Bread Financial Holdings, Inc. (BFH) Earnings Call Transcript & Summary

All right. So next up, we're excited to welcome Perry Beberman. He's CFO of Bread Financial. He has more than 30 years of experience in the industry. Wow, it's a long time. He joined Bread back in 2021, and he's helped rebrand and transition Alliance Data to Bread Financial. So please welcome me -- in welcoming Perry.

I'm going to -- I started every one of these sessions with the looming risk of what's happening with the economy. Obviously, it's really tumultuous time. People are trying to figure out direction. Maybe you could give us an update on sort of what you're seeing in the portfolio?

Yes, I think to what -- whatever you wants to know is what's to come next. And so when we started to think about what's happening with the economy and you wind it back to the past year, we knew there's going to be normalization with consumers as they got back to their normal spend patterns, they were able to travel again and you started to see the wind down of some of the effects of stimulus meaning that they have these, I'll say, excess savings. And so you start to see some of the saving rates come down and you're starting to see consumer debt come back up as that's sort of like a reversion to the mean. What I think unique about this environment is -- and what we've been watching is the impact inflation is having on the broad base of the consumer. And think about middle income, moderate income and lower income families. That's who's most impacted is a regressive tax. And hence, that's why we know the Fed is so focused on trying to get inflation back under control. And what's unique about this environment is it's a job full environment where unemployment has remained very low, yet inflation is creating pressure. What I refer to is it's like the economy has a cold. It's the entire portfolio has little bit of a cold, doesn't feel well. So as soon as inflation gets under control, they'll obviously be a lot better. But what's watchful for is then does unemployment start to creep in, in the back part of the year. As it relates to what we're seeing, you are seeing a deceleration of spend, not surprising as consumers are making choices to spend less to try to manage their income flow as real job growth -- real wage growth hasn't kept up with inflation. We're watching a little bit of transition from discretionary spend to nondiscretionary spend. You're seeing some maybe brand to off-brand spend. So those are things that are -- consumers are trying to be responsible, but there's no question when you listen to collections, delinquencies are starting to go up. Leverage is coming back up with this population, is they're trying to make things work and it's -- this inflation is real. It's tough.

How would -- so like you've obviously done this for a very long time. I've covered this space for a very long time. It's always that credit follows the employment trends. Understanding that inflation has not been as big a factor as it's been in the past, but given that incomes are growing too, shouldn't that be helping offset some of that pain on inflation? Or is there something else underneath at all?

And that's what is unique about this. And I talk about this a lot when we think about what's the loss outlook for the future. When we look at past cycles, to your point, it's been unemployment led. So unemployment is a leading indicator of future loss. When someone loses a job, that's a stress event where they run out of cash, they can no longer pay their bills, they go bad. And so when I refer to the portfolio has a cold, all right, everybody is feeling it. When someone loses their job, it's that extra 3% of the people that now feel that significant stress they can't pay. So this is different. You're right. I mean I've been at this for over 30 years. And same with our credit models, loss models, all industry models, if anyone tells anything different. I'm not sure they're being entirely truthful because models are calibrated on past performance. And we haven't had data and credit card -- and the credit card data available to us that have gone through these high periods of inflation. So this is different, which is where I don't know if this is one of the things you're going to ask about later is like when you think about the reserving that we do, when you're trying to figure out "hey, what might things look like?" Well, you don't know because it's not like the unemployment projections that high in our baseline, but this -- it is inflation environment is what has me most concerned is, "hey, how long can the consumer hold on?" How long does it take for the Fed to get inflation under control to give relief to the consumers.

So how are you managing the business in the backdrop of this? Like what are you doing differently than you were doing 6 months ago for example?

Yes. So just like you would in any credit environment, you've taken a number of factors as you're managing credit. We have a very seasoned credit management team, sophisticated tools, you're looking at lots of different cohorts and variables, not just existing consumer behavior. Are you seeing any change in their payment patterns? Any change in their spend patterns? Any change in their balances both on us but also off us when you look at Bureau attributes? And you take those factors into consideration and you adjust line. So whether it's when you're issuing new credit, you were in the business of low and grow. You'll go with a lower initial line assignment. And as they demonstrate good behavior -- good payment behavior, you can grow that line over time. Now you're a little more cautious with that line. And similarly, for existing accounts, line -- management line increase that I just talked about. You may not do as much of those. You also do some risk detection where perhaps you have to reduce lines based on things like that to reduce exposure. So it's very active, but that's in any part of the cycle, you're constantly tuning that. So there's nothing that you've had to do wholesale, but it's something that certainly you're watched for. And you're also, I'll say, contracting a little bit on the edges. So if you look at our growth outlook for the year, we pulled that back some, recognizing the environment we're in, both from a consumer demand, their spend as well as our credit strategies.

