Synchrony Financial (SYF) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to Synchrony's 2021 Investor Day. We're very excited to have you join our discussion of Synchrony's business model, long-term growth trajectory and financial operating framework and current quarter outlook. Throughout the course of today's event, members of our executive leadership team will reference a PowerPoint presentation that will be broadcast as we move through the discussion. Once today's event is concluded, we'll post a separate PDF file of this presentation with the event webcast link for downloading and free-scrolling purposes. Please note, all presentations were previously recorded last week. The Investor Day webcast link and presentation will be accessible on the Investor Relations section of our website, synchronyfinancial.com. Before we get started, I'd like to remind you that our comments today will include forward-looking statements. These statements are subject to risks and uncertainty, and actual results could differ materially. We list the factors that might cause actual results to differ materially in our SEC filings, which are available on our website. During today's event, we'll refer to non-GAAP financial measures in discussing the company's performance. You can find a reconciliation of these measures to GAAP financial measures in our materials for today's call. Finally, Synchrony Financial is not responsible for and does not edit nor guarantee the accuracy of our teleconference transcripts provided by third parties. The only authorized webcasts are located on our website. This morning, you'll hear from some of our leadership team, and we'll conclude with a live Q&A session. To that end, for those of you who registered to attend and are viewing through our virtual event platform, please be sure to submit your questions on the Q&A tab located on the right side of your screen. You can submit questions throughout the course of today's presentation. This will allow us to collate them and kick off the Q&A session as swiftly as possible. With that, Brian, I'll hand things over to you. Take it away.

Good morning, and thank you all for joining us today. I'm really excited for today's session. On behalf of everyone at Synchrony, we appreciate you taking the time to hear more about our business and the long-term vision we continue to execute against. The foundation of our business goes back almost 90 years. And I think that's important because it really speaks to the experience we have in this space, but it also shows how we've constantly reinvented ourselves in the face of different economic cycles, changing consumer and partner preferences and evolving payment and financing trends. We're a business that constantly challenges the status quo. We invest heavily in innovation and technology. And we clearly recognize that how we've done things in the past will not be how we do things in the future. And I think the last 7 years are certainly evidence of that. We have continuously evolved and adapted our business over the years, and I think we've delivered some pretty impressive results. Since our IPO in 2014, we've generated over $900 billion of purchase volume on our products, reached almost $80 billion of receivables, and we serve more than 65 million customers and secured 29 patents. We've also really diversified our business during that time. In the last 7 years alone, we added over 130 new partners. We renewed and expanded more than 160 partnerships, and we completed 4 acquisitions. This expansion has really positioned us well in areas where we see a lot of opportunity and where we have a real competitive advantage. We kicked today's event off with a video that really highlights the breadth and depth of our partner network today. We make it easy to finance anything from appliances, electronics and home improvement projects, to apparel, health and wellness and power sports. And regardless of whether it's happening in person, online or on a mobile phone, we're focused on providing our partners and customers with both choice and a seamless customer experience. Our ability to leverage our strengths while continuously evolving our products and our tech platform has enabled us to drive significant growth. Over the last decade, we've doubled our purchase volume and almost doubled both our receivables and net interest income. And we've done all this at consistently strong risk-adjusted returns. Over the last decade, our average risk-adjusted yield was 15.6%, 570 basis points higher than the average of our direct peers. We also pride ourselves on our track record of execution and delivering on our commitments. We've built considerable value for all of our stakeholders, including our people and our communities. We've made it our priority to continue to foster and support our people in every way possible. And that includes investing in things like continuing education opportunities and providing comprehensive health and wellness resources. We also recognize that diversity strengthens our team. It rounds out our perspectives and really powers our thought leadership. We ranked fifth on the Fortune list of Best Places to Work for Diversity. And we're really proud that 10,000 of our employees, which is about 60% of our workforce, are members of 1 or more of our 8 diversity networks. And we have an incredibly diverse Board of Directors. I'm so proud of all that we've accomplished together as a team. By delivering products and solutions with compelling value for our partners and customers, we've delivered continued strong performance. And that financial strength has generated significant capital for investment back into our business, and that's enabled further growth and significant expansion of our partner network and customer base. We've achieved massive scale and deep reach in the industry as we plan. We're deeply embedded with partners, both big and small, across the United States in nearly every segment of consumer spend. We help people finance everyday needs as well as special purchases and home improvement projects, and we do this at almost 450,000 locations nationwide. And at the same time, we fostered a culture of technology and innovation. In fact, we've invested more than $5 billion in our digital and technology platform since our IPO. We have more than 200 agile build teams that are focused on meeting the needs of our partners and delivering a comprehensive product suite and a seamless customer experience. Synchrony has evolved our consumer lending business into a digitally powered financial ecosystem. But we've only just scratched the surface. Today, Synchrony is positioned as a leader in the digital commerce revolution. We're well positioned to take advantage of the opportunities in front of us. Our strong business foundation and our culture of innovation will elevate the ways in which we connect our partners and customers every day. Today, we serve a massive addressable market. There's more than $5 trillion of consumer spend across the many industries that we operate in today. And throughout today's discussion, the team will talk about how we see significant opportunity to penetrate more of that market with existing as well as new partners. We'll also spend some time describing how we're leveraging our integrated product set to get even further embedded with our partners and help them drive sales. And lastly, we'll take you through some of the really exciting new adjacencies like health systems and pet insurance as well as other markets where we see good growth opportunities at attractive returns. One of the things I'm most excited about is how we positioned our business to more effectively go after that opportunity. Our 5 sales platforms are organized by industry vertical, which really helps us build scalable products and solutions for our partners. So whether we're integrating into a large-scale digital partner or a small dental practice, the products and capabilities need to be both scalable but also address the unique demands of that individual partner or provider. And this is why I feel we are so well positioned. Our platform leaders and commercial teams have deep domain expertise, which allows them to really anticipate what our partners need to best serve their customers. And lastly, you'll hear how our platforms and commercial teams are supported by 3 scalable functions that are really focused on making smart, strategic, innovative growth investments to drive our business forward. We've always taken a lot of pride in our partner model and really getting embedded with them to help them drive sales and create lasting customer relationships. Our partners want to be able to serve more customers and to offer the best possible experience they can. Consumers today want to have a say in how they transact. They want choice, and they want products that address their specific need at that time. So with these considerations in mind, we have built a product suite and digital platform to be able to do a few things. First, reach more customers more effectively but also more efficiently. And as you'll hear later today, we have the lowest cost to originate new accounts in the industry. Second, provide them with greater choice in the types of products they want to use and the channel they want to interact. And third, be able to say yes to them more often with great products with compelling value. Our integrated product set and ability to drive seamless customer experiences has really helped our partners succeed and has made us their partner of choice. But there's no need to take my word for it. I'd love for you to hear it from one of our largest partners, PayPal.

Hi, everyone. I'm Dan Schulman, the President and CEO of PayPal. And when Brian reached out to me to talk at this Investor Day, I gladly accepted. I'm a firm believer that the only way to truly create a great value proposition for consumers and merchants is through partnerships across our industry. The full potential to satisfy customer needs and demands can only be realized through collaboration that leverages the best of our respective talents. And our work with Synchrony is a powerful example of that. We have very high expectations of our partners. After all, we have 400 million active accounts on our platform. We serve over 30 million merchants on our platform. And we need leading-edge capabilities that can meaningfully scale. We need partners that will consistently evolve with us and innovate with us and do so with the highest regard to regulatory compliance. And Synchrony lives up to all of that. We push them hard and they consistently deliver. The launch of our Venmo credit card is just 1 example of many. We bet on Synchrony's technical platform on their technical prowess to create what I consider to be a best-in-class product. And not only did they deliver it on time, but they overdelivered on features, and they did so in a collaborative manner with us. And as a result, we plan to do much more with Synchrony. We trust their team, I trust their leadership team. We know their technical capabilities. We know their engineering teams. And we couldn't be more pleased with the success of our joint efforts. And we look forward to much more in the quarters ahead. Thank you for the opportunity to share my thoughts, and I hope all of you have a great rest of your Investor Day.

We are so honored to partner with Dan and the PayPal team, and we're so excited to continue to collaborate and innovate together. So at the heart of Synchrony's continued success for our partners and customers is our digitally powered product suite. By combining the most complete product suite of any of our closest competitors, we can really deliver a financial ecosystem that meets our partners and customers however they want to be met and optimizes their experience through our dynamic tech platform. As we've talked about, we serve a very diverse set of partners and providers today. And we know that our product strategy has to align with their objectives and feel customized to their goals and their strategies. So whether they're a single-store merchant, a large-scale digital-first partner or a leading health system, our products have to be both scalable yet able to cater to the specific demands of our unique partners. We also know that customers want to utilize different payment financing products, depending on a number of factors, including affinity with the brand that they're engaging with, the type of purchase they're making and ticket size. So based on a complete understanding of what both our partners and customers are trying to achieve, we can really tailor our offerings to fit that need. Our goal is to provide the right product at the right time for the right purchase. In some cases, that will be more of a transactional product like buy now, pay later for onetime use. In some cases, that will be a revolving product with buy now, pay later and installment options, which facilitates easy reuse and supports multiple purchases and an ongoing relationship with the customer, which is really important for a lot of our partners. In other cases, it might be a dual card, which offers the ability to make multiple purchases as well as earn rewards on out-of-store spend. Mike Bopp is going to go deeper on our integrated product strategy and why we feel this is a real competitive advantage. It's all about offering the right product at the right time for the right purchase, both for our partner and our customer. Our product strategy and our focus on delivering seamless customer experiences reflects a combination of billions of dollars of investment in our proprietary tech platform as well as hundreds of strategic investments and partnerships that we've made over the years. We've invested heavily in areas like Digital Apply; Synchrony Plug-In or SyPI; Synchrony PRISM, which is our advanced underwriting platform; and of course, hundreds of new APIs, which we use to integrate seamlessly with partners like Venmo. We've also made strategic investments and completed a number of acquisitions in areas where we knew we could accelerate our strategy and bring new products and capabilities to market quicker. For example, our acquisition of GPShopper back in 2015. GPShopper really enabled us to accelerate our seamless integration into our partners' mobile apps. Our Pets Best acquisition enabled an immediate entry point into the rapidly growing pet insurance market. This allowed us to really leverage our scale and experience in the vet space. And in fact, we've already tripled the number of pets we cover since we acquired that business just 2 years ago. So how do we bring all this together? You'll see today as we move through the discussion that we've built a very strong foundation and transformed our business from a more traditional consumer lender into a dynamic ecosystem for day-to-day commerce. We're leveraging our core strengths and continuously evolving the ways in which we reach, engage and serve our partners and customers in an ever-changing landscape. In short, we're well positioned to outperform over the long term as we continue to provide our partners and customers with the power of choice. We'll continue to win new partners and renew existing ones. And at the same time, we'll further diversify our programs, products and the markets we operate in. And lastly, underpinning it all is our laser-like focus on our integrated product set and providing that seamless customer experience. And if we deliver on those key objectives, we'll continue to drive sustainable growth at attractive returns and unlock even greater value for our stakeholders. So here's the team that is executing on this vision and taking the company into the future. Each of these leaders has deep domain expertise, both in the industry as well as in our business. So in just a minute, I'll hand our discussion over to Mike Bopp to talk about Synchrony's addressable market, the power of our data and integrated product suite and how those are real differentiators for us. From there, Carol Juel will talk about our tech platform and the ways in which our digital capabilities really enable us to easily integrate with our partners and drive that seamless customer experience. Henry Greig will talk about PRISM, our proprietary underwriting model, and how it incorporates more data on demand and drives greater predictive power to approve more customers for a similar level of risk. And then we'll shift the discussion to our platform leaders. They'll go deeper into each industry vertical, why our partners choose us and the opportunities we see to drive sustainable growth. Brian Wenzel will then tie all this together and talk about how everything you heard today will continue to translate into strong financial performance and value creation for our investors. And with that, let's jump into it, and I'll hand it over to our Chief Growth Officer, Mike Bopp.

