Speaker 1: This is Bloomberg Business Week with Carol Masser and Jason
Speaker 1: Kelly on Bloomberg Radio. Let's move to a conversation. I
Speaker 1: have been so looking forward to catching up with our
Speaker 1: next guest. She's a widely admired CEO in a business
Speaker 1: that is at the crux of so many things we
Speaker 1: care deeply about talking about. Margaret Keene, chief executive officer
Speaker 1: of Synchrony Financial, joining us on the phone from Connecticut. Margaret,
Speaker 1: how are you. I'm good. How are you doing. I'm
Speaker 1: doing very well. You and I spent some time together
Speaker 1: a few years ago now at the Economic Club of
Speaker 1: New York. It seems like a hundred years ago the
Speaker 1: world was a very different place. And I do wonder,
Speaker 1: because you have such keen insights into what's going on
Speaker 1: with the American consumer. How is the consumer doing right now? Well,
Speaker 1: you know, I think going into this it's kind of
Speaker 1: a pre pandemic. Then I guess pandemic, and kind of
Speaker 1: now we're opening up, so we're kind of seeing different fronts.
Speaker 1: I'd say, going into the pandemic, the consumer was very strong.
Speaker 1: We were we were doing really well, Sales were strong,
Speaker 1: payments were coming in. The consumer is really acting very responsibly,
Speaker 1: and we felt like we were going to have, you know,
Speaker 1: a great year. Um then the pandemic came along and obviously,
Speaker 1: you know, the initial onset of that really shut down
Speaker 1: most of the retail landscape. And you know, we saw
Speaker 1: our sales and we've said this in our earning down
Speaker 1: averaging about thirty two to thirty four percent UM. What
Speaker 1: we've seen since then, though, is definitely a bit of
Speaker 1: a comeback. Our sales are down now ten percent. Uh
Speaker 1: So certainly the consumer is um back out and shopping
Speaker 1: and uh you know, we're seeing it across the US.
Speaker 1: So it isn't even just in the states that I
Speaker 1: would say are completely open, It's it's across the board. Well,
Speaker 1: you know we're going to pay close attention to that. Yeah,
Speaker 1: I mean, because you know, it's interesting. We've been having
Speaker 1: so many conversations, certainly here at Bloomberg, you know that
Speaker 1: it feels like to some extent we're flying blind when
Speaker 1: it comes to the economy. We know the past data
Speaker 1: points looking backwards are not going to be good. We
Speaker 1: get that, right, but we are wondering about what kind
Speaker 1: of a bounce back do we get on the other side.
Speaker 1: So you're saying consumers are coming back. I mean, what
Speaker 1: kind of indications are you know, what are they spending
Speaker 1: and and you said it's up about ten percent or
Speaker 1: what can you tell us in terms of well, it's
Speaker 1: down from where it was at the beginning, so we
Speaker 1: dropped ourselves. We're at about they dropped all thirty two
Speaker 1: is then they come back. Now they're down ten percent
Speaker 1: from what they were pre pandemic. So that's a pretty
Speaker 1: big swing. Um, what I would say is, um, you know,
Speaker 1: it's the things we're reading about. You know we were
Speaker 1: talking earlier, is that the Burnstein conference. You know, for instance,
Speaker 1: power sports. We're not big in power sports. Pow power sports,
Speaker 1: cell throw up a hundred percent, So people are buying
Speaker 1: things that they can play with at home US and
Speaker 1: we're seeing things related to the home be very strong,
Speaker 1: whether that um home furnishings or or things that people
Speaker 1: are doing to fix up their home. So we're certainly
Speaker 1: seeing strengths there. Um. You know, we were talking about bicycles.
Speaker 1: Adult bicycles. You can't really get sold out. So it's
Speaker 1: really been I think what's happening with the conservatives a
Speaker 1: couple of things we we believe one is people have
Speaker 1: given up vacations. They're staying at home and fighting stay
Speaker 1: at home, so they're fixing up their homes and doing
Speaker 1: activities around the house with their children and their families.
