Kontrol Payables Journal

Too Small For Commercial Card Products? No Such Thing.

Posted on Mar 9, 2017 7:23:00 AM by Scott Songer

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Think your bank is too small to offer commerial card products, including virtual card? Think again.

It's no secret that commercial cards are big cash management drivers for large national banks. More than 70% of businesses now use commercial cards for B2B payments, and that number is expected to grow by double digits in coming years. With that growth in use comes a growth in spending – and increased revenue opportunities for banks that offer commercial card products, including virtual card, to their customers.

But a bank doesn't have to be a huge national concern to take advantage of the growth opportunity afforded by commercial cards. New technologies, evolving commercial card products, and multiple points of entry to the commercial card market now help to make it easier and more financially rewarding for regional banks to become commercial card issuers.

What does it take to start offering card products to your business customers?

For a bank with a minimum of $1 billion in assets, the process is actually surprisingly easy. Process automation has come a long way since banks first started offering commercial cards, which is a boon to banks now looking to become card issuers with minimal start-up time and cost.

One of the more attractive alternatives to becoming a direct card issuer is for a regional bank to outsource its commercial card program to a larger bank. This outsourcing, or agent banking, program allows banks without a commercial card product to license a card-based AP solution via a larger "sponsor bank." The agent bank's commercial clients use the agent bank's own branded virtual card solutions to pay their suppliers, as they would with any commercial card product. (Volume from the agent bank flows through the sponsor bank’s BIN via the sponsor bank’s contract with the core processor.)

Typically, an agent bank is a regional bank with strong, local treasury relationships that has fielded questions from its larger clients around card-based AP solutions, or has seen competition encroach on its treasury relationships because of lack of a viable AP product. Though less typical, larger national banks and non-traditional banks are also agent banking candidates. 

Why offer a commercial card program to your treasury clients?

With competition in the financial industry fiercer than ever, a robust commercial card program is a compelling – even critical – means of attracting and retaining business customers for regional banks. Agent banking offers the advantages of low start up costs and a shorter time to market vs. instituting a bank's own virtual card program, while upholding the large opportunity for growth.

Lucrative commercial card programs aren't just for big national banks anymore. Regional banks can attract and retain business customers by offering them a card-based accounts payable application that enables a secure, streamlined and automated process for corporate payments. 

Interested in learning more about building your commercial card program? Get the basics in our primer on virtual card payments solutions for your commercial clients. 

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Topics: Agent Banking, Commercial Cards, Virtual Payments, Regional Banking