Thanks, Brian. Good morning. I'm looking forward to talking through why we believe we are so well positioned for growth here at Synchrony. Today, I'd like to focus on 4 areas where we feel we have distinct advantages relative to our peers and how these advantages help us accelerate growth. Our customer base, our privileged access to data, our complete product suite and our investments in the customer experience all add up to what we believe is an over-indexed ability to grow relative to the market. So let's start with the first one of these distinctives, the sheer scale of our customer base. We now have over 60 million customers and 65 million active accounts. These numbers represent the highest number of customers and second highest number of accounts among any of the top U.S. consumer credit card issuers. It was not our intention to build a 60 million consumer customer franchise, but that's exactly what we have. We built it partner-by-partner, platform-by-platform as we saw opportunities in the market. But as we take our lens up to a broader level, this customer base provides tremendous strategic opportunities for us. First, it gives us an immense amount of data about our customers, their financing needs, their shopping preferences, even how they like to be serviced. Second, you've heard a lot about companies and their ability to drive new customers to their partners' platforms. And we've got 60 million customers, and we work very hard every day to bring these 60 million customers to our partners' virtual and physical front door. Lastly, because we have an existing relationship with these customers, we know about their needs. It gives us an opportunity to provide additional credit products, whether as upgrades or as additional products in their wallet. So we feel great that this scale puts us in an advantaged position relative to our peers. I'd like to spend a minute talking about the spend opportunity that we see within our customers. As we dig deeper into the opportunity, this slide speaks to how we think about going after that addressable opportunity strategically. These are credit sales. And recall, we do $139 billion in sales annually. Our very own customers are spending another $110 billion at our existing partners. So existing partners, existing customers, the pool of opportunity is $110 billion. And we do a lot to try to get this opportunity today, and we continue to dig deep into the programs that will increase our wallet share of sales at our partners. There's also opportunity to acquire customers who don't have our card but are shopping at our partners. This represents another $360 billion of opportunity. This is where our acquisition strategies come into play, our credit strategies that you'll hear about later. Lastly, we look at spend that our consumers are doing outside of our partners, where almost $460 billion of total spend sits. Now this spend is a little bit harder to get because we're competing on sales that are not happening within our partners. But this is where we drive a lot of our dual card strategies and our top-of-wallet card strategies to grab our share of that $460 billion, because just a couple of hundred basis points makes a huge difference in our growth rates. We believe we have the value props, the rewards and incentives, the digital capabilities and perhaps most critically, the economic alignment with our partners to make this happen. You'll hear from our platform leaders about how these opportunities split across our 5 platforms and the specific strategies they're using to go after these opportunities. But the main point here is we've got incredible opportunity to gain incremental wallet share with our current cardholders and drive new account acquisitions, opportunities that are unique to Synchrony given our size and scale. Now let's look at some of the statistics about our partner base and how we leverage it to support growth in our business. Today, we have 2 main marketplaces that face consumers, mysynchrony.com and carecredit.com. We get hundreds of millions of visits to these sites on an annual basis. Both these marketplaces provide consumers with the one-stop shop to find partners, shop with partners and find providers in our CareCredit network. We also allow them to service their accounts on these platforms. These are broad and deep networks, as evidenced by the data you see on the slides, hundreds of thousands of partner locations, millions of referrals, and they drive significant referral volume for our partners. We will continue to expand these marketplaces and our applications. Now let's look at some statistics about our partner base and how we leverage it to support growth in our business. We've seen the benefits of this unique competitive advantage through our proven ability to drive repeat sales, thereby significantly enhancing the lifetime value of a customer for both Synchrony and our partners. Among our network products, repeat sales have increased from 43% just 4 years ago to 52% in the second quarter of 2021, proving our ability to bring repeat purchasing volume to our partners. An additional metric we focus on is sales per active for our network products. Here, we compare the sales to the average buy now, pay later products that we see in the marketplace. We see increased sales per active by a factor of 1.5, 1.9, and our home and auto networks generate 2x the amount of sales on buy now, pay later products in a given month. These are significant increases and imply a deep customer relationship that we have with our network products. The ability to leverage the network to drive new customers and repeat sales to our partners at higher spend levels has and will continue to be a huge growth lever for us moving forward, and we will look to invest even deeper into this strategy. So what powers all this? As you would expect and something that receives well-deserved attention is data. At Synchrony, we have privileged access to first-party and other data that is fuel for the types of programs that deepen penetration and drive higher share of wallet. Through a combination of data received from our proprietary networks and data shared with us through our strong partnerships, we drive data insights that power program performance and enhance the customer experience. We invested significantly in a data ecosystem that integrates, analyzes and builds decision-making matrices. We now have over 7 trillion data points in this ecosystem. We have over 200 analysts and data scientists who synthesize, analyze, make actual recommendations off of all this data. It allows us to say yes more often to our consumers to create a more hyper-personalized customer experience and to drive profitable growth. One of them worth mentioning is that given all the noise regarding potential changes around the usage of consumer data, we feel very good that much of this data is first-party data, giving us more flexibility in how and when it is used to benefit the customer. Net-net, we kind of bow to no one when it comes to breadth, depth and application of data analytics to drive increased card acquisition, higher spend in reuse and a higher customer lifetime value. A powerful example of applying this ecosystem to our business strategy is with data sharing. We've spoken a few times about this in the past, so we wanted to provide a brief update on this exciting growth initiative. First, we have greatly expanded the amount of data and penetration of the program across our partner base, as evidenced by the 512 different unique attributes that we receive as well as the fact that we received partner data on 75% of our active accounts. That's 75% of 65 million active accounts, where we're receiving unique and proprietary data from our partners. On the right side, pretty much in every instance where we've partnered with our clients to implement this, we've seen lifts. Our partners' most highly engaged customers get better credit line assignments, oftentimes 20% to 30% higher credit lines, and use these lines to spend more, both at our partner and outside our partner. We see 15% to 20% lift just in that initial month of purchase. Other use cases include using data share elements for fraud mitigation, collections and authentication. So pretty much across the profit and loss statement, we are seeing significant benefits to this data sharing program. It will continue to be a core strategy for us moving forward as we work hand-in-hand with our partners, both large and small, to increase the amount of data that we bring into the ecosystem. This next slide walks through another significant application of this data ecosystem. This slide shows a schematic of how we think about and structure our process for product optimization. We employ proprietary analytics to identify which private label cardholders that are dual card product would be a good fit for, giving them out-of-store utility and a more robust rewards program. We then leverage additional modeling techniques to predict profitability for a given cohort. These models, both the targeted models and the financial models, allow us to offer the upgrade product to customers who are more likely to generate the greatest incremental returns based on the risk/reward trade-offs that we see. This slide shows a business impact of optimizing that product journey. By utilizing our data and analytics to upgrade the right set of customers, we see lifts of 98% in sales and 78% in balances. This drives significant incremental risk-adjusted return once that product gets upgraded. These dynamics then drive a 1.6x increase in a customer's lifetime value. We consistently look for the right time and the right customers to upgrade. And having the product suite and analytic capabilities to effectively migrate customers into products with more utility is a key for us to drive success. Building this capability takes time, several years, in fact. We've been at this for over 15 years, and we will continue to leverage this experience to drive growth through product optimization. Now that we've established a few of our distinctives, the unique customer base and our data and analytics prowess, let's talk about the next variable in the equation, and that is the product set that brings all this to life for consumers. From a complete line of revolving products for consumers and small businesses that offer consumers utility, value through promotional financing and loyalty programs and ease of use to robust installment offerings, including our own buy now, pay later product, SetPay, we have the breadth, depth and experience to meet the broad set of consumer financing needs. We're also expanding into complementary offerings. Products like pet insurance and GiftNow and the opportunity with health systems in our health and wellness vertical are natural extensions of the financial ecosystem that we are building and operating in. The next slide compares this product set to the market, including some of the buy now, pay later firms. As you can see across both the revolving product set and the installment product set, our suite of products covers a broad set of consumer financing needs. So while we know there's always work to do to maintain the most relevant and meaningful products for consumers, our current offering puts us in a unique advantaged position. So let's talk buy now, pay later. We want to spend a few minutes walking through how we see the world of buy now, pay later and installments and do a little bit of a deeper dive. As Brian has spoken about in the past, we currently offer both short-term and long-term fixed payment products across our entire product suite and have approximately $15 billion in receivables on these promotions today. Here, you see just a few of the many short- and long-term installment offers that we provide in the market. It's worth noting that we work extraordinarily closely with our partners to seamlessly integrate these offers into the buy path, as you can see here. We are at the moment of consideration with these products with a great many of our partners today. These offerings are provided through the vehicle of the existing card product, meaning that the customer has ongoing utility for additional purchases and additional promotions after their initial loan is paid off. We see this particular dynamic where a customer can open up a credit card, put an installment loan on that credit card, but keep the utility of that credit card moving forward as a win-win for consumers, our partners and Synchrony. In addition to these products, we also offer our Synchrony-branded installment product, SetPay, across the 3-plus month terms and are doing volume on this product today. These are closed-end loans and typically have order values above $500 and oftentimes significantly higher than that. These 2 products drive tremendous flexibility for our consumers and partners to offer the right product for the right kind of purchase to the right kind of consumer. But as we look across our product set, the competitive landscape and customer feedback, we did see the demand for a shorter duration Pay in 4 type product, and we're excited to announce that we'll be launching our own Synchrony-branded short-term buy now, pay later product. Branded under the Synchrony umbrella, this product will be a Pay in 4 product with no interest in fees and be a completely digital customer experience. As laid out on the prior page, this product will begin to be available for our partners in October, and we're excited to be bringing it to the market. With this new product launch, we feel even better that the Synchrony product suite provides our partners and consumers the broadest and deepest set of financing solutions to meet their broad set of needs. Staying on this topic, as we reviewed how we think about the buy now, pay later and installment lending landscape, I want to spend a few minutes looking at some comparative views that we felt might be helpful as we think about our model deploying a full product suite, having real advantages relative to other players whose strategy is more focused on the buy now, pay later space only. Looking across key performance indicators, our model helps us acquire more accounts, do more business with these accounts, and just as crucially, charges partners 1/4 of the transaction cost. The way we do this is exactly what we've been talking about, deploying the right product to the right customer not only in acquisition but throughout the customer life cycle. So it's the depth and breadth of our product suite that allows us to do this and will continue to allow us to grow. When we think about the challenges the respective financial services players face, us included, it begins and ends with acquiring new customers, responsibly driving sales growth and building a compelling economic equation for our partners. And the winners in this space will be those who can bring a broad set of products, including buy now, pay later, to market in a seamless and customer-centered way, and we're very well positioned to do just that. So let's talk about what a customer's journey through the full Synchrony product suite might look like. Left to right, this slide walks through that journey, starting with a buy now, pay later or an installment-type product under the SetPay branding. As the customers' credit matures, their wallet potential gets larger, their shopping needs increase and their product needs become more complex. We often see customers starting to show some loyalty to one of our partners as well. This is where the data analytics and our product experience come into play to provide a private label product to the right set of customers for repeat purchasing capabilities. Further down the life cycle of the consumer, we may identify that they are eligible for and will be profitable with a dual card product, enabling more purchase utility for consumer and even more comprehensive and compelling value proposition. It's also worth noting that often, as is the case most of the time today, a customer begins their Synchrony journey with a private label product or a dual card product, and that works very well for us as well. So the strategy includes ways to engage a customer throughout their journey with what their preference is. Ultimately, it's about making the right offer at the right time to the right consumer that maximizes our growth and profit while providing our partners enhanced program economics. So how does all this show up for our merchants and how does this all show up for our consumers, both dimensions obviously critically important to success. We've invested heavily in our go-to-market technologies, modernizing to ensure ease of access to our range of products, as we believe there is power in providing choice to partners and customers. And you'll hear a lot more from Carol shortly about the exciting progress here. We also have evolved to become a more experience-driven business, where we seek to engage consumers throughout the purchase journey, from awareness and consideration of a product, all the way through to the purchase. And given the opportunity that lies in front of us, we have built these capabilities and customer experiences to evolve over time, as both merchant and consumer needs are continually evolving. Bringing all of this together to create a smooth customer experience is also something we spend a lot of time on. Much of the benefit has been evidenced in our recent launch with Walgreens, where we've launched a program with all the available components of a seamless customer experience, including top of funnel sales marketing, direct-to-device in-store acquisitions, contactless cards and seamless integration into customers' digital wallets. We know that there's never been more intense competition in this market, and we're up for it. And with the most recent launches, we feel great that we are providing the most integrated product and data-driven experiences for consumers. So in closing, to review our distinctives in how they have positioned us for growth, we have unmatched customer scale and a vast partner base. We've got privileged access to data and have made huge investments in our data ecosystem. We have comprehensive product offerings optimized for each customer. We have an exceptional digital experience. We believe all of this will help us drive an over-indexed growth rate relative to the market. Thank you for your time. And Carol, I'll turn it over to you.

