Synchrony’s new Pay in 4 loan borrows from newcomers buy now / pay later


With credit cards facing new buy-now / pay-later product competition, Synchrony Financial is considering launching its own short-term installment loan.

Starting in October, Synchrony’s business partners will be able to choose whether or not to offer the new loan option as part of their credit card and fundraising programs. This will allow customers to make purchases, typically less than $ 500, with an interest-free loan that they can repay in four installments.

“There is clearly consumer demand for this product, and our partners want to deliver this product,” Synchrony CEO Brian Doubles said on Thursday at the company’s Virtual Investor Day.

Synchrony CEO Brian Doubles said at an investor event on Thursday that while some of the company’s business partners will want to “dive in with both feet,” others will take a more cautious approach to buy now / pay. ready later.

Anthony Collins Photography 2018

Synchrony’s announcement comes amid a BNPL funding boom, as companies like Affirm, Klarna and Afterpay, which Square agreed to buy for $ 29 billion, charge their installment loans as an easier-to-understand alternative to credit cards.

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

One of Synchrony’s card partners, Amazon, made 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 erode the revenue Synchrony generates from its own partnership with the e-commerce giant.

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

As investors focused on the impact of the growing popularity of BNPL products on the credit card industry, some large card issuers reacted by to present installment loan options.

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

The company decided to add a “Pay in 4” option after assessing the competitive landscape and talking to partners and customers, Michael Bopp, director of growth for Synchrony, said at the company’s investor day.

Unlike some BNPL providers, Synchrony will not charge late fees to customers who miss payments, according to a company spokesperson.

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

Synchrony also offers its four installment loan option as a cheaper alternative for merchants than offers from other BNPL companies. As retailers try to drive more online purchases, they often accept lower margins on BNPL purchases than on credit card transactions.

While Synchrony’s business partners have expressed interest in BNPL, they are also “really mindful of the economics” and are careful not to part with additional income, Doubles said.

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

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