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