Businessweek Talks- Synchrony CEO Margaret Keane

How are you doing. I'm doing very well. You and I spent some time together a few years ago now at the Economic Club of New York. It seems like a hundred years ago. The world was a very different place. And I do wonder, because you have such keen insights into what's going on with the American consumer. How is

the consumer doing right now? Well, you know, I think going into this is kind of a pre pandemic, and I guess pandemic and kind of now we're opening up, so we're kind of seeing different fronts, i'd say, going into a pandemic. The consumer was very strong. We were we were doing really well, Sales were strong, payments were coming in. The consumer is really acting very responsibly, and we felt like we were going to have, you know,

a great year. Um, then the pandemic came along and obviously, you know, the initial onset of that really shut down most of the retail landscape. And you know, we saw our sales and we've said this in our earning down averaging about thirty two to thirty four percent UM. What we've seen since then, though, is definitely a bit of a comeback. Our sales are down now ten percent. Uh So certainly the consumer is um back out and shopping, and uh you know, we're seeing it across the US.

So it isn't even just in the states that I would say are completely open, It's it's across the board. Well that's you know, we're going to pay close attention to that. Yeah, I mean, because you know, it's interesting. We've been having some new conversations, certainly here at Bloomberg. You know that it feels like to some extent we're flying blind when it comes to the economy. We know the past data points looking backwards are not going to

be good. We get that, right, but we are wondering about what kind of a bounce back do we get on the other side. So you're saying consumers are coming back. I mean, what kind of indications are you know, what are they spending and and you said it's up about ten percent or what can you tell us in terms of well, it's down from where it was at the beginning,

so we dropped ourselves. We're at about they dropped all thirty two is then they come back now they're down ten percent from what they were pre pandemic, So that's a pretty big swing. Um, what I would say is, um, you know, it's the things we're reading about. You know we were talking earlier, is that the Burnstein conference. You know, for instance, power sports, we're not big in power sports.

POW power sports sales are off a hundred percents, so people are buying things that they can play with at home US and we're seeing things related to the home be very strong, whether that um home furnishings or or things that people are doing to fix up their home. So we're certainly seeing strengths there. Um. You know, we were talking about bicycles. Adult bicycles. You can't really get sold out. So it's really been I think what's happening with the conservatives a couple of things we we believe

One is people have given up vacations. They're staying at home and finding stay at home so they're fixing up their homes and doing activities around the house with their children and their families. I think, uh, you know, we think that's a positive and and I think that's where consumers are spending. Obviously, you know, we have very strong online partners. We're definitely seeing online being a big part

of that process as well. Um, but I you know, honestly, I think we're we're we're probably um, we're probably a bit more positive than we thought we were going to be at this point when we first it out here. Yeah, I think gives a lot of stimulus out there, and that's something we've got to pay attention to. There's still a lot of stimulus. And I think what we've been saying is we've got to make it through this summer. See when that stimulus runs out, and then where do

we where do we stand? And we probably want to have a good read and sulser quarter And so Margaret, when you think about the retail environment, obviously, so many things have been shut down. You've had well known brands UH go bankrupt, and you know, some many restructure, some

may never come back. What's the net effect of that for basically sort of the world at large, but also for your business this shift to online where I know you're very active as well, but break that down for us if you can, sure, you know, I would say, Look, retail has been going through a transformation for quite a while. I think the pandemic and the fact that people have to shut their doors just accelerated some of what was

going to happen over time. So we're seeing that, you know, in some of our partners as well as many the retailers that are not our partners. And I think what's happening is you're seeing retailers who are strong becoming even stronger, and I think that will continue. Um. You know, I do believe that there's been a lot of view that retail is dead. I do not believe retailer is dead. I think people like to shop. I think we will over retail, and I think the strong retailers will certainly

survive this and probably be stronger in the end. I do think retail has to have a digital strategy as well. They need to be able to be where that customer is shopping, and I think from a customer behavior perspective. We certainly have seen a continued shift and an acceleration of people shopping digitally, and I think that will continue.