Speaker 1: I think, uh, you know, we think that's a positive
Speaker 1: and and I think that's where consumers are spending. Obviously,
Speaker 1: you know, we have very strong online partners. We're definitely
Speaker 1: seeing online being a big part of that process as well. Um,
Speaker 1: But I you know, honestly, I think we're we're we're
Speaker 1: probably um, we're probably a bit more positive than we
Speaker 1: thought we were going to be at this point when
Speaker 1: we first started out here. Yeah, I think gives a
Speaker 1: lot of stimulus out there, and that's something we've gotta
Speaker 1: pay attention to. There's still a lot of stimulus. And
Speaker 1: I think what we've been saying is we've got to
Speaker 1: make it through this summer. See when that stimulus runs out,
Speaker 1: and then where do we where do we stand? And
Speaker 1: we probably want to have a good read and Sulser
Speaker 1: quarter And so Margaret, when you think about the retail environment,
Speaker 1: obviously so many things have been shut down. You've had
Speaker 1: well known brands UH go bankrupt, and you know, some
Speaker 1: many restructure, some may never come back. What's the net
Speaker 1: effect of that for basically sort of the world at large,
Speaker 1: but also for your business this shift to online where
Speaker 1: I know you're very active as well, but break that
Speaker 1: down for us if you can, sure, you know, I
Speaker 1: would say, Look, retail has been going through a transformation
Speaker 1: for quite a while. I think the pandemic and the
Speaker 1: fact that people have to shut their doors just accelerated
Speaker 1: some of what was going to happen over time. So
Speaker 1: we're seeing that, you know, in some of our partners
Speaker 1: as well as many other retailers that are not our partners.
Speaker 1: And I think what's happening is you're seeing retailers who
Speaker 1: are strong becoming even stronger, and I think that will continue. Um,
Speaker 1: you know, I do believe that there's been a lot
Speaker 1: of view that retail is dead. I do not believe
Speaker 1: retailer is dead. I think people like to shop. I
Speaker 1: think we will over retail, and I think the strong
Speaker 1: retailers will certainly survive this and probably be stronger in
Speaker 1: the end. I do think retail has to have a
Speaker 1: digital strategy as well. They need to be able to
Speaker 1: be where that customer is shopping. And I think from
Speaker 1: a customer behavior perspective, we certainly have seen a continued
Speaker 1: shift and an acceleration of people shopping digitally, and I
Speaker 1: think that will continue. So I think there are certain
Speaker 1: things that people may have never thought of buying online before,
Speaker 1: but of buying online and have not en comfortable with
Speaker 1: that through this process, and that's going to shift consumer
Speaker 1: behavior I think going forward, what do you think people
Speaker 1: will still shop? People will still shop. Yeah, I agree.
Speaker 1: I think it's a social thing to some extent in
Speaker 1: people enjoy actually going out and feeling merchandise. And I think,
Speaker 1: you know, maybe in New York it's going to take
Speaker 1: a little while to come back, but you know, until
Speaker 1: people feel safe safer. What are you seeing in terms
Speaker 1: of delinquencies and people's ability to actually pay their credit cards?
Speaker 1: So this is this is probably one of the more
Speaker 1: interesting things that we're trying to figure out. You know,
Speaker 1: constomers are paying their credit card So about of the
Speaker 1: customers who initially put themselves into a deferred payment status
Speaker 1: have actually come out of that and are paying their accounts.
Speaker 1: So we actually are seeing good payments right now, which
Speaker 1: is another thing that I think has us a little
Speaker 1: bit that pause to understand Why is that now? Is
Speaker 1: it the stimulus? Is it the fact that people aren't
Speaker 1: spending money elsewhere on discretionaries, so they're paying their credit
Speaker 1: cards and their their obligations. Um, you know, we have
Speaker 1: a lot of people who are receiving benefits, so is
Speaker 1: that helping. Probably all these things are helping, you know.
Speaker 1: The other is a big one is you know, people
Speaker 1: aren't driving, so gas prices are down even if they
Speaker 1: are driving, so there's extra dollars there. So right now,
Speaker 1: our our our performance in our book is is good.
