November 19, 2015
Synchrony Financial is one of the top consumer financial services companies in the US, becoming a standalone entity as it separates from GE. It is the largest provider of private-label credit cards in the US based on purchase volume and receivables. Yesterday was a momentous day for the company as its executive leadership team rang the bell at the NYSE with its stock offering being the third-largest in history (behind Alibaba and AIG). The company sets itself apart by its ability to drive engagement, delivering deep differentiation, integration and omnichannel capabilities. Synchrony’s programs do more than fund the flow of goods and services between business customers and their consumers such as store credit cards to loyalty programs, analytics to marketing, the company brings its expertise to build relationships that last.
The LTP team had the pleasure of meeting CIO Carol Juel and CMO Toni White.
To start with, Carol shared with the LTP team the way she sees the private label card as a market:
Private label cards are a key part of a retailer’s strategy. At Synchrony we own the closed loop network that cards are processed on. And because you are in that network, there is a significant amount of data that can travel in that network. We describe our business as B2B2C. We have integrated teams that are co-located with our retail partners, and we are fully integrate with technology, marketing—we work to understand the challenges that retailers are facing. All of that really helps to grow the programs. That is tremendously valuable for how we think about the investments we make, the products we make, the technology we develop, the technology we invest in. That is how we drive innovation for our company, our partners and consumers.
Carol explained the way the business is organized with three go-to-market platforms.
We have our retail card platform, which includes private label credit cards and patented Dual Cards™ for our largest 21 retailers. We have Payment Solutions, which includes private label credit cards and customized credit programs for national and regional retailers, manufacturers, buying groups and industry associations across a number of verticals. And our CareCredit platform provides financing for elective healthcare services such as dental, veterinary, cosmetic, vision and audiology. All of that is 300,000 points-of-sale across the United States.
The LTP team brought up the topic of Apple Pay, Samsung Pay, CurrentC, Android Pay and the emerging power of the alternative payments systems. Responding to that, Carol said, At Synchrony, we are mobile-wallet agnostic. We want to make sure our cards work in all wallets and we’re working with all of the providers. For Apple Pay, we have launched our BP Dual Card and we are working on the private label card for JCPenney. When you look at private label in all of these wallets, the problems that need to be solved are tokenization and routing. You have to come up with a solution for private label to make those work. Private label cards within our Payment Solutions portfolio can be provisioned and those cards can be used to pay with Samsung Pay. We are working with the Samsung Pay team to do that. We are also working to enable private label for CurrentC and Android Pay.
Synchrony has a good amount of experience working with Apple Pay, Samsung Pay and other wallets, which is very interesting to learn about. However, there is another side of the story: the customer. Being a B2B2C company requires consideration of the end-user needs and preferences. Explaining the trends from retailers in terms of end-user demands for private-label credit cards, Carol emphasized that the private label is a very important part of a retailer’s business because of the value of the customer with a private label card. Those customers are more loyal; they are customers who spend more and they are more engaged. When a retailer has a card that customers carry in their wallets and retailers have an opportunity to market those cards to customers to engage with them through various channels, retailers can build a very active consumer map. As Carol mentioned, the upside for retailers is substantial and multi-layered.
Synchrony’s growth is very symbiotic with the partners the company provides solutions for. The core value Synchrony has for the partners is the ability to drive sales and offer more efficiency because of the rich data that Synchrony receives. The company is able to deliver very targeted offers based on the analytics. Leveraging the data to grow sales and relationships is extremely important, added Carol.
Innovation was among the key topics we touched upon in our conversation. A data and analytics-focused company like Synchrony sees innovation as a crucial part of the business. Carol shared her thoughts on the subject and the way Synchrony is involved in innovating in this space:
We have made significant investments over the years and are innovating with analytics. We have an innovation lab based in our Stamford, CT headquarters that focuses on mobile solutions and we have recently launched an innovation lab in Chicago that is really focused on data analytics.
I always say that innovation in mobile is a lot easier for people to understand. You are building a product: you can understand the output. People can actually see, feel and touch it. Innovation in data is a little more challenging because you are actually mining data, you are building it in real time, looking at real-time unstructured data. It is not a product, but the insight that you are deriving from that will be driven to the products that you build. That is the connection point. We have been investing and building the next generation of analytics.
The way Synchrony collects data is also a part of the innovative development and focus of the company. A great deal of rich data comes from the transactions on the company’s closed-loop network and the direct settlement of those transactions, with additional data from other sources, including some retail partners who share data with Synchrony. And that is the unique position of the company: the ability to combine the data sources and marry them together to drive hugely impactful insights. Synchrony is developing a number of use cases, including its Next Best Offer project, which aims to analyze data about a consumer’s shopping habits and present relevant discount or loyalty offers in real-time. (See image below)
Moreover, being serious about the innovation, Synchrony is involved in the accelerator space and started working with an incubator in New York through the partnership fund from New York, which is a financial services shark tank. The LTP team happened to be familiar with the incubator Carol spoke about: the FinTech Innovation Lab.
Elaborating on the activity in the startup space, Carol added:
We have our own financial technology funnel that is part of our innovation strategy. There are either companies with interesting technology with some applicability to what we are doing or a potential investment opportunity at some point. That’s how we found LoopPay, similar to the way we found GPShopper, which builds mobile applications for retailers. There is an interesting integration of applications for retailers and the integration of mobile payments. This is an area we are really expanding to because we want to get to that small company space.
