Shifting consumer needs put new Synchrony CEO to the test
Synchrony Financial wasn’t unscathed by the pandemic, which slowed consumer spending during the first half of the year — but its mix of private-label and cobranded cards for everyday items suffered far less than other issuers' cards that emphasized luxury and travel.
Other companies also fared relatively well, and Synchrony faces a growing wave of competition from fintechs that enabled new ways for small shops to accept payments. Synchrony's incoming CEO Brian Doubles, who will replace longtime chief executive Margaret Keane when she retires April 1, must now capitalize on the bank's advantages as it shifts from recovery to growth.
The challenge for Doubles will be expanding Synchrony’s share of consumer credit spending in an increasingly tight and competitive market, where consumers have been drawn to credit card alternatives such as installment loans as a way to limit their debt.
Doubles said Synchrony isn’t directly threatened by the buy now-pay later (BNPL) trend, and it is evolving its own installment lending business.
“The credit environment is changing rapidly. Consumers want financing options to be transparent and visible throughout the shopping journey, and we’re providing all those options, including ways for retailers to keep a connection to the customer for repeat purchases,” Doubles said.
Synchrony, which operated with a 100% remote workforce through the pandemic as it launched cobranded cards with both Venmo and Verizon, is now leaning heavily on digital channels to acquire and retain customers, according to Doubles.
“We don’t do much in the travel and entertainment space, which benefited us this year given the contraction in that space during the pandemic, and we’ve reprioritized our card initiatives around how consumer behavior has changed,” he said.
The all-digital cobranded Venmo Visa card Synchrony announced in late 2019 with PayPal is rolling out gradually this year with a QR code on its face as a differentiator. Synchrony has more products in the pipeline in the near term that will emphasize digital and mobile tools, according to Doubles.
During the pandemic, the percentage of consumers applying for Synchrony’s cards through online and mobile channels surged. These now account for about 60% of all applications, up from less than half of applications a year ago.
The urgency to go digital has accelerated Synchrony’s activities to help smaller retail card customers add digital account access and features via its API-powered SyPI tool introduced five years ago, Doubles said.
The shift to digital also enables the rewards programs Synchrony uses to help merchants drive long-term loyalty, he noted.
Synchrony’s experience in lending to diverse types of consumers also provides an advantage in risk management over emerging fintechs in the booming BNPL space, he suggested.
“It’s easy to give credit away, but we’ve been in this space a long time and we’ve developed methods of scoring customers using the credit bureaus, alternative data and our own internal models,” Doubles said.
The private-label credit card industry will be a tougher business after the pandemic, which destroyed many of the stores that would normally benefit from private-label cards.
"Coming out on the other side of COVID-19, the private-label credit card business will change, with more risk and fewer retailers and restaurants," said Brian Riley, director of credit card advisory at Mercator Advisory Group.
During the pandemic, Synchrony managed to retain the Sam’s Club cobranded card program, following some legal friction with Sam’s Club parent Walmart after Synchrony lost the Walmart cobranded credit card to Capital One Financial after a 19-year run.
Synchrony tends to grow its own talent, and Doubles is a prime example, starting at an GE in 1996 after spending 16 years in retail banking at Citi. GE eventually spun off Synchrony as a separate unit in 2015.
With a background in engineering, Doubles spent years climbing the ladder at GE through various financial roles, including spending a decade as CFO, first of GE Capital Retail Finance and then Synchrony. He was named president in 2019.
When Doubles becomes Synchrony’s CEO, Margaret Keane will become executive chair of the company’s board of directors.