Can you talk about just how different the portfolio looks today maybe even compared to when you joined and maybe even slightly ahead of -- before that? I mean it seems like you have had an evolution in the portfolio more upmarket given you have more co-brand for example. Maybe if you can just talk about that a little bit?

Yes. So when I joined, we were in the final stage of what I'll call business transformation to jettison or spin off the last, I'll say, noncore business as it related to our payment space. And now it was focused on the business and space that we're in, which is largely credit card payment solutions and direct-to-consumer savings. So the portfolio used to be predominantly private label. There was no co-brand, general purpose card. And now over time, the portfolio today sits around a little over 50% co-brand general purpose cards. So that's a big shift from where it was now with the BJ's portfolio going out, the numbers will shift around. But that's -- if you think about directionally where things have gone, that should continue to then migrate back because general purpose spend, I'll say, helps you diversify your spend patterns and you're not as reliant, I'll say, brick-and-mortar retailers. So that's a big change from where this company has been in the past. Couple that with other diversified lending instruments like installment lending. So the buy now, pay later purchase of Bread had 2 components to it. There's an installment loan component, and there's the split pay. And so that completed, I'll say, the product suite for the company.

Got it. And so if we were to move into a period where the macro is more challenged, what kind of levers do you have at your disposal outside of just underwriting, I mean, the kind of stuff you're talking about. Maybe just on the expense side, other sort of financial levers. Maybe you can just walk us through those?

Yes. So when you think about on to periods like this, you do throttle your growth, right? Because you've got to figure out -- you're still trying to make sure you're growing responsibly. And I've seen companies over the years take different tactics through it, where some just grow right on through it. And sometimes they're right. Sometimes they're really wrong. So for us, it's just actively managing, like I talked about earlier, with every underwriting decision you make based on the environment you have, you take a -- what we do is we take a stressed approach at the time of underwriting. So we try to stress each account for about 50% increase in losses and does it still hurdle. And so that's an important factor in terms of how we look at it. So you don't turn off underwriting completely, but we'll pull back on the direct-to-consumer marketing. I'll say this, too, we're also conservative with the way we look at risk scores, the Vantage scores. During COVID, when the stimulus came, you saw this period of elevated inflated risk score. So all the consumers' risk score has got a little bit better. We didn't take that -- we knew that was a head fake because as soon as you got past that, and consumers reverse -- I'll say reversion to the mean that those will come back down. And that's exactly what you saw through normalization. Now I think you're past the period of normalization for moderate middle income Americans, and now you're starting to feel that a little bit of erosion on FICO scores, risk scores due to inflation impacts. But you just -- you do -- you throw up and we're pulling back on market a little bit right now in credit strategies. We're not chasing growth.

Yes. It's interesting because some of the issuers are still growing at a pretty nice rate despite sort of the choppy backdrop because they're pretty -- they have high conviction that the economy is still on solid footing, which is interesting to me?

Yes, and it is. It's on solid footing, but it's also where do you lend, right? So we're more of a full spectrum lender. If we were focused on super prime and high prime, they're basically unaffected by this, right? They're feeling like the wages keep going up, they can handle inflation without a blip. It's more middle income and moderate income families that are really feeling the pain of inflation. I think you've heard economists talk about a K recovery. Well, we're past the stage of recovery. So I think we're in this K economy, and we'll see how this plays out. But that's kind of where I can see where there's different views on it.

That makes sense. Maybe we could talk about the other topic that's sort of the elephant in the room, which is the CFPB's proposal around credit card late fees. I know you've talked about it a little bit in terms of how you can make adjustments. Maybe just walk us through where you're at right now and how you intend to sort of execute until we get to a final proposal?