So I think there are certain things that people may have never thought of buying online before, but of buying online and have not been comfortable with that through this process, and that's going to shift consumer behavior. I think going forward, what do you think people will still shop? People will still shop. Yeah, I agree. I think it's a social thing to some extent, and people enjoy actually going out

and feeling merchandise. And I think, you know, maybe in New York it's going to take a little while to come back, but you know, until people feel safe safer. What are you seeing in terms of delinquencies and people's ability to actually pay their credit cards? So this is this is probably one of the more interesting things that

we're trying to figure out. You know, consumers are paying their credit card so about of the customers who initially put themselves into a deferred payment status have actually come out of that and are paying their accounts. So we actually are seeing good payments right now, which is another thing that I think has us a little bit that pause to understand why is that now? Is it the stimulus?

Is it the fact that people aren't spending money elsewhere on discretionaries, so they're paying their credit cards and their their obligations. Um, you know, we have a lot of people who are receiving benefits, so is that helping. Probably all these things are helping, you know. The other is a big one is you know, people aren't driving, so gas prices are down even if they are driving, so this extra dollars there. So right now, our our our

performance in our book is is good. We're very cautious on this though, because we still believe that, you know, we got to see how people come out of this after the stimulus runs out, and more importantly, what is the job market look like, how many people are still at work. I think we're still very clautious on this particular area. We're talking with Margaret Keene to see have Synchrony Financial. She's on the phone for Connecticut where the

company is based. Margaret, you know, it's interesting what you said that that statistics customers who put themselves in a deferral payments does have come out of it? Are they paying off their balances and spending more paying off their full balances? And some are just making what their regular payment would be, but some are paying off their balances

rather than than spending and increasing the balances. Yes, where seeing our balances come down as a result of that, And so that that I think have surprised us a bit because I think we just didn't, you know, you know, we have modeled for all kinds of recessions. We don't really have a model for a pandemic and conserned behavior into something like this. And I think, you know, I guess the positive of this is those who have gotten stimulus are are being thoughtful about it um and possibly

using that towards their payments. But I think the real test is going to be once we get through all of that stimulus, it's not there anymore, how many people

are employed and what does that look like. So that's why I'm saying what I'm saying is great, man is good now, but I'm being very cautious because we think there might be another another side of this, right, And so Margaret, when you think about sort of changing behavior going forward, you know, just getting right down to the nitty gritty of someone, you know, a human handing another human a credit card. All of a sudden, something we

never thought about. We're thinking about more and more. You know, the very few times I venture out, I think about that, I think about who's touching my credit card? Are there technologies that that you're working on that change the nature of how we behave going forward given that we are thinking so specifically about literally every single thing we touched. Yeah. Absolutely.

And I think people don't want to touch anything. And even when I do go out, if I have if I have to hand my card to someone, I actually actually like it off after I come home and I on it because I think you have to based on what what all the experts are saying. Uh, look, I think the technology is actually available. So I think we're we're looking at doing more contactless cards where you just have to you don't even have to, um, you know, insert it or you just you know, stop it by

the actual machine. UM. What really have to shift here is and I'm sure you see this particularly in smaller businesses, UM, they need to change their point of sale. So I think more businesses are shifting to that. In some cases, some of the regulation that's sent has in some of these things is you have to do contact less. So I've even seen in the little stories I shop in here and in the town that I live in, people have made changes to their point ofself. So I think

that's going to continue to happen. The technology is there, um, it's just a question of accelerating the use of that technology. So how does that all impact you? And I also think, like in my household, we hadn't signed up for Apple Pay, but because of this environment, we're thinking, okay, less back and forth transactions where we're giving a card or doing something. We really have been thinking about this in a big way. So if more people move to platforms like that, how

does it impact synchrony. Um, It's it doesn't really because we can do all those all those we can do Apple Pay. We're in Apple pay today, so you can use the Apple peg, you can use Samsung Pay. But I think also you know master card vs are the big um, the big associations are actually moving to contact with credit cards themselves. So it could be a digital wall, it could actually be the physical cards that that's contactless. So France sense, we we just we're preparing for the future.

We put in on order for plastic that's going to be only contact less capable, so that we're ready to roll when we we reis for cards and their things like that, because we think, as as you said, people are not going to want to touch different different points.

So Margaret, you know, one of the things that we've talked a lot about on this program, and I think we're all learning in a very profound way, is that while the virus doesn't discriminate medically in many ways, it does discriminate economically and socio economically, and the impact of this on all of our lives is really different depending on what you earn and sometimes what your gender is. In many cases, what have you identified and what do

you think we can do about it? As we start to assess the impact that this has had societally, and especially when it comes to the economics of it. Yeah, you know, I think what what's happened in the pandemic.