Speaker 1: We're very cautious on this though, because we still believe that,
Speaker 1: you know, we got to see how people come out
Speaker 1: of this after the stimulus runs out, and more importantly,
Speaker 1: what is the job market look like, how many people
Speaker 1: are still at work. I think we're still very clauseous
Speaker 1: on this particular area. We're talking with Margaret Keene to
Speaker 1: see have Synchrony Financial. She's on the phone for Connecticut
Speaker 1: where the company is based. Margaret, you know, it's interesting
Speaker 1: what you said that that statistics customers who put themselves
Speaker 1: in a deferral payments does have come out of it?
Speaker 1: Are they paying off their balances and spending more paying
Speaker 1: off their full balances, and some are just making what
Speaker 1: their regular payment would be, but some are paying off
Speaker 1: their balances rather than than spending and increasing the balances. Yes,
Speaker 1: where seeing our balances come down as a result of that.
Speaker 1: And so that that I think has surprised us a
Speaker 1: bit because I think it just didn't you know, you know,
Speaker 1: we have modeled for all kinds of recessions. We don't
Speaker 1: really have a model for a pandemic and conserned behavior
Speaker 1: into something like this. And I think, you know, I
Speaker 1: guess the positive of this is those who have gotten
Speaker 1: stimulus are are being thoughtful about it um and possibly
Speaker 1: using that towards their payments. But I think the real
Speaker 1: test is going to be once we get through all
Speaker 1: of that stimulus, it's not there anymore, how many people
Speaker 1: are employed and what does that look like. So that's
Speaker 1: why I'm saying what I'm saying is great, Man is
Speaker 1: good now, but I'm being very cautious because we think
Speaker 1: there might be another another side of this, right, And
Speaker 1: so Margaret, when you think about sort of changing behavior
Speaker 1: going forward, you know, just getting right down to the
Speaker 1: nitty gritty of someone, you know, a human handing another
Speaker 1: human a credit card, all of a sudden, something we
Speaker 1: never thought about. We're thinking about more and more. You
Speaker 1: know that very few times I venture out, I think
Speaker 1: about that. I think about who's touching my credit card?
Speaker 1: Are there technologies that that you're working on that change
Speaker 1: the nature of how we behave going forward given that
Speaker 1: we are thinking so specifically about literally every single thing
Speaker 1: we touched. Yeah, absolutely, And I think people don't want
Speaker 1: to touch anything. And even when I do go out,
Speaker 1: if I have, if I have to hand my card
Speaker 1: to someone, I actually actually like it off after I
Speaker 1: come home, and I want it because I think you
Speaker 1: have to based on what what all the experts are saying. Uh, look,
Speaker 1: I think the technology is actually available. So I think
Speaker 1: we're we're looking at doing more contactless cards where you
Speaker 1: just have to you don't even have to, um, you know,
Speaker 1: insert it, or you just you know stoped by the
Speaker 1: actual machine. Um. What really have to shift here is
Speaker 1: and I'm sure you see this particularly in smaller businesses, UM,
Speaker 1: they need to change their point of self. So I
Speaker 1: think more businesses are shifting to that. In some cases,
Speaker 1: some of the regulation that's been passed in some of
Speaker 1: these states, as you have to do contactless, so I've
Speaker 1: even seen in the little stores I shop in here
Speaker 1: and in the town that I live in, people have
Speaker 1: made changes to their point ofself. So I think that's
Speaker 1: going to continue to happen. The technology is there, Um,
Speaker 1: it's just a question of accelerating the use of that technology.
Speaker 1: So how does that will impact you? And I also think,
Speaker 1: like in my household, we hadn't signed up for Apple Pay,
Speaker 1: but because of this environment, we're thinking, okay, less back
Speaker 1: and forth transactions where we're giving a card or doing something.
Speaker 1: We really have been thinking about this in a big way.