Yes. I think as we think about the CFPB proposal, what I'd tell you is, as a company, we remain very compliant with all the regulations that are out there. Similarly, when we look at the buy now, pay later space, we operate as a bank. We make sure we're compliant with all those rules and regulations. Similarly, as it relates to late fees, today, we apply the rules that the CFPB has governed through the safe harbor fees. While we don't necessarily agree with the proposal that is out there in terms of the fee structure, there's -- we're going to work through it. We'll work with them. And I'll say the other participants to come up with something that hopefully is fair at all. Again, when you think about late fees, the #1 reason consumers pay on time is to avoid a late fee. So the fee needs to be enough to be a deterrent. And as it relates to -- if the fee is significantly different, then we'll work through strategies to mitigate it. At the end of the day, there's a cost to collect, there's a cost to lend. And ultimately, you have to get the right return on capital or to do that lending. So we'll do things like across the board pricing, more risk-based pricing, introduce fees for credit, whatever it is, that you have to do to the point of then you're trying to leave the retail partner or brand partners whole is the best you can and not impact them. But ultimately, there could be some retail share agreement changes. And the last thing is restrict credit to customers is the ultimate because you've got to get paid for the risk and that could be the unintended consequence of it. Or consumers -- we talk about for $8, if that was the proposal. That's the [ ventilate ], right? Would you not go late if that was the case, but they really got to make sure they're not harming the credit from that either.

It is a fact that it's $8 for Venti Latte, by the way. .

I know that I paid that bill for my daughter's lattes plenty.

I can't believe it's $8 now. I guess like what do you think is being lost in the communication with the CFPB on deterrence? Because like, to me, I agree that the deterrence is -- should be a factor in terms of a cost input into this. But yes, I mean, you're the second person today to say that you believe this. I mean how do you get that message across to the CFPB?

Look, I don't know what the CFPB's agenda is. I don't work for the CFPB. What I'd say is the regulation comes about for whatever reason. And we'll work with it, like we work through Card Act at the end of the day. We mitigated the financial impacts of that. We'll continue to work through that. I think it's -- what's the motivation, not sure. You got to look at the studies that are done, do consumer studies, understand what late fees do and don't do and come up with a solution that works for all. But ultimately, there's a cost to credit. And banks will find a way to call that back.

Understood. Maybe we shift gears, talk about the competitive backdrop. A year ago, we were talking about buying now, pay later as it being the biggest competitive threat maybe 2 years ago, right? And I think prior to that, there was a lot of dislocation among banks buying for portfolios, and that continues to some extent today, maybe not at the same rate as we had seen 2 years ago. Maybe just give us the temperature of the backdrop that you operate in today competitively?

Yes. So competitively, I think as it relates to new deals, RFPs, what I do love about Bread Financial is we can compete up and down the spectrum for size and portfolio. When I say that, clearly, not going after things like Apple Card or the Amazon portfolio, not this $20 billion deals, but ones that have reasonable size from -- it could be $100 million, where it's not as much competition to ones where you looked at the AAA portfolio that we won, and that was like -- more like $1.5 billion. So we like all of those. And we can put together a number of those $100 million to $500 million deals that add up to something really nice with nice returns. We can compete for ones that are a little more competitive. And what we do is we try to differentiate ourselves, not just on price and economics, we've won deals that are larger, where we were the, I'll call it, best economics, but there was confidence from the brand partner that we could grow the pie better than the competition. And that's what you're really trying to win on. And I think as long as I've been in this space from, I'll say, well, I started in the late '80s, but starting in the mid-'90s, the competition really started to heat up in the credit card space, and it just hasn't stopped. So what I love about it is, it forces innovation. And in the world we're in today, it's about coming with good creative value propositions for the consumer. Ways to market, ways to deepen being a full spectrum lender is a competitive advantage. And then offering a full suite. I mean you talked about buy now, pay later. No question. I mean I got under the hood of that as soon as I joined and -- joined Bread Financial a little over 18 months ago, and I started looking at some of the deal economics and scratch my head thinking who would ever sign these and their big signing bonus, thin economics, and there's no way it was going to work. So we stepped away from it because the mantra was be disciplined and we're going to drive responsible growth. And now what you're seeing is a bit of a pullback in that space to more rational economics. So we are well positioned to lean in on some of the buy now, pay later or split pay if those economics make sense, and that is consumer preference or our brand partners' preference.

And how is that going to play out? Like are there -- there's probably RFPs that are going to come up because there are contracts that were signed? Is that in front of us now like -- because it seems like we're heading up against the time period?

Yes. So I think that's exactly right. As I think a lot of the buy now, pay later contracts were shorter term in nature, right? So you look at these co-brand deals, they're usually 5 to 10 years in term. What we are observing is the buy now, pay later were 2- to 3-year terms. So they are cycling. And I can only say what I've read as well, is that a number of them are coming up for renewal, they're going back and renegotiating terms because with higher cost of funds, oh, there's something called credit losses, something called regulation may be coming. So it's a maturing space. And I think with that, you get rational economics and then you'll really get good competition in there.