Thank you, Mike. Good morning, everyone. I'm Carol Juel, the Chief Technology and Operating Officer here at Synchrony, and I'm so pleased to have the opportunity to share with you today some details about our technology strategy and our investments and how they have drive differentiation and competitive advantage for Synchrony, really allowing us to stay on the forefront of an evolving landscape. We've built a leading financial services ecosystem that connects seamlessly to our partners and our customers. And this ecosystem delivers on the power of choice, is experience-driven and is designed and built to evolve. Innovation is core at Synchrony, ensuring that we have a comprehensive set of products that we can provide to our customers at the right time in their journey. And this helps our partners grow their sales and develop that deep brand loyalty. Innovation also drives us to ensure we were delivering exceptional customer experience across all channels. The technology strategy and investments helped us build this dynamic and scalable environment. And we are positioned for the future, and we are excited to tell you more about it. So let's jump into how it powers our success. So I want to take you back in time. So when we had the opportunity to become Synchrony, it was a unique opportunity. I wouldn't even say a once-in-a-lifetime opportunity. We had the opportunity to rethink, reimagine and invest in our foundation in a way that positioned the company uniquely. We have the opportunity to redesign our technology foundation from the ground up. Now why is this important? When we were becoming Synchrony, this was back in 2013 and 2014, technology was changing drastically. We were entering a new age of cloud and AI and data lakes. And our ability to take advantage of those technologies was available to us because of the decisions we made to invest heavily. And over the time horizon here, we've invested over $5 billion in our platform. And that is critical when we think about how we were able to make decisions around technology foundation that will position us for all the change that's happening in our industry. The acceleration of consumer expectations, digital transformation, AI transformation, all of these things were part of how we thought about our investment strategy back in 2013 and 2014. We were focused, we were deliberate, and we wanted to make sure what we were doing was going to drive innovation and speed for our company. And what we built is a fast and flexible technical foundation. And you'll see on this chart here, moving left to right, over the time horizon, we were dramatically able to reduce our dependency on legacy technology. And why does this matter? Many of our competitors still have a significant amount of legacy technology. Legacy slows you down. Legacy is complex. Legacy isn't where innovation is happening. And so our ability to shift from legacy to modern technology was critically important for Synchrony and for how we thought about our future. Our competitors have a different set of challenges that we no longer have, and that has allowed us to really revolutionize many of the things we are doing for how we build digital capabilities, to how we underwrite, to how we use data, to how we build unique customer experiences. So let's talk a little bit more, how does this platform come to life? And it's really important. In our business, we reach more partners. Through our platform, we are able to meet our partners where they are. As you know, we have a broad spectrum of partners who have various degrees of technical sophistication, but the way we've approached our investment strategy and how we build and deploy, we can meet them where they are. That is really important. We can meet the smallest partner in a local dental shop to a marquee digital payments company. This multidimensional nature of our platform allows us to power growth across all of our platforms regardless of their stages of investment. Additionally, we provide more options to our customers. Flexibility and scale allows us to create environments where customers choose how and when they want to engage on the journey with us, the power of choice. And then we have a differentiated ability to translate data into action. We have a robust data set through our data partners share, as Mike was talking to you about, third-party data. We bring that together in actionable insights that help us to continue to drive program performance and more sales for our partners. So let me talk to you a bit about how we partner. We have technology to meet our partners where they are in their digital journey, from small retailers to big dynamic ones. And our platform can power those brands to reach their goals regardless of their level of sophistication. Venmo is a huge tech giant, as you know. They have a huge focus on their user experience. When you are in the Venmo app, you know you're in the Venmo app in terms of how the experience works. They wanted to ensure that the customer experience in the app was as they wanted it to be. And so that created a unique opportunity for us to build a deeply integrated technology solution and how we deliver financing within the Venmo app. So Venmo on the experience, but it's powered by Synchrony's real-time APIs and alerting solutions. And this results in an incredibly seamless customer experience. So let's talk about it. While in the Venmo app, the Venmo user and potential Synchrony customers sees she is preapproved for the Venmo credit card and decides to apply. She enters a few pieces of information to complete the application process. Venmo then leverages Synchrony's APIs to get the user's history as a Synchrony customer and ultimately creates her account. The customer is approved and now has multiple ways to transact with her card. First, her card has been linked to her Venmo account and is usable for any Venmo payments, which is done by seamlessly calling a Synchrony API. She'll also receive a physical card that will have a QR code for easy activation and usage. There's also a third option here where she requests a virtual card, also powered by Synchrony APIs, which she can then use to complete online purchases. Within the Venmo digital ecosystem, Synchrony then translates purchase details and publishes an event to Venmo to provide the real-time alert to their customers. So as we brought this digital integrated solution to life, Venmo uses more than 20 Synchrony APIs to deliver the full digital customer experience in the Venmo app. So what's really important here is this deep integration is incredibly powerful for our partners and their customers. And we're able to accomplish this because of the terrific partnership with Venmo, but also because of the investments that we've been making along the way in our innovation, in our cloud, in our digital and in our real-time APIs. Our differentiation is that our digital and innovation investments have created a platform to cover this broad spectrum of partners with integration capabilities across industries regardless of their tech investment or level of sophistication. And our approach is really to give our partners flexibility, flexibility in how they integrate, but also in the products that they offer to their customers, from a complete line of revolving products that offer consumer utility, value and ease of use, to robust installment offerings, including our own BNPL product, SetPay. We have breadth and depth of experience across the broad set of consumer financing needs. One of the industries you see listed here is health systems. We think this is a great space for CareCredit and is one of our focus areas. Health systems have made investments in information technology, but not generally in the payments or the financing area. Instead, they're focused on their business, patient health records, electronic medical records, areas they should be. But there's an opportunity for Synchrony here to think about payments in that ecosystem. So the leader in patient health records is a platform called MyChart from Epic. You may have used this if you've experienced it in your doctor's office, if you've viewed a test result or anything like that. We decided to create the right financing solution for health systems, and we wanted to integrate CareCredit into the MyChart experience. This is the Epic App Orchard, the App Store for MyChart. Just like you download apps from the Apple Store on your iPhone, health systems use the App Orchard to download MyChart capabilities for their customers. This allows the health system to install CareCredit in just a few hours. And then this enables patients, like the one you see here who has had an unexpected medical expense, utilize his CareCredit account to seamlessly pay his bills through MyChart. He has choice and flexibility to select the right financing offer for his family and his overall needs. Synchrony's ability to provide this level of simplicity for both the health system and the customer was enabled through our investments in technology and innovation in our APIs and our digital tools. Just like we meet our partners where they are, we meet our customers who use our products where they are on their digital journey. You could be shopping for a furniture in a store. You could be taking your dog to the vet or sitting on your couch looking for a new couch. We create compelling touch points and experiences to power their life. And whether they're looking for traditional private label credit card products or one of our many equal pay products, we have the right financing product for them, in the right channel. Providing customers choice and optionality is driven by our flexible platform that delivers exceptional digital experiences, seamless integration across partner channels. Our flexibility and scale is differentiated here. Our ability to adapt and respond to our customers' digital shifts is critically important, and this is all powered by the flexibility of our platform and our technical capabilities and innovation to engage them along that journey. By offering choice and the seamless experience, we can drive these customers back to our partners' business again and again, compounding loyalty and driving higher lifetime value of these cardholders. And why does this matter? It matters because we work with our partners to ensure we represent their brands correctly. We work with our partners to engage in the channels where all of their customers are, and this is really important and differentiated for us. So let's jump to an example across a big omnichannel retail partner, Lowe's. We are deeply integrated across their channels, with their brand and their customer experience. At Lowe's, we offer consumer products for customers, for pros, and we do it across multiple channels. So let's jump in and show how we integrate with Lowe's across the various platforms they have. Here's a loyal Lowe's customer named Jeff, who's about to check out at Lowe's and wants to use his Lowe's Advantage Card. Unfortunately, he left it at home. Fortunately, though, we allow him to look up his account number from his phone quickly and securely. This is enabled by our digital and authentication technologies. Jeff provides a few pieces of information and is authenticated behind the scenes. He can now shop in store with a virtual card and receive all the benefits of the Lowe's Advantage Card. When it's time for Jeff to pay his bill, he can do that easily through our digital servicing platform. And while scheduling his payment, our automated alerts catch his eye. He takes a couple of minutes to sign up. While Jeff can completely manage his account through e-service, Lowe's also likes their customers to download their native app to further drive digital adoption and engagement. In order to help our partners drive customers to their app, we created SyPI, our native app plug-in, so that we can easily embed Synchrony's digital capabilities into a client's native application, allowing customers to use their card and service their card in the Lowe's digitally native experience. So let's recap. You've seen a lot of ways customers engage with Synchrony through the Lowe's omnichannel experience. They leverage Synchrony technology across so many touch points. And this is the flexibility and the adaptability and the scalability in our platform that allows this to happen. The choice that we can give to our customers across the spectrum integrated into Lowe's is truly differentiated. This really highlights Synchrony's capabilities. It is the power of choice, it's experience-driven and it's designed to build and evolve with partner and customer needs. We've been talking about how our technology and innovation investments and strategy have helped us reach more partners and provide more options for our customers, really, really important components. The third and really key piece of our competitive advantage is our differentiated ability to translate data into action. Mike shared the details of our data share strategy, how we work with our partners. The combination of our data, plus partner data enabled through really deep integration and oftentimes APIs and third-party data is a differentiator for Synchrony and brings immense value to our partners and their programs. We have invested heavily in our large data lake ecosystem. These investments in big data management tools, analytics and machine learning allow us to use the data to power actionable insights that drive program performance and meaningful outcomes around personalization, customized experiences, better credit decisions and fraud reduction. And the application of this data is continuing to grow. Our investments in big data management tools, analytics and machine learning allow us to use that data to power actionable insights that help drive program performance. Meaningful outcomes include personalized offers, customized user experiences, which are increasingly more important in today's digital world, better credit decisioning and fraud reductions. The application of data and analytics is growing. We are continuing to invest to ensure that we are positioned to leverage and enhance the customer experience and drive program results. So let's walk through an example. Here you see a potential customer, Jennifer, applying for a zulily credit on her phone. Our dApply platform uses our phone-based authentication. You can see most of Jennifer's application can be prefilled. She only has to enter 4 pieces of information and accept the terms. Once she applies, though, that's when the real magic happens. There's a lot happening behind the scenes. First, we confirm that the phone number Jennifer is using to apply actually belongs to her. Then we pull her credit bureau score. Once upon a time, that would have been our primary means of decisioning her application. But now we can do so much more. We call our data lake, and we find that Jennifer is a CareCredit customer in good standing. We get zulily's insight through client data share on our payment history with them. Ultimately, we are able to get an incredibly well-rounded view of Jennifer in just a few seconds. This is all possible because of our powerful orchestration engine. We use this engine to call APIs and to make the optimal credit decision. All of this resides in our cloud and is directly enabled by our data lake and API investments. You might have noticed here that we added a new data source, utility payment data. The most powerful part of the story is not any 1 data source. Instead, it is the dynamic engine that allows us to easily incorporate and test new data sources of useful data and rapidly evolve our decision-making capabilities. So here we are, talked a lot about how we reach more partners, provide more options, and our platforms are built to evolve. This is really, really important. We continue to invest in our tech platforms. We continue to be on the forefront of a rapidly evolving landscape. It is critically important for us to continue to understand where our partners are going, where the market is going and ensuring that the technology that we are investing in is going to continue to help us drive to the future. Thank you, and I will pass it over to Henry.