It's really bringing to light many of the issues social issues that have existed out there for quite a while, whether it's you know, you mentioned New York City they didn't close schools student en off and you know one of the reasons it's because of the students they received at least one or two meals there a day, right, so they knew that clothing creates this other issue UM. And I think for us, it's really about how do we continue to drive our diversity and inclusion initiatives inside

the company. How do we take us stands in certain areas where we're going to lift people up UM, making sure we're paying good wages, making sure you know, we're doing all the right UM activities for For us, for instance, we've been really really focused on what I call overall wellness and we've been doing a lot for employees in that area. We have diversity networks, and so we've been doing some extra UM UM work groups. What with with our webinars, if you will, with all folks in both

the the African American, Hispanic and even UM. You know, we have a Native American network, which as we know that that that group of folks have also been hit very hard. So we're trying to make sure that education availability UM inside our company is really very focused on those groups to really help them UM you know, get

the right support they need. But what about you know, I think about if you look at store cards, I think the average rate on it is you know or more I mean it's And I do wonder about when we think about the vulnerable folks that are part of our society often need to do a card because that's how they can afford things, but those rates often really

make it difficult for them. I wonder, you know, because of what we're seeing in as a result of the pandemic, you know how you guys might be rethinking some of that strategy. And I understand, you know, you're set, You've got a business to run, UM, but I do wonder how you think about something like that. Yeah, you know, I I think you know, we always take take you know, the rates in the process that we do into UH

consideration whenever we're originating new accounts. I think part of part of how this works is really the mechanism of the rewards that people get on the card and how you pay for those rewards. If you look at most of our rewards, they're richer than what a general general purpose credit card would be UM. And you know, we we pay close attention, and you know, I don't you know, we've changed. I think there's a miscond a little bit of a misconception that UM private Lebel credit cards are

mostly UM sub SubTime. That's actually not true. We've changed our book dramatically from the last recession, and our book is is much much higher cycles than it was back then. It's uh, you know, um, I would say, I would say, you know, midprime type of customers who, so your point, do need these cards, um, And you know, we think we manage those those cards well and we treat our customers with great respect. You know, it's important for us

to support the brand. And you know, when we do get customers who are in trouble, we we definitely are trying to do the right thing to help them along the way. And so, from a very practical perspective, Margaret, how does your company specifically get back to the office. I'm very sensitive about saying, you know, back to work, because we know everybody's working hard, uh in many ways. But but what does the office look like for you? I believe you're probably not coming back to work until

at least September, Is that right? Yeah? We put to September out there. You know. Look, I think, um, we're going to be very cautious about this. I think it's uh just responsible to make sure we have the right protocols in place before we even think about putting people back in the office. I do think the mix of people in office versus at home has been a dramatically change for us. I think we've learned through this process

that we can work from home, you know. And I think probably the the one area that to me has been really fantastic to see is, you know, we moved We moved all our call center folks to home, work at home. We had a subset of people who are working at home before the crisis, um, but we pretty much were able to move everybody home. And look, we're gonna be thoughful, we're gonna start out with volunteers, We're

going to test our processes, um. But I would say in general, I think we'll have less a lot less people in in our offices and more at home as we go through this. So we're looking at our footprint what makes sense? I mean an important part here, and this is the part I think that's unknown right now that we've got to figure out, you know, is how do you keep your culture, how do you keep your identity? How do you make sure people are feeling belonged to

something bigger? Um and and how do we make sure we have those processes in place? Now? We had that in place where the thousand people we had worked at home. It's very different when you have seventeen thousand people working at house. So you know, we want to make sure we're doing this in a in a fawful way. I have to say that was the number. That was the number one thing that came up on a conversation I had with CEOs earlier today. It's all about culture, like

how do you keep that going? So it's interesting to hear that from you as well. All right, Margaret King, thank you so much, really good to catch up with you. The CEO of Synchrony Financial joining us on the phone from Connecticut, A. You know, what are these companies? We've been saying this all afternoon, Carol, and some ways used to be part of ge uh everybody like so so

many people touch this company and vice versas. So getting her insights into the consumer I think was interesting, and I have to say some of the stuff she said surprised me. On the upside, Yeah, totally, you know, absolutely in terms of you know, consumers spending and where people where, you know, where people are committing money at this point, a really great conversation