I guess, like you've onboarded and extended your relationships with a number of partners. Maybe you could just talk about how you've won in the marketplace today, right? I have to believe that buy now, pay later and extending -- product extension helped. But is there anything else that you guys are doing that's different from before?

No, it certainly does help. I think the strength of the data analytics being a full spectrum lender, maybe able to go a little deeper, helps. But in this space, when you're in the, I'll say, the brand partner space or with the co-brands, it's a relationship space. And when Ralph Andretta, our CEO, came on board, he hired Val Greer, who was instrumental in co-brand space and her background in this partnership space, and she built out a business development team and a client partnership team that's really focused on those relations and relationships, and they had deep connections into the industry. So the deals that I see come across our table we're getting looks at almost everything where it was before they knew not to send those deals over because the company wasn't serious about because of a strategy. This place, we're getting great looks at things, and we're making serious offers for -- and competitive offers for these deals where we can -- really have a chance to win. So it's a full package and then also knowing that we're going to take care of them, and we're going to grow that pie together. And that's the biggest thing that they're looking for.

I mean you worked at large banks that had the balance sheet benefit, right? This is obviously a smaller balance sheet. So you don't necessarily have the scale on the balance sheet side as you did at your other shops. How do you compete with that economically? Is it just about economics? Or is it about something else in terms of winning today?

It's a combination. Look, you're not going to win a brand partner without giving them strong economics. That's just the way it goes. But at the same time, they have to have confidence that they're going to get the attention to customization if there's customization that's required and the attention that they want to know that their brand is valued and that they matter. And that's part of what the culture and philosophy of our businesses is to make sure we can do that. And as it relates to capital, you're not wrong that this company has run itself in a very thin capital position. I remember the first time I met you, I think we had a -- I don't know if we were almost like a 0 TCE to TA ratio, but we were just above maybe I think we're like 2%. And my charge was to try to get us up to, we'll say, pure level capital ratios. And so where we are today you can probably see from the way I've taken a position on a conservative view of our reserve rate and building that ahead of looking around the corner of what could be coming that we have enough financial resiliency there, coupled with building our capital levels. And we did the spin, that helped the nice shot in the arm for our capital. And now where we will sit at the end of this first quarter, we'll be at a very nice level relative to where we were -- probably above where we were in the third quarter. So that's about running this place, building the capital, getting that resiliency. So it's less of a concern.

No, it's great. I mean, I agree. I think the direction that capital is headed is positive, pretty healthy reserve rate. I'm just curious like what happens if you don't see the follow-through that you're seeing on the credit metrics because the economy is still relatively good. But can you guys make -- have that qualitative overlay for some time because they might take them next year before we see anything on credit?

Yes. So well, I think what -- when you say that, I think we're already seeing it, right? So in our portfolio, we have a 6% through-the-cycle loss rate is the, I'll say, the underlying target, which means you're going to have periods in stress where you're above 6%, and you have periods then you're going to be below 6% to average out to the 6%. And our guidance to this year says, "Hey, we're going to be around 7%." Now some portion of that is because we have some carryover effect of the conversion, where we should see, like in the month of February, a significant step-up in the loss rate compared to what it was in January of over 100 basis points, and that's from the July action. But when we get through the second half of the year, then we're going to be really kind of what I'll say, in the norm of what's happening in this environment, which is still above 6%. So there's still the impact of inflation, not guaranteed our rate is going to be up a little bit because BJ's goes out, which is in our portfolio at a lower rate. But it's -- so when you just talk about what's to happen next year, we'll get into it more in their Investor Day later in the year. But that's the thing, right? I don't have a crystal ball when you talk about the overlay to my reserve rate. What I expect to happen is as the baseline -- so credit quality in the portfolio deteriorates a little bit, right, is what you're seeing as delinquencies goes up, that comes up. And then the baseline economics -- the baseline economic outlook that feeds into the base model will also erode a little bit. It allows me to dial down that conservative risk overlay. But it's -- right now, it's kind of playing out as I've expected.

You have some transitory stuff there, though.

I have some transitory for the conversion. That makes it a little hard. But the fact that even without the conversion, we're a little bit above the 6% through the cycle as part of the stress that the inflation environment is creating. And then what I'm expecting to happen in the back part of the year, if things play out as the Fed would like, and I would like too, is that inflation starts to come down throughout the year. But then I think what we're expecting is that unemployment may start to go up, and that's a leading indicator for what losses could do then in 2024. But I'm not expecting a lot of impact in this year from elevated unemployment.