Thanks, Carol. That was a great presentation. We really rely on you, and I think it will show here as I walk through this presentation. Hi. I'm Henry Greig. I'm happy to be here to represent the whole credit and capital management team. Before we get into the actual underwriting process, I'd like to talk a little bit about what our objectives are for the underwriting team. First and foremost, we're looking for a stable, consistent underwriting process. Our clients and partners really depend upon us to deliver that to them and their customers over time. Second, we underwrite it to a risk-adjusted return that is attractive for both us and our clients. Again, that's extremely important, that stable, consistent performance to attractive returns. And that sort of sets up for us what our lost underwriting targets are. And over time, with the mix of clients we have, we are trying to get to a 5.5% to 6% net loss rate for the whole portfolio. Let me just take a moment and now sort of transition to how do we underwrite. And underwriting is where we can actually start to maximize that solution for our clients, partners and for Synchrony in that 5.5% and 6% loss rate range. So let me tell you a little bit about Synchrony PRISM, our underwriting process here at Synchrony. It's really based on the common theme that we want to underwrite to the customer, a customer-centric approach such that make the customer experience better, and a better customer experience will lead to better results. So what does that mean? Well, that means that if we focus on the customer, if we focus on understanding everything there is to know about the customer, then that, in turn, will lead to a better experience, will lead to better results. Results being higher approval rates, better credit lines and overall, a better customer experience. So what are the key components of PRISM? Well, for us, there are really 3 big concepts. First and foremost is data. We want as much data as we can get on our customers, and we want to be able to get that data to the point we can actually use it. So the second pillar is it needs to be on demand. Data doesn't help us. It doesn't do any good at all if we have data available to us in our customer warehouses but not at the point where we can actually use it to decision for our customers. Third pillar is deeper insights. Data on demand. Deeper insights being taking that data and turning it into information that is actually helpful in the underwriting process that we're working in. So for example, insights around whether that customer is a better credit risk or whether they need a higher credit line. So let's go a little deeper. A little deeper in the client data process is really trying to gather as much as we can about that customer. And we know a lot today, Synchrony itself has over 100 million accounts. 60 million are active at any given particular point in time. We have over 100 million when you consider those that are inactive at various points in their life cycle. That data is driven by billions of transactions that those customers do with us. Sales, payments, customer inquiries, all of that data can be brought together and is unique to Synchrony and driving results. Secondly, client data. Our clients have their own data, and that's unique to them, which they can then give to us. For example, if a customer is applying with us and we actually get data from our client that says, this is a customer that uses this account -- uses that particular retailer a lot, that's information we can use in the underwriting process to help set credit lines, and that drives better results. So proprietary to us, Synchrony is both data that we have and our clients have. Let me spend a moment on credit bureau data. There's been a huge transformation over the last few years in credit bureau information. A few years ago, it was all relatively standard. You could go to 1 credit bureau or the other and get relatively similar information. That's changed dramatically and is changing dramatically in the past few years. So using that alternative data to help differentiate between 1 credit bureau and another sort of tells us that sometimes, what we need to do is use multiple credit bureaus in the process. And there are other alternative datas that we can access as well, data about digital footprints, identities of the customer. All of this data can be brought together to deliver better insights on who that customer is. So let's move on to the second pillar of Synchrony PRISM. This pillar is really what Carol was talking a lot about earlier in terms of the technology that helps deliver this data and these solutions at the point in which we need them. Those show up in a number of different ways. First and foremost is it has to be dynamic. It has to be available when the customer wants to transact. And so that could be at a point of application or a point of authorization. There's an expectation that, that happens very quickly. And so how do we bring that data to that point in time? And those technology solutions help deliver that. There's also triggers. Triggers are basically data that we use to help indicate to us when a customer has changed or some lifestyle change, which then leads us being able to take new actions such as a credit line increase. And then finally, there are event-based triggers. Those where Mike talked a little bit about in his pitch about upgrading to a dual card. That is an event. That's something in which we determine that we're going to promote a customer from their private label relationship into a dual card relationship based on changes that they have in their profile. All of these are key system solutions that we need to get the data to the point where we make a decision. I'll spend a minute on fraud really in the next section. And that final pillar is, how do we take this critical customer data and turn it into actual results? Well, we do that, quite frankly, by actually distilling it down to key information that we need, thousands of attributes into a handful of scores or a handful of behavioral attributes that then sort of indicate the actions that we need to take as a credit team. First and foremost, I'll talk a little bit about proprietary scores. Proprietary scores are nothing new. But as a former modeler myself, I think that you understand that data in equals results out. So our proprietary scores are now leveraging all of that data I talked about a little earlier to develop specific proprietary scores for each underwriting action that we'll take. We've also developed a testing platform which is advanced and allows us to propagate it with scores and information much quicker and learn and make decisions on the fly that actually then will take lots of new scores and data that we could feed into the process, test and learn and then propagate those into production much quicker than we had in the past. All of this is distilling that information into key points that we need to make decisions. Nothing is more important in that particular scenario than our fraud analytics solutions. Fraud analytics solutions are really like looking for really that needle in a haystack. Those really small number of times where we need to take specific action on an account because we think there may be fraud. The flip side of that is we do not want to slow down good customers. So you need specific machine learning and advanced solutions that allow you to really pinpoint where you need to take action on a fraud while actually letting most of the portfolio continue to transact as they will. Our fraud and analytics solutions under PRISM have really matured working with both internal and external people to help build these types of advanced solutions. Those are the critical pillars of PRISM. And what I want to take you through now is some actual cases where we've used PRISM to improve our results. First one is in acquisitions, simple applications. Instant applications are nothing new. Synchrony has been doing this for decades. We've got pretty quick systems. We provide those systems with scoring. And we make a decision very quickly. Under PRISM, we're feeding 100x or more the amount of data into the process, which allows us now to differentiate customers coming through, let's say, the mobile channel versus those that come in through the store channel. That differentiation, the ability to mix and match data with the customers, with the client, with the channel really takes this to another level. And we've seen big results from this so far, 15% increase in approval rates at similar risk levels. And I believe we're only scratching the surface. As we add more data, as we get more experience with this process, we expect that we're going to continue to see increased results over time. The second example is a little different for a credit person to be talking about authentication, but I think it's important. PRISM is really taking all the data around our customers and trying to understand them better. Before, authentication was based upon the channel the customer talked to us through. We've now, under the concept of PRISM, brought that into all of 1 single area where that data can be shared. Imagine, if you will, a customer calling us from a -- first time from a new mobile phone. We can authenticate that, and then we can then take that and propagate that number across all of their accounts, all of their information, such that the next time they call us on that phone, we know exactly who they are, and we know exactly what all their relationships are with us. Authentication is a full triple threat in terms of the results that it gives us. It creates a better customer experience, which enables customers to make sales easier so they make more sales, and we've proven that. And also, those sales that they make are safer because we know who to let through the system and who to actually authenticate in a much more stepped-up fashion. And so that improves our fraud solutions. And then finally, because we're sharing this information across the whole enterprise, we don't have to purchase the same data twice. So it lowers costs as well. It's a great solution, and it's something that comes out of PRISM that quite frankly was a little unexpected when we first started developing this program. The third example is based on customer management and similar to the authentication case in which we can now share data across all customer accounts. And as you've shared that data across accounts, you learn things about, hey, how is this customer performing? Where are they in the credit spectrum? Are they improving? And so this particular example is a simple one. We've been doing credit line increase programs for years. But now as we compare those programs under PRISM to where they were before, we're seeing much better results as we're able to target exactly who is going to use those programs, who's going to use that increase, which helps to increase sales. At the same time, it allows us to be much more targeted in who we give increases to, so it improves the credit risk and fraud risk as well. Those are just a few of the examples of which Synchrony PRISM is bringing results today to Synchrony and to our clients and to our partners. However, we're not done. Synchrony PRISM is a journey. We will continue to gather data. We will continue to improve our tools in that process. And we continually will see results throughout the whole spectrum of a customer relationship from the application, authentication, customer management and even into collections. Let me take a step back for a moment and talk a little bit about how Synchrony PRISM and the underwriting process links back to what Mike Bopp talked about a little earlier in terms of product. We underwrite here at Synchrony across the whole spectrum. We don't just underwrite for super prime consumers. We underwrite across the whole spectrum, and we have products for customers across the whole spectrum. And what Synchrony Prism allows us to do is really kind of focus in on those particular areas where we can offer a bigger customer choice to customers based upon where they are in that credit system. In fact, we can even suggest products that might be right for them at this particular point in time. And then because Synchrony PRISM evolves, we can then track that customer and then offer them new products or upgraded products in the future. And so Synchrony PRISM actually works very much hand in glove with Mike and his product organization in terms of how we actually book and underwrite credit. That's Synchrony PRISM. That's the underwriting process here at Synchrony. We aim to create a stable underwriting process over time for our clients and customers. We underwrite to attractive returns that then generate loss rates that we target in the future for our programs. And then we continually improve our underwriting process through Synchrony PRISM to continue to deliver better results for our clients, our customers and our company. Thank you for your time. I will turn it back over to Kathryn, our master of ceremonies.

Thanks, Henry. I'm sure most would agree, any opportunity we find to enhance the predictive power of our underwriting leads to better outcomes for everyone. And speaking of better outcomes for everyone, earlier today, we heard Brian talk about Synchrony's commitment to our people, our culture and our ESG opportunity. As we go into our 15-minute break, let's take a deeper dive into what that means for Synchrony stakeholders. [Break]

Welcome back, everyone. We hope you've taken the opportunity to get away from your screens for just a few minutes to refresh and recharge, if not, grab some popcorn. This next section will feature presentations from our platform CEOs. And if you've never had the pleasure of chatting with any of these fine gentlemen before, believe me, you're in for a real treat. They're as knowledgeable as they are passionate about each of the platforms they lead. Beto Casellas will kick things off by talking about our Health & Wellness platform, followed by Curtis Howse, our Home & Auto CEO; and then Tom Quindlen, the CEO of both our Diversified and Value and Lifestyle platforms. Last, but certainly not least, Bart Schaller will talk about our Digital platform. So without further ado, let's go over to you, Beto.

Thank you, Kathryn. I'm Beto Casellas, and I lead the Health & Wellness platform for Synchrony. Our team wakes up every day, thinking of ways to provide a comprehensive health care financing and payment solution through a network of providers and partners for those seeking health and wellness for themselves, their families and their pets. Let me tell you a little bit about our platform. We have scale and expertise in health care and pet care, $10 billion of purchase volume with average active accounts of 6 million. These 6 million customers on average every month transact with over 250,000 providers in our network. And let me tell you a little bit about how we have grown our network over the years. It first started with dental. We saw a need in the market that consumers needed a way to finance for out-of-pocket expenses in that particular industry. Expenses and insurance typically did not cover for each of the procedures around dental. And so we started with that. We worked with dentists to provide the CareCredit card as well as being part of the CareCredit network. We took that same formula and moved it to veterinarians and offered it to veterinarians because they have the same need: how can we provide patient financing, pet financing for the procedures that were not covered with insurance. And so we have expanded that to over 45 specialties in our industry like cosmetics, vision and audiology, and being able to provide the flexibility of payments for consumers seeking the care that they need and providing it when they need it. Over the last 2 years, we have expanded the markets that we're in. For example, health systems and hospitals. Over the last 2 years, we've been able to sign over a dozen hospital systems to begin accepting the CareCredit network and being able to accept our card at point of care. We also have recently launched, as you have heard over the last 2 weeks, myWalgreens card. And it's a great way to utilize the expertise that exists in retail in Synchrony with the domain expertise that we have in health care. And we're excited to grow that partnership. And earlier this year, we bought Allegro, a strategic acquisition for us to expand our offerings in product as well as in our audiology market. We have over 30 years of experience. We have financed over $100 billion since our inception, and we just have deep domain expertise in health care, in pet care, in pet insurance, and we're happy to be able to do this for many of our customers across the board over the last 30-plus years. Now not only we have expanded these markets, but we also have expanded our suite of products. First of all, our marquee product, the CareCredit card. It's a way to finance large ticket items in the health care industry. Over 250,000 providers accept it. we can finance in 6, 12, 24 months. We also have equal payment plans as well as being able to purchase regular purchases within the 250,000 providers that are part of our network. We also launched the myWalgreens credit card, which is a great way to bring forth the loyalty of the Walgreens customers into financial services that they're exploring and embarking in that business. We also bought Allegro Credit this year to expand our capabilities in installment loans. And in pet insurance, we bought Pets Best about 2.5 years ago to expand the way that we provide products to our pet parents. On the left-hand side of the page, it's just a sample and illustrative way to show our partners. Over 250,000 of them are providers across the health care, pet and wellness space. Now our network really powers the growth for many of our providers. We have 75% of the veterinarians out there in the United States are part of our network. 80% of the dentist office in the U.S. do business with us. Close to 90% of the ophthalmologists connect with CareCredit. And so we have these specialties that continue to grow every year in terms of creating our network and providing the patient financing needed for consumers to get the care that they need when they need it. Over 11 million open accounts. And what that means is this business used to be a one-and-done. And really, we have transformed the business to be able to say that 60% of our volume are really repeat sales, which 80% of those sales are really coming from providers where the consumer did not open the account. So really, what that means is we're bringing consumers to many of our providers and bringing them to be able to get the care that they need. An example of this is an individual that needs LASIK. He will research what he needs to do and being able to go to a LASIK provider and get a procedure. He will open an account and be able to provide the financing for taking care of that surgery. He has a daughter, and the daughter needs some orthodontia or perhaps some dental work. He now has a CareCredit card to be able to pay for that expense. A few months later, one of their pets need some help with the veterinarian. Again, he will look to our provider locator in being able to have veterinarians that can accept CareCredit. It really gives the consumer peace of mind in being able to have capacity to pay and ability to pay for the care that they're seeking and the care that they need. And we continue to increase our robust national provider network. One of the things that shows up day in and day out is the fact that every month, we have about 1.5 million consumers hitting our provider locator. It's the way that continues to show the value that we bring to our consumers by having this robust network of offering places where they can get the care that they're seeking. We also have heard from our cardholders that 98% of them, we meet the demands of them, and we also exceed the way that we use our card in our network, the way that we apply, use our card, transact or pay, they're extremely satisfied with us. And for us, we have a deep domain expertise in health care and in pet. We got a well-regarded brand in CareCredit. We have a great brand in Allegro Credit, in Pets Best, in pet insurance. We have built a brand over a long period of time, and we've been able to have a very strong relationship with over 100 professional organizations and associations in this space that help us think and act on how to best bring forth patient financing into our industry. Now just to show a couple of different ways that we've been able to innovate in our space. The last 1.5 years has been quite unique. And for veterinarians, they definitely have been extremely busy over the last 18 months. And one thing that we did is we noticed that the waiting room in the veterinarian offices really became the parking spot and the parking lots. And so we created this Little Curby Pocket Pal. And it's a way for veterinarians to get the opportunity to explain CareCredit. It's an easy way for consumers to learn about CareCredit in a fun way at the comfort of their own car, quite frankly. And being able to apply, being able to service their account and being able to also pay for service during that particular visit. It's a great way to bring forth the digital capabilities and technologies that we have brought forth and invested in over the last several years, innovating and pivoting in a quick way for veterinarians to have something to offer in these very difficult times during the pandemic. It's a great way to show this and really has been great to be able to roll this out to many veterinarians across the United States. We continue to deliver tangible value to our partners. 3 out of 4 are likely to recommend CareCredit to their patients. We give them access to many of our patients. They say that 73% helps them to move patients forward for the procedure that they need. And we accelerate kind of their cash flow and back end. We take care of the burden of collecting debt, pay that into the provider in 2 days and hold our responsibility to us to collect on that out-of-pocket expense. And the majority of them really have said that they increased the practice revenue since they accepted CareCredit. Now you may ask, where do you see us? Where can you find us? And really, we meet customers in multiple ways. We can meet them at Discovery when they're online, seeking what it is about CareCredit, where is it accepted, how can they apply, and the type of programs that we have and products to offer. We also are at the provider's office, at pre-care, point-of-care and post-care. And we use Pay My Provider. It's a tool and a capability that we have built over the years that have come really handy to be able to pay for bills at the comfort of their own device, at the comfort of their own home. Now what's important to note here is that 47% of our customers have told us that if CareCredit did not exist, they would have either delayed or they would have completely postponed the care that they've been ascribed to do. And it's great to be able to bring this offer of help to many consumers across the board and bring this help and offer it to our providers, and it's really shown in the high NPS scores that we're able to achieve over the last several years. Now you may be asking also about our growth, and we think we have great opportunity in this space in our platform at health and wellness. Let me tell you a little bit about our out-of-pocket expense, over $400 billion of health out-of-pocket expenditures. Over the last several years, high deductible health care plans have become more common. And what that means is the out-of-pocket and the responsibility of that particular consumer to pay for health care needs is greater. And so with that, we think we're greatly positioned to be able to be in an environment, in an ecosystem that we can provide offers of help, products and capabilities to help consumers help with bringing flexibility of payments to pay for that out-of-pocket. We have 3 pillars of growth here. In our core business, the pillar #1, we continue to have opportunities to continue to expand in our network in the specialties that we currently have and continue to have more providers join us every month in dental and veterinarian and many of the specialties that we are. We continue to invest in capabilities and technology to be able to have an easier way to deal with our consumers as well as with our providers. And we think we can enhance, continue to enhance these opportunities and grow this part of our business. Secondly, expanding our business. It's important for us to know that over the last couple of years, we've been able to sign over a dozen health systems and hospitals. It's an area that we didn't do before that, the CareCredit acceptance of our product in these complex organizations at point-of-care and post-care. It's one that we're excited about. One way that we're doing this is also through strategic technology partnerships. An example of this is Epic and how we're showing up on MyChart, which is used by many of the health systems in our country to be able to integrate into the consumer journey of being able to pay for that bill. So we're excited with the integration that we're doing transactionally with Epic and looking forward to interact with those hospital systems that are able to have Epic in their system. Another great opportunity to expand has been the recent launch of myWalgreens card. And we have here John Standley, President of Walgreens that he's going to tell us a little bit about our relationship, how they find us and how they see this as a great opportunity to grow their business.

