B2B Payments

Closing The Bank/Middle Market Commercial Card Gap

The middle market can be an ideal corporate customer for a financial institution (FI).

Unlike a small business, the middle market typically holds a lower-risk profile with steady profits and strong growth. And unlike the large commercial enterprise space, the middle market doesn’t often demand immense complexity of products and services.

Yet, according to Kris Carrera, general manager and business line executive of Credit Payments at FIS, the middle market is often underserved — particularly when it comes to commercial card products. One of the biggest reasons for that gap is the middle market is difficult to define, sitting somewhere between small business and large commercial enterprise.

As such, middle-market businesses have different motivations than their smaller and larger counterparts for adopting commercial card solutions. At the same time, financial service providers cannot wield the same strategies for consumer and large enterprise card adoption when addressing their middle-market clients’ needs.

In a recent interview with PYMNTS, Carrera explored what it will take for both banks and businesses to close the middle-market commercial card gap.

Lacking the Right Product

Although the middle-market corporate can be a “sweet spot” for financial service providers, there is no standard definition of this segment. For Carrera, this business operates with between $10 million and $500 million in revenues, with commercial card adoption the smallest at the lower end of this spectrum.

Despite their size, said Carrera, these businesses continue to rely on spreadsheets to manage expenses, and use employees’ personal cards to make business purchases.

One of the largest reasons for the gap is simply a lack of product offering.

“If you look at any banking website, it’s small business, corporate or treasury, and consumer,” said Carrera. “On the FI side, we’re stuck in our traditional consumer/small business/corporate ways. There are these three different segments. But you shouldn’t shove [the middle market] into small business or commercial — you should have a third segment.”

FIs themselves, however, struggle to understand how to define the middle market. Once that occurs, they continue to face obstacles in understanding exactly what drives commercial card adoption for this customer base.

Meeting Middle-Market Needs

In the credit card arena, rewards are king, Carrera said. With consumer cards, rewards drive loyalty; with large corporates, rebates entice usage. But when it comes to the middle market, financial service providers aren’t always sure.

According to Carrera, banks must look beyond rewards to encourage middle-market adoption.

“For banks, the middle market is the sweetest spot because they don’t require so many rewards,” she said. “They’re not even asking for rebates. What they’re looking for is ease-of-use, convenience and reporting that can come out of it.”

Rewards certainly must be a part of the commercial card package when targeting middle-market firms, she noted, but the add-on benefits will be what really drives adoption. That’s particularly true as card products gain traction in areas beyond employee travel and entertainment, and into spend categories like fleet and accounts payable.

FIs have an opportunity to package a commercial card solution as a tool to address an array of middle-market businesses’ biggest challenges, not simply as a tool to gain rewards. Implementation of ePayables and virtual card capabilities that support integration with ERPs and automated spend analysis and reporting are important drivers of adoption, for example.

Issuers have a range of opportunities to add value for middle-market commercial card users, too, including in areas like cash management with features such as installment payments when a user makes a large purchase for the business, or connectivity to various loan products.

“This all makes perfect sense for the mid-market,” said Carrera. “They are savvy enough — we just really need to get a product out there.”

The Element of Education

The other major hurdle preventing middle-market adoption of commercial card products is a lack of awareness.

While FIs may not always have a commercial card tool clearly defined for the middle-market customer, this segment also lacks awareness of the opportunity for rebates and rewards, said Carrera, as well as the value-added benefits of replacing their existing processes and reliance on personal cards.

This is particularly true in verticals such as construction and manufacturing, in which businesses “really just don’t see the value of a purchasing card,” she said, adding that financial service providers must step up to the plate and talk to their middle-market clients about the benefits and opportunities of commercial cards.

However, none of this education and awareness can occur until the commercial card issuing community begins to develop products tailor-made to the middle market — rather than forcing these businesses to fit into a small business or large enterprise card category, she warned.

“Yes, banks need to be pushing awareness,” Carrera said. “But they need to have a product. We have to start talking about the middle market, and the difference of the middle market. FIs don’t address this customer in a way they want to be talked to, but there is so much opportunity there.”



The September 2020 Leveraging The Digital Banking Shift Study, PYMNTS examines consumers’ growing use of online and mobile tools to open and manage accounts as well as the factors that are paramount in building and maintaining trust in the current economic environment. The report is based on a survey of nearly 2,200 account-holding U.S. consumers.