Got it. Okay. Very helpful. Maybe just transitioning to new products, and you guys rolled out the new Bread Cashback Card with American Express. I mean -- I know Ralph has talked about a positive reception to the product. Maybe you could just talk about how you see that product growing and becoming a bigger part of the business?

Yes. So when I think about proprietary cards, it's a branded product, the Bread Cashback Amex Card, it's a nice product. It's a 2% Cashback card. And having the Amex Cash too, it is nice with those benefits. I view it more as a little bit of a niche product right now. We're not going to -- you're not going to see us put a $1 billion marketing campaign out there as something we're using very targeted. We're testing in some places. And we're going to make sure that we target consumers who revolve. I mean that's a sweet spot where you make money. We're not looking to chase the super prime customer. We have to put out big incentives or big bonus programs and then it's really thin returns where it takes you 5 years to get a payback. This is about keeping it as a -- in our sweet spot and growing it nice and steady over time. One of the things that I applaud to the team, it already happened before I joined, they converted almost, I don't know how many hundreds of thousands of customers who didn't have a home because the -- I'll say that the partner -- brand partner may have gone bankrupt or whatever it was, converted them into a Comenity card, the 1.5% cashback product. And that created a branded solution. And that, combined with the new Amex card, we have over 1 million customers now in those products. So you can build upon that. But that's something where you can throttle that up and down on a discretionary basis depending on the environment that we're in. So in an environment like this, we're full throttling back a little bit on growth. We'll throttle all that investment back a little bit. In periods of strong economy, you want to lean in a little bit more, we can do that.

And like who these customers would have what type of card but not for this card, like who are you taking share from with that card?

It's really -- so...

Is it a revolve? It's like a prime revolver?

Yes, it would be a prime revolver. That's a near prime-to-prime revolvers where I would say that sweet spot is and we can cross-sell that into our Bread direct-to-consumer savings accounts where we now have over $5.5 billion of direct consumer deposits.

Now I want to talk about that. So like -- yes, so maybe how much bigger can that pool of deposits become? Because I think that could be a really positive development for funding costs?

It absolutely is. I mean, we're up, I want to say, over 70% year-over-year in direct-to-consumer deposits. And that has been a deliberate strategy. One of the things that I'm pleased about is we did hire a new treasurer, who's from financial services, deep experience in the space and is looking at our entire debt stack and funding strategy and one of the things that Ralph put out there, I think nearly after we started that, we are looking at increasing our direct-to-consumer deposits. We are 50% of our funding over time. So as we continue to grow the business, not only do we want to continue to grow the deposits to keep up with that, but to actually get to be an increasing percent of our mix. So I think today, we're around 26% of our funding mix, and I would expect it to exit the year at a much higher rate than that as we continue to march towards that. But you're right, it is a great funding instrument for us.

How high can it theoretically go?

Theoretically?

Yes, it can go to?

Really depends how high you want to take the rate table, I suppose, but for us...

You have really high-yielding assets?

That's right. And a mostly variable price. So for us, being towards the higher end of the lead table is fine because as rates go up, we're fine passing most of that on in terms of CD rates or high-yield savings because the prime rate is going to increase the yield on our assets. And we're not trying to be clever with a rate arbitrage one way or another. I'm trying to be pretty neutral on net interest margin.

Absolutely. Okay. I've got a couple more questions, but I figure let me open it up to the audience and see if there's any questions from the audience. And then -- and if not, then I can continue with my questions. Any questions? One right here?

Private label credit exists in many markets around the world. Any thoughts on taking Bread overseas?

Canada would be an interesting, convenient market. I liked this question.

That is a great question and 1 that we have not really fully explored the international space right now to be candid. We've actually retrenched from the international operations to re-simplify our business, make sure we get our systems working as expected, compliant with U.S. regulations and take care of what we've got and go from there. But we're constantly looking at what adjacencies make sense, but it's something certainly comes across the wires every once in a while is something that we evaluate.

Any other questions in the room? One back there. Just one second. Let me just get the mic to you.

Firstly, thanks for the presentation. The shift from consumer to business. I'm just interested to know if Bread has plans for B2B and specifically vertical -- specific verticals in B2B financial management?