Thank you for having me today. I'm John Standley, President of Walgreens. I want to take a minute to talk about Walgreens' collaboration with Synchrony. Through the process of expanding Walgreens' financial services offering, we selected Synchrony as our partner based on their innovative operating model, expertise in health and wellness space and advanced technology capabilities. We launched the myWalgreens credit card with Synchrony on August 16, and have been pleased with the early results as well as the path we took in developing a frictionless customer experience. The collaboration between Walgreens and Synchrony teams has been outstanding. The Synchrony team has a client-first approach to partnership, which was demonstrated throughout all aspects of the program development, strategy and execution. Walgreens and Synchrony have a shared commitment to address [ those ], and we have extremely high expectations for the program.

Thank you, John, and we look forward to growing our partnership together with Walgreens. And the third pillar of growth for Health & Wellness is Vet to Pet. We've had a strong presence in the veterinarian market. We have over 75% of veterinarians with us, and we have a longstanding relationship with many of them. We thought if we looked at the journey of a pet parent, we thought there were opportunities for us to expand our influence and be able to show up in payments with payment solutions and different ways of financing. Given it's a $100 billion addressable market, we think there is an opportunity for us to expand into adjacent pet products, adjacent services as well as retail. Now one move that we made 2 years ago, 2.5 years ago on this is the acquisition of Pets Best. And really, it was a strategic acquisition to accelerate the entry into this growing pet insurance market. When we first look at pet insurance, it's a form of payment. So it was right in our wheelhouse in terms of competing with CareCredit in terms of how people pay for care on their pet. But it's not ubiquitous out there. We saw this opportunity as a growth opportunity for us. We also saw it as an opportunity for us to bring additional product in terms of helping pet parents get the care that they need for their pets. We've been able to grow Pets Best to over 400,000 pets in force, more than double than where they were 2.5 years ago. And it's a way for us to continue to bring forth to our pet parents and their journey of raising pets at their home a flexibility of payments and different options on how they can take care of their pets when they need it. Now we thought one way to be able to do all this and share with you how important CareCredit is to our consumers is to have the voice of our consumer really tell the story of how they found us, what they think about CareCredit and how they're able to use CareCredit to get the care that they need when they need it. [Presentation]

Thank you to the half a dozen customers or so, plus the 6 million customers that interact with us every single month. We have built a great franchise here at Health & Wellness within Synchrony. We're a leader in health care and pet care financing. We've got great brands that we have built with CareCredit, with Pets Best, with Allegro Credit. We have broad distribution across the board, significant scale and expertise that really bring forth great offers of help across our industry. And we still believe there is considerable opportunity for us to grow this business and expand not only on the core side of the business as well as some of the expansion that I spoke to in terms of the markets, but also adjacencies and being strategic around those. So thank you for listening, and let me turn it over to our next presenter, Curtis Howse.

Thanks, Beto. Today, it is my pleasure to provide you with an overview of our Home & Auto platform. We have one key deliverable for our platform, and that is to work with partners to offer flexible financing options to customers, which in turn will help our partners grow and enhance customer loyalty. This next slide speaks to the breadth and depth of our Home & Auto franchise. We're an established leader with $40 billion in credit sales, 18 million active accounts and 120,000 partner locations. At $26 billion in receivables, we are the largest Synchrony platform. And while we produce $40 billion of credit sales, this only represents 2% of the total $2 trillion home and auto market, excluding mortgages and auto loans. Our efforts to increase share in this space will take place by adding new partners and merchants, increasing penetration with existing partners and accelerating growth through platform adjacencies. And with our recent reorganization, we're better positioned to leverage products and capabilities to make our share increase objectives a reality. When looking at the value the Home & Auto platform brings to our partners and customers, we see a number of benefits. In terms of value for partners, the first thing we see is expertise. Home is where Synchrony started financing appliances during the Great Depression. We also have 35 years of deep domain experience in the auto and fuel space. Next, there's data and analytics. We leverage these tools to drive loyalty and incremental repeat sales. In fact, 60% of our platform sales come from repeat purchases. This in turn drives cross-shop via Synchrony's marketplace and our Home & Auto networks. And then there's dealer and merchant onboarding. We onboard merchants and set them up to process applications within 30 minutes. We have also invested in waterfall solutions, underwriting tools and shopping cart integrations to drive increased sales. All of these efforts bring big box capabilities to our smallest partners. When thinking about the value we bring to customers, it starts with flexibility and choice. We offer multiple financing products from deferred interest to installment. This provides options for customers and has driven $20 billion in promotional financing in the past year. Next, there's purchasing power and utility. Our home and auto networks offer broad utility, drive top-of-wallet behavior and give our customers access to thousands of participating locations. And last, but perhaps most important, there's the customer experience. We are very focused on investments to enhance the customer experience, including direct-to-device and our pre-fill capabilities. When thinking about Synchrony's marketplace, this truly demonstrates how we can bring customers to our partners. This site is used by our customers to service their accounts and learn more about our partners. This site is also used by our partners to highlight special offers and create new customer traffic. In 2020 alone, we had over 180 million visits to the marketplace, generated over 1 million referrals to our Home & Auto partners and originated 240,000 new applications for our Home & Auto customers. The scale and reach of the Synchrony marketplace is a key growth driver for our partners and our platform. Our growth strategy consists of 3 pillars that I will cover over the next few pages. First, there's core growth, which is focused on driving deeper integration with current partners through better analytics, improved customer experiences and enhanced products and capabilities. Second, there's network growth, a differentiator in the marketplace giving access to a broad set of industry partners. The key objective here are to drive sales, utilization, and cross-shop behavior. We're accelerating growth in this pillar by increasing partner engagement into the network, broadening acceptance and enhancing awareness of the benefits the network has to offer. And finally, there is adjacent market growth. This opportunity is all about leveraging the aforementioned capabilities while testing, learning and leaning into areas such as smart home, untapped home improvement categories, auto insurance and ride share. Now when thinking about our home business, there are some additional details I'd like to share with you. We have a robust, well-diversified platform with over 60,000 merchants. In fact, our average relationship tenure is 30-plus years with our top 20 partners. We also support a wide range of partners and segments, including home improvement, furniture, bedding, appliances and electronics. And our results have been strong. This includes 60% repeat sales and $35 billion in credit sales, which is an increase of 3% over the prior year. Although the pandemic has brought about many challenges, it has also created many opportunities. While customers quarantined at home or left cities for suburban neighborhoods, there was an increased desire to renovate homes or upgrade furniture and decor. Today's consumers view these purchases more as investments in their homes as opposed to expenses. In 2020 alone, the home industry represented more than a $600 billion market opportunity. Synchrony only serves a fraction of that today, which is why we're so excited about our future in this space. When thinking about the types of partners and programs we support within our home business, they span a number of areas. This includes partner-based, associations, OEMs, independent dealers and contractor programs in addition to our home network. The largest segment that we support from a partnership perspective is with our partner-based programs. As you can see from this page, we have a long-standing set of customers that we work with in the furniture, decor, appliance and electronics sectors. This includes some of the biggest players in the industry, such as Ashley, Rooms To Go, P.C. Richard & Son and La-Z-Boy. We also have large buying groups and associations such as nationwide marketing and the Home Furnishings Association, in addition to OEMs, which allow support of thousands of individual merchants through one channel and one approach. In home improvement, we are a key provider in both the do-it-yourself and do-it-for-me spaces. In DIY, which makes up 2/3 of all home improvement projects, we have one of our largest partners in Lowe's. For the do-it-for-me space, we have Lowe's Pro, large OEMs and independent contractors. These include Andersen Windows, Mohawk and Generac. This page provides an overview of the dealer and contractor part of our home business. We have a large network of over 50,000 independent dealers and contractors. We added 8,000 new partners in this segment in 2020 alone. Our cross-functional support teams focus on this fragmented space with an emphasis on onboarding and customer experience. And as previously mentioned, we're able to onboard new dealers in as little as 30 minutes. As we know, there's been a strong shift to digital in the do-it-for-me space as partners adopt Synchrony's digital solutions such as direct-to-device and custom dealer applications. This has resulted in a 40% increase in all digital apps, including a 60% in all mobile applications specifically. The early read on our direct-to-device solution has been positive with a 500 basis point approval rate lift, which matters most to our partners. Our next page provides an illustrative example of how direct-to-device works. The dealer sends a secure e-mail link to the customer's device or generates a QR code to scan. Customers then complete the application process privately, efficiently and securely. There are a number of benefits associated with this technology. It is contactless, paperless, completed on the customer's device and minimizes friction. It also creates a simpler and faster application process where convenience is key. And finally, it prioritizes customer privacy and security. This is a great example of where technology can help both our customers and partners. To date, we're seeing an incremental $200 per transaction for those merchants using direct-to-device, which is a key benefit for our partners. I would now like to give you an overview of the home network. Today, we have over 5 million accounts in the network that have utility at over 400,000 locations. Currently, the average sale generated outside of the originating merchant is over $1,800. The home network has only been in place for 2 years. And as we go into year 3, our focus is going to be on adding more partners to the network, increasing our distribution and refining our value proposition. With housing starts up 29% in June versus last year. We see continued growth in home spend and cross-shop needs. All of these factors provide a strong use case for our home network card. Like home, auto is an area where a big portion of the customers' discretionary dollars are spent. Synchrony plays across all aspects of this fragmented space from oil and gas, to servicing, parts, repairs and tires. We have long-standing partnerships with our largest programs in this space that average nearly 14 years. Partners include major service providers across the industry, including BP, P66, CITGO, Discount Tire, Pep Boys and NAPA. Our customers see the value in our cards in this space with 80% of our sales being made by repeat customers. While the overall market is over $1 trillion, Synchrony's $5 billion in credit sales represents nearly 1% of this space, leaving us with plenty of opportunity to grow and expand. Our diverse network of automotive retailers, unique offerings and deep industry knowledge are key differentiators in this space and will drive growth for our business. Now I'd like to review details of the Synchrony Car Care network. The Synchrony Car Care network has been in the market for nearly 5 years, has over 1 million locations and consists of more than 40 partnerships where our 5 million accounts can use their Car Care card. We have a strong value proposition and a large number of acceptance points that drive top-of-wallet behavior. With the length of car ownership increasing and, therefore, servicing needs, we do see a tailwind to growth for the Car Care network over time. This page provides a vignette on the Synchrony Car Care network. Cardholders are able to use their card for all their auto spend, making it both top of mind and wallet. In fact, 26% of sales for our accounts are generated outside of the accounts' originating store. We see evidence of a strong network effect as network shoppers spend 82% more at the originating retailer versus those customers that didn't take advantage of the network. This year, we expect that to grow more as we continue to drive awareness, add distribution points and add new digital capabilities. This page concludes our Home & Auto presentation. We have positioned our Home & Auto platforms very well to capitalize on positive market tailwinds. This includes only having a fraction of the market despite a large business today, which means we have plenty of room to grow. Partners valuing our deep expertise, customers valuing our experiences. This helps us to win both sides of the equation, and we continue to expand through our networks with significant opportunity in home and car care and through the addition of new clients and adjacencies, including smart home, untapped home improvement categories, auto insurance and ride share. Overall, given our deep expertise, best-in-class capabilities, broad array of partners and products and significant opportunities, we remain very excited about the long-term growth prospects of our Home & Auto platform. And now it is my pleasure to introduce Tom Quindlen.

