Yes, Smaller Institutions Can Compete In Small Business Credit Cards

Small businesses spend an average of $13,000 per month on credit cards, with 70% using them for operating expenses and 55% for inventory. Small institutions can capitalize on reducing friction and offering relevant products that can build loyalty and long-term profitability.

Winning on Relationships and Relevance

Larger issuers often rely on automation and scale. Smaller institutions have an advantage that’s harder to replicate: real relationships. For many small business owners, being able to speak directly with a banker, especially during moments of stress or growth, can matter more than a points program or welcome bonus.

“Many of our clients have the personal cell phones of their bankers, which gives them direct access to resources versus having to call an 800 number when they’re in need of solutions,” says Tyler.

That personal guidance often begins with relationship managers who can identify patterns and suggest using a credit card as a tool to help. “Our relationship managers play a key role in identifying these needs early on,” explains Argüello. “They spot trends, like frequent short-term overdrafts and high transaction volumes, and introduce the credit card as a practical solution for short-term liquidity and spend control.”

It’s an approach that can resonate, especially when paired with responsive service. “Some of the community institutions have checks and processes in place, where it’s ‘Let’s have a conversation,'” says Von Holten. “Even if a small business gets an automatic denial, they can still reach out to see if there’s a way to make it work. That’s a difference from larger banks, where the process can often stop with the algorithm.”

Smaller banks and credit unions also benefit from a built-in trust advantage. Many small business consumers still rely on the same institution for both personal and business accounts, making them more open to guidance on which tools fit their needs.

Von Holten also notes that many smaller institutions may serve single business owners or very small businesses that operate out of a personal account. So, it’s an opportunity to introduce these customers to business accounts and, eventually, business credit cards, which can be another revenue opportunity for banks. This shift can generate higher interchange revenue, at 2.49% for commercial transactions versus 1.88% for personal transactions for banks.

Dig deeper:

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• Yes, You Can Compete with the Major Card Issuers. But It Takes Creativity and Focus.

Designing for Utility, Not Flash

When it comes to small business credit cards, most smaller institutions can’t outspend national issuers on flashy perks or travel rewards. But they don’t have to. What small business owners value most are simple, useful features that help them manage their operations more efficiently.

“Employee cards with built-in spend controls are making expense management much more efficient and easier to oversee,” says Tyler. “Cashback and flexible rewards, especially when tied to key business categories like office supplies, travel, or digital services, are delivering real, tangible value.”

That value also extends to integration. Credit cards that sync with accounting platforms can save time and reduce errors, particularly for lean teams without dedicated finance staff. “Seamless integration with accounting platforms is significantly cutting down on administrative work,” Tyler adds.

Smaller and community institutions can also create an edge when it comes to security and onboarding. “All of our credit cards are contactless-enabled, making them one of the safest options for in-person and online transactions,” says Argüello. “This technology ensures faster processing and reduced exposure to fraud, a key concern for our global client base.”

For businesses expanding from a sole proprietor to a small team, adding employees to the card account is often a turning point. But it also introduces new risks. Small business credit cards can offer guardrails, explains Von Holten. “Let’s say a small business now has five employees; there’s trust, but the owner wants limits. They can work with the bank to restrict spending by merchant category codes, allowing purchases for gas, office supplies, and from wholesalers but blocking those for restaurants and entertainment.”

Cashback is another smart bet for smaller issuers. Unlike travel point programs, which can require large-scale funding and tend to attract customers chasing rewards rather than relationships, cash back allows small intuitions to compete on equal footing. “Whether it’s a 1% or 1.5% cashback rate, it’s the same reward that the larger banks are going to be offering,” Von Holten says. “It allows them to be competitive.”