So right now, we are solely focused on consumer, right? You're going to be a small business commercial. It's an entirely different type of underwriting. And we'd have to build out that capability. It's something that we have -- we look at, we evaluate it. And again, similar to the question of going international, you just have to -- if you're going to step into that space, you have to really make sure you have the competencies in place to do that. It's not the same as underwriting consumers. Even though folks thinks -- they think it is, I can tell you from where I came from, I was the CFO of our small business banking, it is not the same. And there can be missteps, if you don't really go through the right process to make sure you have the competencies in order to do that. So right now, it's not something that we do. It is something that we have talked about at different points, but again, with where we are right now in this economy and the product build out, we're staying focused on the core. Good question.

Any other questions in the room? Along those lines, one of your competitors is doing sort of embedded finance like products or merchants. Is that something that you've considered given you have a bank and obviously, over time, there's a view that maybe those merchants and your partners could be distribution source?

Yes. I mean if you think about the buy now, pay later product that we have today. And we have a construct with RBC in Canada, where we kind of do that where we're a platform as a service. In other places, we have a sales finance type of a business. Embedded finance could be a natural extension. So as adjacencies, again, it's another thing that we look at to leverage the platform that we have to generate the, I'll say, the loans, the revenue but also lean on the core competencies that we have. So it is certainly something that is worth considering.

So my final question is about the conversion. Maybe we could just talk about the learnings from the conversion and what we have to look forward to now that we're almost done. Obviously, there's going to be a little bit of a headwind on credit as a result in the short term, and there has been, but there's probably positive things on the horizon. Maybe you can just kind of walk us through all of that?

Sure, I hope so.

Me too.

No. So this is the second massive conversion like this that I've been through in my career. And when I went through it at the first time, there was a lot, a lot of people, a ton of cost put against it. It was a different time and error. But similarly, this was a large-scale conversion. And with any of these conversions, they never go off exactly as you hope. And so I think some of it was -- I think everybody was hoping it was going to go flawlessly. And I think you always do. And there's some -- there's a long tail on some of these things. And I saw it in the last one as well. And I think that's part of working through this. There's no question things could have gone better. And -- but throughout this, we were really keen on making sure that we took care of our partners, making sure they were whole, taking care of the consumer and that there is no harm done to them that if something was weird with the rewards that they made a whole on that, if there was something that -- if payments weren't getting through because they couldn't call in or that we were giving them accommodations. And all of these things are, like you said, kind of going to see their way through right now. And then we get on to what we expect to be the cost benefits in the next couple of years as well as increased pricing capabilities. Or if there's changes, like if there's changes to regulation, well, our partner now has to code all that and test it as they do it for all their other partners. So we'll be the beneficiary of not having to do that ourselves. So there's definitely opportunity to lean in on the new capabilities of our processing partner. And we're excited about that.

Can you just like talk a little bit about the cost side of this, like how much more efficient it will be over some period of time using this platform versus having your internally sourced one? I understand there's efficiencies in terms of having a better, more modern platform, one that has more utility that can help the revenue side, right? But then on the cost side, like are there redundant costs that at some point, go away? Or how should we think about that?

Yes. So I think the way I think about cost is -- I'll give one quick commentary on cost. So first quarter this year, still going to be some elevated costs. So we're looking at probably costs compared to the fourth quarter flat to slightly down. So that's probably going to be -- I don't know if it's our prior high watermark for the year, and then it starts to come down. We do have a little bit of some overlapping costs while you're kind of moving off certain platforms to other process because it wasn't just the conversion to Fiserv that we did, we also went to Azure cloud. We converted to collection system. We moved off some other third parties. So there's a lot of things going on that should give us a nice glide path going forward into the outer years. And we'll give more, again, guidance around that later in the year. But a lot of the investments have some payoff in terms of -- I'll take the example, the digital investments that we've been making, we're going to deploy our first mobile app, which is hard to believe, to say that out loud. But this is how the business has been underinvested in for a long time. And when Ralph and Val came in, they made a commitment to making the right investments to modernize the platform. But a mobile app is how consumers want to pay their bills. They want to see things. So instead of them calling in or getting -- they can go in and check in, that's going to lower our cost to serve over time. So later this year, that will deploy. Hopefully, we get that out more widespread and get that adoption. So lots of things can help drive down our costs over time.

All right. Great. Any other questions in the room before we conclude?

We should probably give us some more guidance on that. And that's dependent upon the opportunities we see to invest. And we talked about growing the proprietary card. So it's a combination of how much you want to invest in capabilities, your technology, what's required to compete and/or grow the business. So it's really about those measures and metrics and then what are you doing for cost to serve as that comes down to help bring that down, it helps you to reinvest to continue to grow so long as you can find the right economics that makes sense to lean into.

All right. I don't see any other hand raised. So we're going to stop right there. Thank you, Perry.