North Dallas Bank & Trust Co. has a couple of reasons for offering business debit cards. "One, to stay competitive," says Greg Niemeyer, an executive vice president at the bank. "Several banks here are at about the same stage we are," he continues. "And two, to offer more convenience for our customers. They do not have to carry cash, and it is easier than writing a business check at the place of purchase."
According to industry analysts, North Dallas Bank isn't alone. The marketing of business debit cards has picked up recently, they say. "Banks have started to market it more aggressively in the past one or two years," says Gwenn Bezard, New York-based senior analyst at Celent Communications. "It took some time for banks to realize the potential of debit cards. I think that debit cards still, for many banks, are not a product on their own - they see a business debit card as an access channel to a checking account."
For banks, though, the appeal should be logical. "It is a more efficient and more profitable payment mechanism than checks," says John Gould, director of consumer lending and bank cards at TowerGroup in Needham, Mass. "Why not migrate all payment-based environments?"
North Dallas Bank, which has four locations in the Dallas area and more than $850 million in assets, rolled out the business debit cards in late May. It plans to market them in the Dallas area, with transaction management provider Elan Financial Services - part of Minneapolis-based U.S. Bancorp - handling the technology administration. The bank will make money on the cards because, "When someone makes a purchase, we get a percentage of the sale, about 2.5 percent," Niemeyer explains.
According to Niemeyer, North Dallas Bank believes the cards' potential market includes businesses with $2 million to $20 million in sales. "They are typically family-owned businesses or small businesses," he says. "They are able to have a select group of people they want to give this card to." The bank hopes to issue about 300 cards in the next six months, Niemeyer adds, and then expand card sign-ups at the same rate as the bank's overall growth - 10 percent to 12 percent.