Thank you, Curtis, and good morning, everybody. It's great to be with you. My name is Tom Quindlen. I'm going to talk to you this morning about Diversified & Value, one of our platforms, one of our 5 sales platforms, and also the Lifestyle platform. But we're going to kick it off here with Diversified & Value. This is a platform that helps a lot of our larger retail partners who are focused on delivering everyday value to their customers. We engage with these partners in store, in club and digitally, and we'll walk you through that. It's a very sizable platform. We got a lot of scale here. It's $38 billion in purchase volume, almost $16 billion in assets and an active account base of 18 million cardholders. So a lot of opportunity for us to engage with our partners' customers and a lot of opportunity to grow. Here are our partners. We're very proud of the 18-year average relationship here. You can see Sam's Club, 27; and TJX at 10. These are great partners for us. They've got over $100 billion in sales across these 5 partners, and they have -- we engage 5,000 locations in digital properties. So a lot of opportunity for our teams to engage with these partners and their customers. And we do that. We engage 55 million transactions per month, and about 25% of the sales are digital. So you heard this morning, Carol and Henry and Mike talk about our deep expertise in so many areas. We bring that to bear with all of these partners. And whether it's credit underwriting, our data analytics, our marketing prowess, our sales teams going out, engaging in-club or in-store, all this adds to the deep customer loyalty engagement for these partners. If you look at a cardholder for one of our partners, they will spend 2x what a non-cardholder spends. Real value for our partners. And then we put contracts together that quite candidly align our interests. And so we're both focused on the same thing: profitable growth. And for the customers, the value comes in the form of rewards and savings. Almost $1 billion given back to the consumer here through val props and rewards programs and savings that we generate. And you can see, almost 60% of our customers have at least 2 Synchrony products. There's some real loyalty here. The market is big. It's roughly $750 billion. I mentioned the $100 billion-plus of sales that our partners have in this space. And one of the metrics we look at is penetration. We have about 18% of their sales on our cards. Now that's a big opportunity for growth in this marketplace. We also have a world sales component here, so they have the ability to spend in the world. So together, we think that this is a very, very sizable opportunity in this very large market. Now when we talk about our partner-centric strategy, you've heard that before, there's really 4 tenets: partner alignment, value props, in-store experience and digital. And when we drive all that together for our partners. We think that for every 1% more of that pen, getting that 18 to 19, 20, 21, that's another $1.5 billion in credit sales for every 1%. Partner alignment, crucial. We have dedicated teams, many times co-located, integrated with the partner. And this is an example where in Belk's case, we're saying we want to drive sales in our beauty department. Our team with theirs collaborates and put together this offer to earn extra rewards and brings the customer into Belk either physically in-store or digitally. Strong val props. The Sam's val prop that we launched this year is a great example, 5% back for Plus members. It drives more Plus members, which is really strategic for Sam's, and it gives great value to that member, 5% off on gas, 3% off on dining, 1% everywhere else. A really great example. We do this with all of our partners. The val props are different, but they do create value and give rewards back to consumers. This is an example in Fleet Farm where in store, we have the digital in-store application. You can come on with your device and apply for credit and start spending in the store right away. And then the digital experience. Here with JCPenney, our digital shopping integration. The Synchrony plug-in installed in the JCPenney app gives you the power to go in, check your available balance, pay your bill. Or if you're new to credit, apply seamlessly, get the card in store through your device and begin shopping. So again, that 1% gain, important metric for us. $100 billion plus of sales across these 5 partners. We've got 18% pen for every 1% we can get. That's $1.5 billion in credit sales, and that's a great opportunity for us. Another example here, just to drive some of these points home of the integration of that partner-centric model. This is TJX. Over the last 18 months, we digitized their rewards process, basically. So now if you use the card in store or in the world, you're going to get rewards faster, and you're going to determine how you interact with TJX. Is it through their app? Is it through e-mail or is it through their website? Whatever your choice, you're going to get those rewards faster and be able to go back in store and redeem. And we really appreciate the relationship we have with TJX. While it's only 10 years, it's been a fantastic relationship for both of us. And as Ernie Herrman here, their CEO, alludes, this digital rewards process or enhancements that we drove was really important, not only to TJX but to their customer. And so having us as one of their trusted partners has been just a great partnership for both of us. And then lastly, another example of this integration of our partner-centric model, Sam's Club. If you know Sam's Club, you know that Scan & Go is strategically important to them. And 4, 5 years ago, as they really started off on this journey, we were right there with them. And it started with simply driving people to Scan & Go through campaigns. And now it's a completely integrated opportunity where you can apply for credit, get your rewards, check your rewards. You can actually pay and check out without going through the register with our card completely embedded in Scan & Go. It's a great example of the alignment -- of that partner-centric alignment that I talked about. So just to wrap up D&V for you this morning. A market leader in scaled retail. We think there's real opportunity to enhance that 18% pen I talked about. We're delivering everyday value and loyal customers, which drives greater spend in our partners, which is what it's all about: helping their sales grow. And we think we have top of wallet products and customer experiences to fuel that growth and enhance our partners' business model. So thanks for listening on D&V. Let me take a pause now and switch over and give you a little background on our Lifestyle platform. And here, we've got a diverse set of merchants with really iconic brands, and they've got tremendous passion for their brands and their products and customers. And where we come in is offering a seamless financing product, building relationship with the OEM and their dealer network, as you'll see. Here's some of the metrics around the platform. Almost $5 billion in purchase volume and slightly over $5 billion in receivables. We like the correlation there for every -- just about every dollar volume we can put on the books, we get assets of similar size. And here, you've got almost 2.6 million -- roughly 2.6 million average active accounts for us to build and engage with. So when you look at the partners here, it's really -- it's a broad spectrum, starting with our specialty retail partners like American Eagle, DICK'S Sporting Goods, where we offer private label credit cards and co-brand products to name a few. And then across some of our verticals here, music, luxury, outdoor, we're really interacting here with the consumer that's coming in frequently and making multiple purchases throughout the year. And then we have the larger purchases for more special occasion, and the consumers shopping 2 or 3 times before they decide on that purchase. And of course, we'll have the right financing product for them when they do. There's also a huge dealer network here with these OEMs, 20,000-plus, and we think it's a really, really big opportunity for us. When we think about winning in this space, there's a couple of things we focus on. You've got to be fast with this dealer network. You got to get them up and running quickly, and we have a 30-minute onboarding. We onboard 2,000 dealers annually. So you've got to get them up and running quickly. 30 minutes start to finish. But beyond that, as important, we provide a lot of service and training to the dealer network. Mike Bopp talked earlier about data analytics, that's very important in this space as well. personalization is important here. And we found that in a survey of our customers, 40% of the sales would not have been obtained if they hadn't had credit available to them. So we know that our product works here. We also know that channel is important, being able to engage in every channel. If you look at our American Eagle experience in their app or online, it's a great example of that. And then also similar to the D&V platform, our consumers here have 2-plus Synchrony accounts. So very familiar with us and very loyal. So this is a big market as well, but this one is highly fragmented, and that's a difference than what you saw in the D&V marketplace. Here, no single retailer holds more than roughly 4% in this space. And so we think that creates a ton of opportunity. There's also a nuance in some of the verticals like music and luxury, where up to 75% of the sales are financed. So we believe that our products have a real opportunity to win here. It's our products. It's our capabilities, our service to these consumers and our partners' needs, we believe we're zeroed in on the right things to win in this large, highly fragmented marketplace. And the way we think about growing is sort of threefold. Let's win in our existing base. If we get one application, one incremental application per dealer per month, we think that translates into roughly $150 million in sales volume. And there's also some large national partners with programs, some with de novo opportunities that we think we can win. And that's a big play for us. And then this dealer network I talked about. We bring on 2,000 dealers annually. There's over 20,000 existing partner dealerships out there that we interface with. And that's a great game for us, and we think we've got the right tools to win. To just touch on that a little bit more. To win with these dealers, there's really 4 things we look at that we deliver. Speed. You've got to be fast. You got to get these guys up and running quickly, as I talked about. You've got to be flexible. Your terms have to be simple, easy to understand. You got to have the right product for the right financial situation. And then you've got to meet them in every channel. Crucial that all 4 of these help you win in that dealer ecosystem I talked about. So let me see if I can bring this to life for you up here on the big screen. [Presentation]

To win in this space, speed, flexibility, multichannel, multiproduct, that's what we bring to that dealer network ecosystem, and that's why we think we're going to win there. So let me wrap this for you here this morning. We have deep expertise in this space, and we've really partnered with several iconic brands. And we think that this network that we've enabled and partnered with, these OEMs and their long-reaching dealer networks, I think we've been very successful there, and we feel that, that continues to be a big opportunity for our growth. And then lastly, we have cutting-edge customer experience. It's frictionless customer experiences in all the right channels with all the right products. And we think all of that together really enables us to have game here and build this business. I really appreciate your listening today to both the Diversified, Value and the Lifestyle platform discussions. I look forward to taking your questions. We're excited about both of these platforms as real growth levers for the company. And now it's my privilege to introduce to you the leader of our fifth sales platform you're going to hear from today. That's Bart Schaller, and he runs our Digital platform. So over to you, Bart.

