing a steady stream of fee income.
The Role of Subscription Fees
Complementing the revenue generated through interchange fees, community banks and credit unions can further leverage fee income by adopting a subscription-based model for their business credit card programs. Taking inspiration from successful Software-as-a-Service (SaaS) companies, financial institutions can offer tiered subscription levels and generate monthly recurring revenue (MRR).
This approach provides customers with the flexibility to choose the level of service that best suits their requirements and unlocks several advantages for the financial institution:
- Subscription fees offer a predictable cash flow, mitigating the volatility associated with transaction-based income sources.
- A SaaS-style tiered subscription model creates opportunities for customization where banks can incentivize customers to upgrade to access new features or benefits.
- As business customers grow, subscription revenue can scale, providing revenue growth without increasing operational expenses.
- Subscription models also tend to create “stickier” customer relationships once integrated into processes, resulting in less turnover.
Getting Started With Branded Business Credit Cards
How do you smoothly implement a business credit card program with minimal overhead?
Torpago's cutting-edge technology provides no-code solutions and extensive support options for managing programs at your bank or credit union.
With powerful features helping you attract business owners and stand out from your competitors, you can give your customers:
- Spend management: Allowing customers to manage all aspects of their finances, from spending, approval, bill pay, and reimbursements.
- Mobile app management: Enabling business owners to see real-time data, manage accounts, and pay bills securely online.
- Automation: Seamlessly connecting HRIS or ERP accounting systems to automate and streamline processes.
- Physical and virtual cards: Choose physical or virtual cards to expand options and provide better tracking.
A white-labeled business credit card program helps drive additional fees and subscription income.
Schedule a demo with Torpago, and let us show you how to grow your income.