We also asked our favorite question on APIs. In particular, open APIs. Explaining the reasons why Synchrony has not opened shop in that space and why it doesn’t give open access to its APIs, Carol mentioned the nature of the highly regulated financial industry that requires companies to be careful and knowledgeable about their third parties and those who access the APIs. However, the company is certainly looking into the ways to benefit from open APIs with minimized risks.
The end of the conversation with Carol was about the company's announcement at Money20/20. A week prior to the conference, Synchrony announced the launch of a mobile app for CarCareONE, a network of 22,000 automotive merchants to engage with their customers wherever they are. At Money20/20, the company announced the launch of CareCredit’s native app, allowing patients of CareCredit’s healthcare providers to manage their accounts and financing via their mobile devices. As Carol shared, Synchrony has done a lot of different pilots in different areas to see how they can use technology to drive adoption and engagement.
After the interview with Carol, we met with Toni White, who demonstrated the engaging experience Synchrony provides to the digital customer, starting with her insights on the way Synchrony thinks about the shopping experience at the highest level:
We are combining the analytics with the shopping experience and constantly measuring and evaluating to make sure we are presenting the right offers to customers. That is something we have been focused on at Synchrony Financial.
Elaborating on the ways shopping is evolving, Toni presented different perspectives on traditional cards, discussed whether she thinks they will become obsolete or not, and explained how Synchrony improves the shopping experience.
You have brands today that don't issue plastic cards, but are actually considering issuing a plastic card because of the branding opportunity it presents. A lot of customers want that piece of plastic—they want that brand. However, I do think that millennials are certainly much more comfortable with paying with their phones. For us, in some cases, because we are wallet-agnostic, we think that any of the providers that are out there can provide a great user experience as long as it's simple, safe and secure. Security is still number one concern based on our customer research. For us at Synchrony, the biggest questions are what do customers buy, how do they like to pay, what channel are they buying on, and then how can we customize the relevant content to present them with the rewards they want. If you have a rewards program with us, you can find in-store exactly how many points you have; you can actually redeem the points in-store by showing your phone and scanning a barcode, for instance. And we are integrating that experience so that customers can customize it too. Not everyone wants points; there are also experiential rewards. We process a billion transactions a year across industries, and for us, it is about understanding the insights that data drives and how to turn it into actionable marketing that benefits our partners and customers.
In order to understand the beauty of the solutions Synchrony provides and the way the company works with clients, Toni explained it using the example:
In some cases, our partners like to share their data with us, and not only credit card data, but the retail data as well. The reason they do that is because we are also designing their loyalty program. So even though a retailer’s private label cards may have a 30% credit penetration, meaning 30% of sales are on their cards, 70% are not. So that partner might come to us saying that they see their credit penetration increasing every year, but the loyalty rates are not increasing in the same way. We can then work with them to design their loyalty program and the power of the solution we can provide is the integration of the credit cards and loyalty program. The real beauty here is to understand which customers are spending more at the retailer and are right for a card so that we can deliver a tailored offer. We then see response rates increase.
Synchrony does a lot of its analytics in-house and has also invested in data visualization tools and training associates, especially in the Chicago analytics Innovation Station. The external data that the company is sourcing is demographic, psychographic, etc. For incorporating that data, Synchrony partners with external data providers that have rich data streams and allow a holistic look at customers. (See ‘Next Best Offer’ graphic above.)
Toni walked the LTP team through the way Synchrony affects the in-store experience:
So the customer is in the store and wants to buy something he needs credit for. We already have an application process (online or mobile), which is fast and easy. But it still requires typing in a lot of information. What we are demoing here is the concept of popping data into the application through means other than just typing.
Interestingly, Synchrony uses Mitek technology for this experience. We have covered that topic earlier at LTP.
The information necessary for the credit application can be captured with a picture a shopper takes of his/her driver’s license. There are many other ways to get that data, but we want to make it as easy as possible to fill out the form and it allows an instant credit decision. The product we have right now is embedded in the retailer’s app, but it is a website that we host and run, Toni continued.
Moving to the next topic, Toni explained what it means to influence the sale:
A lot of shopping experiences right now are around retailers presenting current offers, but not including credit offers. We see a big opportunity to work on highlighting services so that our retailers could present offers and information about rewards to add to the customer’s shopping experience. It has a great impact on the shopping experience: when a customer sees that she has a $20 reward certificate, she is going to spend it. But we need to make sure that she is aware of that certificate.
Synchrony Financial has just fully separated from GE, and Carol also shared the amount of work involved and the excitement as the company became independent and focused on driving growth through its technology.
We have built out our new data centers, connected all of our clients and migrated all of our systems. It has been a busy time, but it has laid the foundation for our growth. What we are excited about is the opportunity to take all we had from GE and make technology-based decisions that are unique and specific for Synchrony Financial versus a larger company like GE. The decisions that we have been making in the technology space around the way we will run and operate the company are very exciting. Our GE history coupled with the excitement of being a new standalone entity focused on innovation is a wonderfully unique experience, concluded Carol.