Speaker 1: So if more people move to platforms like that, how
Speaker 1: does it impact synchrony? Um, it's it doesn't really because
Speaker 1: we can do all those all those we can do
Speaker 1: Apple Pay. We're in Apple pay today, so you can
Speaker 1: use the Apple peg, you can use Samsung Pay. But
Speaker 1: I think also you know master Card vs are the
Speaker 1: big um, the big associations are actually moving to contact
Speaker 1: with credit cards themselves. So it could be a digital law,
Speaker 1: it could actually be the physical cards that that's contact us.
Speaker 1: So for instance, we we just we're preparing for the future.
Speaker 1: We put in on order for plastic that's going to
Speaker 1: be only contact less capable so that we're ready to
Speaker 1: roll when we we reas for cards and do things
Speaker 1: like that, because we think, as as you said, people
Speaker 1: are not going to want to touch different different points. Well, Margaret,
Speaker 1: you know, one of the things that we've talked a
Speaker 1: lot about on this program, and I think we're all
Speaker 1: learning in a very profound way, is that while the
Speaker 1: virus doesn't discriminate medically, in many ways, it does discriminate
Speaker 1: economically and socio economically, and the impact of this on
Speaker 1: all of our lives is really different depending on what
Speaker 1: you earn and sometimes what your gender is. In many cases,
Speaker 1: what have you identified and what do you think we
Speaker 1: can do about it? As we start to assess the
Speaker 1: impact that this has had societally, and especially when it
Speaker 1: comes to the economics of it. Yeah, you know, I
Speaker 1: think what what's happened in this pandemic. It's really bringing
Speaker 1: to light many of the issues social issues that have
Speaker 1: existed out there for quite a while, whether it's you know,
Speaker 1: you mentioned New York City they didn't close schools student
Speaker 1: off and you know, one of the reasons it's because
Speaker 1: of the students they received at least one or two
Speaker 1: meals there a day, right, so they knew that closing
Speaker 1: creates this other issue UM. And I think for us,
Speaker 1: it's really about how do we continue to drive our
Speaker 1: diversity and inclusion initiatives inside the company. How do we
Speaker 1: take us stands in certain areas where we're gonna going
Speaker 1: to lift people up, UM, making sure we're paying good wages,
Speaker 1: making sure you know, we're doing all the right UM
Speaker 1: activities for for us, for instance, we've been really really
Speaker 1: focused on what I call overall wellness and we've been
Speaker 1: doing a lot for employees in that area. We have
Speaker 1: diversity networks, and so we've been doing some extra um
Speaker 1: UM work groups. What with with our webinars, if you will,
Speaker 1: with our folks in both the the African American, Hispanic
Speaker 1: and even UM. You know, we have a Native American network,
Speaker 1: which as you know that that that group of folks
Speaker 1: have also been hit very hard. So we're trying to
Speaker 1: make sure that education availability UM inside our company is
Speaker 1: really very focused on those groups to really help them UM,
Speaker 1: you know, get the right support they need. But what
Speaker 1: about you know, I think about if you look at
Speaker 1: store cards, I think the average rate on it is
Speaker 1: you know or more I mean it's and I do
Speaker 1: wonder about when we think about the vulnerable folks that
Speaker 1: are part of our society often need to do a
Speaker 1: card because that's how they can afford things, but those
Speaker 1: rates often really make it difficult for them. I wonder,
Speaker 1: you know, because of what we're seeing in as a
Speaker 1: result of the pandemic, you know, how you guys might
Speaker 1: be rethinking some of that at GINE. I understand, you know,
Speaker 1: you're set, You've got a business to run, UM, but
Speaker 1: I do wonder how you think about something like that. Yeah,
Speaker 1: you know, I I think you know, we always take
Speaker 1: take you know, the rates in the process that we
Speaker 1: do into UH consideration whenever we're originating new accounts. I
Speaker 1: think part of part of how this works is really
Speaker 1: the mechanism of the rewards that people get on the
Speaker 1: card and how you pay for those rewards. If you
Speaker 1: look at most of our rewards, they're richer than what
Speaker 1: a general general purpose credit card would be UM. And
Speaker 1: you know, we we pay close attention, and you know,
Speaker 1: I don't you know, we've changed. I think there's a miscond,
Speaker 1: a little bit of a misconception that UM private Lebel
Speaker 1: credit cards are mostly UM subprime. That's actually not true.
