Synchrony’s new “Pay in 4” loan borrows from buy now / later paying upstarts


As credit cards face new competition from buy-it-now products, Synchrony Financial is planning to introduce its own short-term installment loan.

Starting in October, Synchrony trading partners will be able to choose whether to offer the new credit option as part of their credit card and financing programs. This allows customers to make purchases typically less than $ 500 through an interest-free loan that they can repay in four installments.

“There is clearly consumer demand for this product and our partners want to offer this product,” said Brian Doubles, CEO of Synchrony, on Thursday at the company’s virtual investor day.

Brian Doubles, CEO of Synchrony, told an investor event Thursday that while some of the company’s retail partners want to “dip both feet”, others will be more cautious about buying credit now / paying later.

Anthony Collins Photography 2018

Synchrony’s announcement comes amid a boom in BNPL funding as companies like Affirm, Klarna and Afterpay use the Square has agreed to buy settle their installment loans for 29 billion dollars as a more understandable alternative to credit cards.

Synchrony, based in Stamford, Connecticut, works on cards with a variety of retailers including Lowe’s, Crate & Barrel, Sam’s Club, Verizon and Walgreens.

One of Synchrony’s card partners, Amazon, has a splash last month by announcing a partnership with Affirm. Amazon is currently testing Affirm’s product with a limited number of customers, but over time, Affirm’s BNPL product could detract from the revenue Synchrony generates from its own partnership with the e-commerce giant.

Synchrony also offers consumer credit in partnership with PayPal in San Jose, California, a leader in the BNPL market.

As investors have focused on how the growing popularity of BNPL products could affect the credit card industry, some major card issuers have come with them introduce Installment loan options.

Synchrony, which is nearly 90 years old and originally offered financing for the purchase of General Electric appliances, is no stranger to consumer installment loans. The $ 92 billion lender currently offers installment payment options through both its credit cards and a product called SetPay, which allows buyers to split larger purchases into loans with terms ranging from three months to seven years.

The company decided to add a “Pay in 4” option after evaluating the competitive landscape and speaking with its partners and customers, Michael Bopp, Chief Growth Officer of Synchrony, said at the company’s Investor Day event.

Unlike some BNPL providers, Synchrony doesn’t charge late fees from customers who miss payments, according to a company spokesperson.

Synchrony’s competitive advantage, according to Bopp, is the “wide range of products” it can offer to dealers. He gave the example of a new customer who buys a product with a Buy It Now / Pay Later credit and then decides to open a credit card for repeat purchases.

Synchrony also bills its four-rate loan option as a cheaper alternative for merchants than the offerings of other BNPL companies. As retailers try to encourage more online shopping, they often accept lower margins on BNPL purchases than they do on credit card transactions.

While Synchrony’s retail partners have shown interest in BNPL, they also “really think about the economics” and make sure they don’t part with additional revenue, Doubles said.

Some Synchrony partners will want to “dive in” and offer BNPL loans quickly, but others could take a more cautious approach, he said.


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