Thanks [ to you ]. I'm happy to be here and talk more about our Digital platform, our partners and how we're thinking about growth. So this is what we do every day. But more importantly, it's what we aspire to continue to evolve and improve upon every day, more integration, more seamlessly integrated into our partners' environment, to deliver for their customers payment solutions and offers with leading values and rewards and increasingly personalized offers and communications, all seamlessly inside of that partner's experience and extending the value of that customer for our partner. So as we look at our platform, 17 million active accounts, $36 billion in purchase volume, some great scale to grow from. A couple of statistics on the left that are unique to digital. And I guess I should say the Digital platform is new to Synchrony, but Synchrony is certainly not new to digital. And that's proven with this group of core partners who average a 16-year tenure with Synchrony. And then from that, and those business partners' models, the way they engage with their customer weekly, daily, maybe even more often, we see that same engagement with 52 purchases per active customer per year, and that's different and unique for the digital platform. As we look at who makes up our platform, we have PayPal and Venmo delivering payment solutions and enabling customers to shop online, but increasingly off-line. We have marketplace models with Amazon and eBay, delivering huge scale and utility to their customers. And then our digital-first brands and merchants. We have an array of products, and we take those through multiple channels depending on the partner. And no 2 partners have the same integration or configuration with Synchrony. Each one of those meets the partner and their customer and their expectations, where they are in that journey. And then we evolve and collaborate and grow from there. So as we shift and look at growth, on the left-hand side, huge scale with our existing partner, $650 billion opportunity. Big growing e-comm space. And then those in-person sales, that retail, travel, entertainment, dining experiences, driving value back for our partner. So we can grow with our partners, with our partners, and we can also grow and increase share. And we do that through those integrated customer experiences driving that personalized messaging and offers, leveraging the data that Mike talked about and consistently evolving that customer experience to stay relevant. Part of staying relevant is continuing to look at our product suite and expanding our product offerings with each of these brands and partners and ensuring that our offers remain relevant and real time. And then finally, winning with new partners. Two great examples, Venmo and Verizon, both programs we launched in some interesting times last year, both performing very well. And the great thing about the new digital partners, almost universally, they come with huge databases. Consumers that they already know an immense amount about, where they're logging in, what they're looking at, what they're shopping for. More importantly, what they're buying, where they're shipping to. And using all of that data, married in real time with the Synchrony insights and data is very powerful, as Mike and Henry have already talked about today. But I didn't just want to talk to you or tell you that we're going to engage better with these customers, that we're going to grow with a partner over time. I thought I'd spend a few moments and demonstrate how we're actually doing that today. So here's our customer journey: engage, apply, use and service. Not always linear or in this order, but in each one of these cases, I want you to notice the personalization, the engagement seamlessly with the customer and all inside of the partner's brand. So first, we'll start with Verizon. This is a personalized video as part of an Early Months on Books e-mail. It's personalized and it's specific to the Verizon key channel of a smartphone. So we're going to talk to the customer about how to activate their card and get started, how to provision it into the mobile wallet so that they can begin shopping online and off-line immediately. And then we're going to wrap it up with the value proposition that ties back into the Verizon brand. Signing up for Verizon's auto pay earns the customer an additional $10 a month per line off of their cell bill, beyond the Verizon Visa spend value of 4, 3, 2, 1. An HSN example. Several of my peers have talked about different instances of our digital apply platform. And I want to take it a step further, another layer deeper in terms of integration inside of a customer shopping experience. So we have Jen logged into HSN shopping for a purse. She finds the one she likes and she places it in her electronic shopping bag. Now while she's doing that, we're using HSN's known shopping data and the real-time API connectivity that Carol highlighted and we are transacting back and forth with HSN behind the scenes. We're interacting with Henry's PRISM platform, and we're delivering a seamless preapproved offer with a great value to accept it today. A few more clicks from Jen and she's right back into her shopping experience with a new card and a great value. Then let's look at Venmo. So again, Carol highlighted how we worked with the Venmo team to seamlessly integrate and layer in credit to their already impressive Venmo app experience. But for the consumer, it's personalized and intuitive from the first moment. They get to select the card they want, and we're going to personalize that. But not just with your name and account number and an expiration date. On the front of that card is the unique QR code that accesses your Venmo account. So it's easier to split bills, pay friends and be paid. And that's really important. We've taken the ultimate off-line tool, the piece of plastic, and we have linked it back to the Venmo application digital experience that the consumer values. Then we look at rewards. The rewards fluctuate and optimize every month. So this month, you're traveling, more rewards. Next month, you're at home working on the house, the rewards optimize and fluctuate to meet your spending and deliver cash back at different rates each month. That cash back is deposited back into your Venmo account so you can pay family and friends. You can pay your bills, you can pay your Venmo Visa bill. And Venmo has even enabled the conversion now to cryptocurrencies. And then finally, even in servicing, using intuitive integration and technology to deliver service. So here, we have 2 very well-known voice assistants from 2 of our partners. Our innovation station created voice skill sets for managing those credit accounts, balance inquiries, due dates, making payments. And those are available not only to these clients or Synchrony platform clients. So we do integrate and iterate, personalize and drive more engagement and do it as seamlessly as possible and importantly, within our clients, our partners' branded experiences. It's a constant evolution in collaboration, and it all starts with the Synchrony scalable platforms with unique and configured integrations. So I wanted to spend a minute to, I talked about wanting to grow with a partner, evolve with a partner over time. No better example than Amazon. We started back in 2007 with a fairly straightforward simple promotional full cart offer. As Amazon continued to grow and change their business model, we grew and changed with them, changing not only the integrated experiences across the consumer journey on the top, but also evolving the product and the value proposition along the bottom, the value we provide to that customer. Complementing the Prime launch, shifting from a promotional offer to an equal pay offer. And the great thing about the Amazon business model based on product ratings, many, if not all of our efforts are guided by real consumer feedback and those star ratings. So we don't just say and believe we can grow with partners. We're actually doing it. We have been doing it, and we will continue to. So if we step back and look just broadly at the digital commerce journey, go back 10 years, $170 billion in e-comm sales and roughly only 1/3 of us with a smartphone. We look at where we are today with close to $1 trillion in e-commerce sales and a growing number of connected devices that certainly 10 years ago, we couldn't have imagined. So what does that mean 10 years forward? Certainly, significant growth, but maybe more importantly, continued evolution, collaboration, new technologies, new customer experiences and customer expectations to be met. We're going to continue to grow both with our partners and with new partners and certainly with those new technologies to lead the market. So I'm going to conclude with 3 themes you've heard throughout the day. First, we have to be integrated, seamlessly part of our partners' platforms, improving the placement of payments and offers to be in the right place at the right time, to be relevant. Then use the incredible insights and data from our partners, marry that with the Synchrony insights and power better decisions, relevant personalized offers and communications. And finally, this evolution is constant. The journey in digital is never-ending. And the collaboration with world-class partners is a privilege. They make us better. We expand our capabilities, we help them grow their business and in turn, we grow the Synchrony business. So thanks, that's Digital. And now I'm going to turn it back over to Kathryn.

Thanks, Bart. So hopefully, thus far today, you've picked up on a couple of key themes. Synchrony has spent decades building out and diversifying our business. We've amassed a tremendous amount of powerful data and insights and have heavily invested in our technology and digital capabilities to power our dynamic financial ecosystem, all with the end goal of providing our partners and customers with greater optionality in how they connect and engage each and every day. And as you just heard from each of our platform CEOs, each of our industry verticals are well positioned to leverage these proprietary resources to win and expand new partnerships, expand the value propositions we offer and enhance the commerce experiences we power, all leading to sustainable growth over the long term. So now the moment you've all been waiting for. It's time to hand over the reins to Mr. Brian Wenzel, our Chief Financial Officer. Brian will bring together today's discussion by highlighting how Synchrony's core differentiators, our business model, data analytics, product suite, digital capabilities and platform opportunities translate to sustainable, strong financial performance and value creation for our stakeholders over the long term. So now to the ultimate closer himself, Mr. Wenzel.

