Plastic cards will be gone in five years: Synchrony CEO

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The days of swiping plastic are rapidly coming to an end.

That’s according to Margaret Keane, president and CEO of Synchrony Financial, the industry’s largest issuer of store cards, who said during a public appearance Tuesday that she expects credit cards to go by the wayside as soon as five years from now.

Asked whether she thought plastic cards would meet their demise within the next decade, Keane said she expects the transition to occur much faster than that.

“It’s going to happen soon. I’m surprised it hasn’t happened, but I think some of the infrastructure and the environment has to shift,” Keane said, speaking at the Economic Club of New York in midtown Manhattan. “But you would hope that five to eight years from now, you won’t have plastic.”

Getting personal

Synchony Financial is exploring ways to use customer data to help retailers create targeted ads. Young customers, in particular, “love that you know who they are,” said Margaret Keane, president and CEO.

Rather than swiping their cards, consumers will make everyday payments using their cell phone or some other personal device, Keane said.

Discussing the investments that Synchrony is making in technology, Keane — one of American Banker’s Most Powerful Women in Finance — said her company is exploring ways to use the data it collects on consumer spending to help its retail partners sell products through targeted advertising.

“Our dream is, sometime in the future, we know that you like the cashmere sweaters at Banana Republic,” Keane said, offering an example. “Then we can say, ‘We know that you like them because you bought them before.’ We can say, ‘They just got new colors in, and by the way, you have $50 in rewards.’”

Banana Republic is one of Synchony’s white-label credit card partners.

Keane added that Synchrony would give customers a way to opt out of personalized ads, but, she said, younger customers — or “digital natives,” who have grown up with cell phones — prefer targeted promotional material.

“They love that you know who they are,” she said.

Keane’s comments about the evolution of payments and retail marketing come just months after Walmart decided not to renew its partnership with her $100 billion-asset company, choosing to ink a deal with Capital One instead.

News of the split, announced in mid-July, sent shares of Stamford, Conn., company tumbling.

Profits at Synchrony rose 21% during the third quarter from a year earlier, to $671 million, thanks to a mix of higher average yields and lower taxes.

During the appearance Tuesday, Keane, who began her career in the collections department at Citigroup, was asked about the state of consumer credit. Synchrony, notably, has tightened its underwriting standards over the past year, after reporting an unexpected rise in the charge-offs in mid-2017.

Charge-offs as a percentage of average loans were mostly flat as of Sep. 30 from a year earlier, increasing by just two basis points, to 4.97%.

Keane said that that macroeconomic data, such as the low unemployment rate, show that consumers are in a good position to keep up with their monthly bills.

“If you look at the general metrics, the consumer is good,” she said.

Still, she warned about the long-term impact of economic inequality. Describing her company as a lender “to the spectrum of America,” she said she has observed that lower-earning consumers aren’t sharing in the benefits of an otherwise healthy economy.

“I do think there is a bit of a have-and-have not in the economy, and I think that people on the edge — there are more of them,” Keane said.

Asked how economic inequality manifests itself in her business, Keane — who said she still sometimes listens to customer service calls — said many of the questions customers have been asking recently revolve around how much available credit they have left to spend.

“It’s someone calling up and asking, ‘How much is the open line on my credit card?’ because it means they’re trying to get to their next paycheck,” Keane said.


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