Speaker 1: We've changed our book dramatically from the last recession, and
Speaker 1: our book is is much much higher facous than it
Speaker 1: was back then. It's uh, you know, um, I would say,
Speaker 1: I would say, you know, mid time type of customers
Speaker 1: who so your point, do need these cards? Um, And
Speaker 1: you know, we think we manage those those cards well
Speaker 1: and we treat our customers with great respect. You know,
Speaker 1: it's important for us to support the brand. And you know,
Speaker 1: when we do get customers who are in trouble, we
Speaker 1: we definitely are trying to do the right thing to
Speaker 1: help them along the way. And so, from a very
Speaker 1: practical perspective, Margaret, how does your company specifically get back
Speaker 1: to the office. I'm very sensitive about saying, you know,
Speaker 1: back to work because we know everybody's working hard, uh
Speaker 1: in many ways. But but what does the office look
Speaker 1: like for you? I believe you're probably not coming back
Speaker 1: to work until at least September? Is that right? Yeah?
Speaker 1: We put to September out there. You know. Look, I think, um,
Speaker 1: we're going to be very cautious about this. I think
Speaker 1: it's uh just responsible to make sure we have the
Speaker 1: right protocols in place before we even think about putting
Speaker 1: people back in the office. I do say in the
Speaker 1: mix of people in office versus at home is gonna
Speaker 1: dramatically change for us. I think we've learned through this
Speaker 1: process that we can work from home, you know. And
Speaker 1: I think probably the the one area that to me
Speaker 1: has been really fantastic to see is you know, we
Speaker 1: moved We moved all our call center folks to home,
Speaker 1: work at home. We had a subset of people who
Speaker 1: are working at home before the crisis, um, but we
Speaker 1: pretty much were able to move everybody home. And look,
Speaker 1: we're gonna be thoughtful, We're gonna start out with volunteers,
Speaker 1: We're going to test our processes, um. But I would
Speaker 1: say in general, I think we'll have less a lot
Speaker 1: less people in in our offices and were at home
Speaker 1: as we go through this. So we're looking at our
Speaker 1: footprint what makes sense? I mean an important part here
Speaker 1: and this is the part I think that's unknown right
Speaker 1: now that we've got to figure out, you know, is
Speaker 1: how do you keep your culture, how do you keep
Speaker 1: your identity, How do you make sure people are feeling
Speaker 1: belonged to something bigger, um and and how do we
Speaker 1: make sure we have those processes in place? Now? We
Speaker 1: had that in place where the people we had working
Speaker 1: at home. It's very different when you have seventeen thousand
Speaker 1: people working at house. So you know, we want to
Speaker 1: make sure we're doing this in a in a fawful way.
Speaker 1: I have to say that was the number. That was
Speaker 1: the number one thing that came up on a conversation
Speaker 1: I had with CEOs earlier today. It's all about culture,
Speaker 1: like how do you keep that going? So it's interesting
Speaker 1: to hear that from you as well. All right, Margaret Kane,
Speaker 1: thank you so much, really good to catch up with you.
Speaker 1: The CEO of Synchrony Financial joining us on the phone
Speaker 1: from Connecticut, A, you know, what are these companies? We've
Speaker 1: been saying this all afternoon, Carol, and some ways used
Speaker 1: to be part of ge uh everybody like so so
Speaker 1: many people touched this company and vice versas. So getting
Speaker 1: her insights into the consumer I think was interesting and
Speaker 1: I have to say some of the souf she said
Speaker 1: surprised me on the upside. Yeah, totally, you know, absolutely
Speaker 1: in terms of you know, consumers spending and where people
Speaker 1: what we're you know, where people are committing money at
Speaker 1: this point, a really great conversation