Community BankFinancial Institutions of all sizes can make credit card issuing a significant (target loans as 1% of assets) and profitable (target 4 – 5% net operating margin) part of their business. Community Banks are best positioned to offer qualified credit cards to their small business customers.

Credit card issuing business achieves strong financial results

Over 80% of Banks and 45% of Credit Unions do not have credit card loans or fees as part of their assets and revenue. They are missing out on a significant and high margin area of banking.

Below are results published by First Annapolis in 2017 reflecting Revenue (including fees), expense, and profitability remain favorable for credit cards with pre-tax margin of 3.2% – 4.1% in 2016 compared with overall bank average ROAs of 1%.

In 2016, average after-tax return on all assets for U.S. banks with $10 billion or more in assets was 1%. Download the report (1 page PDF).

consumer credit table

Community financial institutions have strategic advantages over many competitors from their:

  • Relationship knowledge of business, municipality, and non-profit clients
  • Low funding costs
  • Multi-product customer relationships that lower credit card loss levels
  • Local brand awareness that lowers marketing cost, increases credit card acquisition, activation and retention rates
  • Business credit cards also enhance cross-selling opportunities and greater adoption of more services, resulting in longer, “stickier” and more profitable relationships.”

Strong Profits - Heavily Fee DrivenAnother report from First Annapolis describes the “US Business Credit Cards: Strong Growth and Profitability”. Download the report (1 page PDF).

According to the report “2014 FDIC: Community Banks Remain Resilient Amid Industry Consolidation & 2012 FDIC Study”:

Community banks are vitally important sources of small loans to U.S. farms and businesses and as providers of mainstream banking services to rural communities, small towns, and urban neighborhoods that are frequently overlooked by larger banks.

In addition, there are more than 600 U.S. counties (almost one fifth of all U.S. counties) that would not have had any physical banking offices operated by FDIC-insured institutions if not for those operated by community banks.