Thanks, Kathryn, and good morning, everyone. Today, we provided you a lot of information on our sales platform and business strategy. What I'm going to do over the next few minutes is try to help you map that information to the financial attributes of our company. Before I dive into detail, what I'd like to do is cover 4 core financial elements of our business model. The first is around sustained growth. What we've shown you today is diversification across our platforms and inside of our platforms. Now when you have such a diverse set, what really fuels that and what's required is a multi -- vast array of products that we have to service the customers and provide financing to them in their customer journey, to help them enable the sale and help our partners pull through that sale and convert those sales for them. What fuels all this is a compelling value proposition, and most of that value proposition is paid by the partners out of their portion of the RSA. So when you combine that diversification, a multiproduct strategy, the compelling value prop, what you end up with is a highly engaged customer. When you have a highly engaged customer, what it allows us to do is get favorable terms, which gives us a higher interest and fee yield. And then you combine that with the underwriting. Now Henry outlined his underwriting principles and the way in which we go to market. And that's really -- the foundation of that is our 80-plus years operating in this market in the retail origination and execution. When you couple that with the data elements that we have for the vast majority of the transactions that we have and data share from our partners, you fuel that with the advanced tools and unique attributes that Henry talked about earlier, and you deliver that through the technology that Carol talked about having action-driven items that we can really execute at the time in which a sale is happening or accounts being requested. So that gives us a very strong risk-adjusted margin. What's also unique about our business is RSAs. And our RSAs are very simple. What all they're trying to do is align the interest of our partners with Synchrony, and they're aligned around growth and profitability. So when we have conversations about where to spend money on growth, we have conversations on if we want to adjust cardholder terms of value proposition, if we're making underwriting refinements, our interests are aligned to service the customer the best way to drive growth and drive profitability. And then finally, the core element to is on operational efficiency. We come from an environment where we don't need a lot of marketing dollars to generate new accounts. Our marketing goes to early month on book activities, life cycle activities and then some things like -- such as upgrades that Mike talked about, where we drive increased lifetime value of accounts. You couple that with heritage from several decades ago of operating on low balance accounts. That discipline in driving digitization across all our activities yields us a highly effective, highly efficient business model. And the foundation of that, which Mike talked about, is having the #1 set of cardholders across our financial institution peers. And that's powered by this model with 65 million plus active accounts, almost 450,000 locations in which we operate and 55% of our application is coming digitally. And you look at the engagement of our customers, we generate over 25 million new accounts per year. Our average length is 10 years. And when you look at the bank, 40% of our customers have more than 1 product with us. They're engaging on the credit side without us trying. So really a strong foundation to our business. And what that has yielded, what Brian talked about, was really a significant amount of growth over the last 10 years, right? If you go back to 2010, our business was $45 billion in assets and over $82 billion at the end of 2020. When you look at it, what's more attractive is the fact that we've been able to convert volume to receivables to NII. Now you may say, but you were an independent company all those times. What's happened more recently? So when you look at this, since the IPO through the pre-pandemic period, we've been able to grow purchase volume and end receivables around 7% per year and convert that 7% into NII. And when you look at the performance relative to our peers on volume and receivables, we outperform them. It goes back to the diversification, the multiproduct strategy and compelling value propositions we put our partners. Now what fuels this growth? What fuels this growth is the 25 million plus new accounts we generate per year. The way in which we have this value proposition is constructed, the way which we have the multiproduct strategy allows us to originate new accounts at a fraction of our competitors' cost, $18 per account. When you look at that relative to our peers, they're either 2x or 4x that amount, and really goes back to driving that engagement, having that highly engaged customer, providing them the right product when they need it in their journey, engaging with them as they move through the journey, and we provide different products to them. This product, when you look at the margin that we generate, generates $350 lifetime value per account, 15 to 20x on average the cost to acquire. Now you might say, well, that's a great model. Why wouldn't you originate a lot more new accounts? What we try to do is optimize this equation. I could originate a whole bunch of new accounts and what that's going to do is drive up our costs to acquire and drive down our lifetime value. We're again trying to find the optimal level of an effective and efficient cost to acquire with a very attractive lifetime value. Now as we think about that lifetime value, that brings us to margins. As I talked to you earlier, having an engaged customer, a compelling value proposition gives us favorable terms. That leads us to an interest in fee yield on average about 800 basis points higher than our peers. When you couple that with the underwriting we do, we generate risk-adjusted yields of 560 basis points more than peers and 600 basis points in comparison to our broader peer set. That provides us superior risk-adjusted returns, which we can use to flow the business. Now when you think about losses, one of the things you have to think about is the sustainability of losses over time. Here, what Henry talked about earlier is the consistency in our underwriting model. So on this chart, when you look at the pre-GFC period, the great financial crisis, and you look at it through 2021, we performed in line or better than our peers that are going through several cycles. We underwrite at a customer and channel level and we've optimized the loss rate really by aggregating a portfolio of portfolio approach, using the rich data set and the PRISM tools, we're able to achieve this on a consistent basis over an extended period of time. Now what you may ask is how did you do during the pandemic? And this chart gives you how we transformed the portfolio. We've taken our prime exposure from 72% to 80%. Effectively, 20% of our book is now subprime. In the GFC, that was 39%. Pre-pandemic, it was 26%. We've done this by refining our earning criteria at the beginning of the pandemic, providing forbearance accounts to those who need it, closely monitoring those who have forbearance and other forms of support and really beginning to unwind that now as we get comfortable with where the consumer is in the pandemic, a very effective way in which we've managed through this period of time. Now turning to the RSAs. RSAs are a way in which we again align the interest of parties. Roughly 25% of our RSAs are volume-oriented payments. So essentially payment on volume. 75% was effective -- So you think about interest and fee yield, you think about other income, you think about provision for losses and expenses. The alignment here leads to long-lasting relationships that align our partners' interest. If we lose this floor for a second, the fundamental RSA constructs, they vary by partner, but they're designed to achieve an overall ROA in line when you think about the risk-dependent factors. So how much risk is the retailer willing to take? How much risk are we willing to take? And you adjust the ROA for that. And when you think about what varies inside of that equation, it's really 2 things: the growth of the assets and the second is the operating performance of the business. So let me go to 2 hypothetical examples on the right-hand side of the page. The first one has a hurdle rate targeted at 1.5%. Given the low hurdle rate, the share is lower. So they only share 50% of the upside economics above the return above 1.5%. That yields 69% of the program returned to Synchrony. In another illustrative example, if we retain the first 2% of that first take, and that illustrative return is at 4%, we may give up 75% of the economics above the 2% hurdle. In that case, we only get 63% of the program economics. But now each scenarios, one scenario is where you have an increase in the operating performance of the portfolio, with no asset growth; and one where you have a decrease in the operating performance, again, with no asset growth. If you take that first illustrative example of the 1.5% hurdle rate, and you say this [ harder ] program return went from 4% to 4.5%, Synchrony's share in the overall program return goes from 69% to 67%. Effectively, 50% of that incremental 50 basis points goes to the partner. In a downside case where you have 150 basis points reduction in the operating performance of the business, again, the retail partner's share is 50% of that. In a downside case of 150 basis points lower off to 4%, so effectively a 2.5% illustrative return, we get 80% of the program economics. So here, it's illustrating the downside protection and the greater upside sharing with the partner. If you look at the second example, where we retain the first 2% and have a 75% share, and you do that same thing, no growth, plus 50 basis points, here, we get 58% of the program return down from 63%. But when the profitability goes down 150 basis points, we get 85% of the economics. Again, an illustrative example of how we're protected on the downside, and we share potentially more on the upside. But this aligns our interest and protects our company when times are more challenging. Now as we turn to our next core element, our operational efficiency, one of the core differentiators for us is our efficient marketing spend. I talked earlier about our retail partners really funding a lot of the value proposition and engagement with their customers through the RSA. So we don't need as much marketing dollars to originate new accounts, which is back to the cost per account that I referred to earlier. When you think about that, we can deploy our marketing dollars again towards differentiating types of marketing activities, early month on book, life cycle, upgrades. What this allows us to do is fundamentally invest in strategic aspects of our business. Our digital assets that help us really drive home a Venmo program. We spent over $5 billion in technology spend since our IPO, incredible investment in our business. You couple that with core productivity initiatives, things around e-bill, things around driving our virtual assistant, Sydney. When you think about engaging customers digitally with 55% of our applications coming in a digital way, we're driving core productivity initiatives across the portfolio. And then you have a heritage where our business used to operate at a much lower average balance per account. We've built this business to operate highly efficiently and gives us a 21-point advantage when it comes to efficiency ratio versus our peers. Now turning to the balance sheet, the thing that we focus on is our loss absorption capacity. That's really our ability to sustain losses in any environment. So the way you think about loss absorption capacity is our Tier 1 capital plus our reserve for credit losses. And we've grown that from 20% to 28% from our IPO. So we built a very strong balance sheet. At the same time, we've improved the credit quality of our portfolio. And if you go back to the GFC, we dramatically improved the credit quality. So here, we're operating with a very strong balance sheet with regard to our loss absorption and the credit quality underneath it. Now what funds this balance sheet and another side of the strength of this balance sheet is our funding model. Our funding model has at its core retail deposits which we have grown from 72% of our funding stack in 2016 to 81% today. But we maintain access and reliability into the secured market and unsecured market, so we have a diverse set of funding sources for the business so we can fund growth during any period. This funding profile provides a very attractive cost of funds of 1.4% at the end of the second quarter. From a capital perspective, we're on a journey. As we exited our former parent, we came out with excess capital. That strong capital position was designed to ensure our separation. In 2016, we began the reduction of our capital. We returned over $11.5 billion of capital through share repurchases and dividend over that period. And we reduced our CET1 from 18% by 390 basis points to 14.1%. Now during the pandemic, we thought it was prudent to limit and reduce our share repurchases and eliminate those for a period of time. That's allowed the CET1 to build back up to 17.8% to really weather whatever events we thought may come out of the pandemic. But we've resumed share repurchases in the first half of this year with just under $600 million of repurchases and $2.5 billion remaining on our authorized repurchase plan as we exited the second quarter. As we look at the funding model, one of the core element is our digital bank. Our digital bank, we've grown from $37 billion in 2016 to $50 billion in 2021. That's a 6% on average CAGR growth of that. But what's critical to that is the engagement with the customers, engaging them in a frictionless environment, providing them value and ease in which the way they can open an account and service that account. That's driven 94% customer retention, very strong and consistent over that period. And when you look at that cardholder, they've been with us over 5 years, 40% of them have another product with us, a credit product that we haven't even marketed out to them. They have $60,000 on average balance with them, a very engaged customer. One of the other things that we do is really engage broadly across a multigenerational set. How do we reach different people about savings and financial planning? And at the bottom, we really illustrate some of the things we do, whether it's our Save Like a Hero campaign, our America Saves initiative, our partnership with Millie around financial planning and content for women, we really try to engage people around the importance of savings and the importance of financial planning. As we move from the digital bank, we talk about our capital allocation strategy. And the first is being able to fund our organic growth and the opportunities we have outlined today. We have a $5 trillion opportunity that Brian talked about earlier. And when you go by each of the sales platforms, they outline the growth potential in each of the businesses. We want to be able to fund that growth at attractive risk-adjusted returns. Our next priority is dividends. We want to have a consistent, reliable dividends through the cycle and through all cycles. When we started our dividend back in 2016, we returned over $2.5 billion as a core element of our capital allocation strategy. The remaining capital generation, which exceeds 100 basis points per annum on an operating basis, says what do we want to do? Do we want to do share repurchases? Or will we do inorganic opportunities to expand our capabilities, provide further diversification or enhance our capabilities or products? And here, we give you 4 examples of the acquisitions that we have done in order to do that. Now let's turn to what this equation really means. As you think about the long-term financial framework of our company, we're designing this to deliver double-digit EPS growth in a normalized environment. So let's spend a little bit of time going through these pieces. The first is growth. Now when we went public, we gave a target of 5-plus percent growth. What I outlined today was a history of around 7% CAGR growth pre-pandemic. When you look at the migration in our portfolio to high-growth partners, and our recent reorganization, we think we can accelerate that growth and deliver 7% to 10% in a normalized environment. The next is the risk-adjusted margin. We believe the risk-adjusted margin is going to be attractive for our shareholders. When we went public, we thought our net interest margin will be at 14% to 15%. We're now saying it's going to be approximately 16% in that normalized environment. And the underwriting capabilities that Henry outlined based on our history, the data and the tools that we have should deliver a loss on net charge-off rate between 5.5% and 6%. That provides a very strong risk-adjusted margin and one that will be resilient through multiple cycles. Again, we talked today a little bit about the RSAs and I gave you some examples, again, very unique to us. This allows us to have a sharing with our partners of alignment around growth, of alignment around profitability, and that should operate in that 4% to 4.5% of ALR. We talked a little bit about our operating efficiency. In a normalized environment, we believe that comes back to 32% and 33%. And over the last 18 months, we've taken initiatives in order to ensure that we can deliver on that cost and that operating efficiency. What underpins this, we spent some time today on the balance sheet and really given the resilient margins that we have in the business and considering the buffers that we have in the retailer share arrangements, we believe that we can operate this business effectively and efficiently and safely at 11% target CET1. That's a highly efficient machine where we can continue to have capital generation, where we can look at share repurchases as well as inorganic opportunities as well as fund our growth and maintain our dividend. So when you put this equation together, a 7% to 10% growth, attractive risk-adjusted margin, the RSA buffer and the capital levers that we talked about, you should come out with a return profile of 2.5% plus ROA or a 28% plus ROTCE. So when you think about the whole model, you're thinking about a high-growth, high-margin, resilient business that generates a very attractive return to shareholders, both on an ROA basis and a return on tangible common equity. Now before I turn it over to Brian for some final comments, I want to leave you with 2 things. The first is a quick update on our third quarter. We continue to see mid-teens purchase volume growth and strength with the consumer. We still see an elevated payment rate, although certain cohorts have begun to moderate. As you think about the net interest margin of the business, we see modest improvement sequentially on the margin driven by a better ALR percentage, yield improvement and a better write-off environment. When you think about net charge-offs, we really have strength in our credit performance and delinquencies, which sequentially will give us an improvement in write-offs. Finally, when you think about a higher net interest margin, when you think about a lower loss environment, you think about those 2 items together, what's going to happen is you're going to pay slightly higher RSA. So the benefits that we see in the net interest margin and in the net charge-offs will be partially offset by the RSA payments. Now let me leave you with some closing thoughts. A key part of our business model is our diversification and multiproduct strategy. It delivers sustained growth for us. We demonstrated that track record over the last 10 years, over the pre-pandemic period. And we've outlined numerous ways in which we think we can attack the market to really drive and increase our growth percentage as we move forward. The second is the attractiveness of the risk-adjusted yields we have in our portfolio. By having that diversification and multiproduct strategy, compelling value props, highly engaged people, we can deliver attractive risk-adjusted yields, powered by the underwriting capabilities built on a long history in the retail environment delivered by data and advanced tools. We also have something very unique to Synchrony, the RSAs. It aligns the interest with our partners to drive growth but to drive growth at a profitable rate of return and attractive risk-adjusted return with our partners. And then finally, the key takeaway for the business. You should think about our business as a high-growth, high-margin, resilient business that produces 2.5% ROA, 28% plus ROTCE and is designed to deliver double-digit earnings growth in a normal environment. Now I'm going to turn it over to Brian who's going to provide some closing remarks, and then we'll go to Q&A.

So what we hope you take away from our conversation today is that our business is diversified and deep, giving us tremendous addressable market opportunity. The combination of our integrated product suite and digital capabilities really enables us to engage and serve more partners and more customers, empowering them with greater choice. And as a result, Synchrony is well positioned to continue to generate sustainable growth, attractive returns and significant capital over the long term. So with that, let me welcome back our executive team and turn the program back over to Kathryn to kick off the Q&A portion of today's session.

Thank you, Brian, and thanks again to our executive leadership team and to all who have joined us today. Let's now kick over to our Q&A session. We've received a couple of questions regarding buy now, pay later. So I've done my best to consolidate them into a few questions. First, Brian and Brian, can you talk about your integrated product strategy and how buy now, pay later fits into it?

Yes, great. I actually, Kathryn, had a feeling the first question might come across as buy now, pay later. One of the things that we tried to do today between Mike Bopp and I was really lay out an integrated product strategy and why we think that is a real competitive advantage for us. We're out there every day talking to hundreds of partners. And I can tell you that the one thing that they all agree on is that they don't agree. They all have different ways in which they want to use these products. They all have different customers that they're serving. It varies by industry segment. It varies by the types of products that they're offering. It varies by customer type. And I think that's why when we take a step back, we say, it is so important for us to have this integrated and very comprehensive product strategy for our company. We think that's a competitive advantage. And I can also tell you that one of the things that we're talking to our partners a lot about now is really the economic equation. And that probably doesn't get enough attention. When we talked about buy now, pay later installment, there's clearly a consumer demand for that product, and our partners want to offer that product. But they're also really being thoughtful about the economics of that. They're looking at a buy now, pay later product that may cost them 700, 800 basis points of margin, and they're comparing that to some of the products that they have in market today where they're earning a substantial amount through the RSA. And so in some cases, we're going to have partners that want to dive both feet in with Pay in 4, our long-term installment product, and we offer that today obviously. We're going to have some that are a little more cautious and want to test and learn and see how that kind of impacts their bottom line. But at the end of the day, as Mike showed you, having that integrated product strategy is a real advantage for us. We think it's best in class. There's no one else out there competitively that can offer all those products. And so we're really excited about it. We're excited about SetPay. We're seeing really good traction there. We're going to launch Pay in 4 in October. We're excited about that as well. I'm going to kick it over to Mike just to talk a little bit more about how we think about that integrated strategy.

Yes. Thanks, Brian. And Brian did speak a little bit about the population of customers. The -- we talk about average order values, typically average order values on Pay in 4 type products are going to be lower. We even look at certain types of things that customers are purchasing, jeans, shoes, things along those lines. So while it's a relatively narrow part of the market, we are hearing from customers and partners that is driving some value. But what we really think our differentiator is we don't stop at that particular Pay in 4 product. We have the experience, we have the data, we have the analytics to be able to identify which customers that we might start with a Pay in 4 type product would benefit from a higher utility product. We might see, for example, partner value out of taking something from a Pay in 4 up to a private label card. So our strategy doesn't begin and end with that Pay in 4 product, we see it as a good acquisition strategy to drive long-term customer value.

Great, Mike. Thanks. Kathryn, why don't we take our next question?

Sure. When your buy now, pay later, Pay in 4 is launched, will it be Synchrony branded or white label? And how do you think you -- and how do you think about facing an uphill battle with regard to the first-mover advantage?

Yes. So I would say a couple of things. One, I think this is also a competitive advantage of ours in that we're going to offer it in a few different ways, and it's really going to be partner-based. Our entire business actually works that way. So if we have a partner, and we've actually had some discussions with some of our partners where we know they want to brand it with their brand, we're happy to do that. It can be their brand, coupled with SetPay. It could just be their brand, or we could offer it as Synchrony SetPay. So we're going to be very flexible. We're going to flex to what our partners want. I think that's going to be a real differentiator for us. And as we know, like I said, all of our partners want different things from us at different times. And we've been in the business a long time, and that's part of -- part of the value we bring is being able to flex and adapt to what they want.

Thanks, Brian. Can you talk a bit more about how the impact of buy now, pay later has shown through our business, either in terms of customer acquisition, our revolve rates and margin?

Yes, Brian, why don't you take that?

Yes. So Kathryn, we've done a lot of analysis really on looking at customers who take out a buy now, pay later product and then what the overlap is into our portfolio. When we looked at cohorts that carry our Synchrony Dual Card or our co-branded card that also have buy now, pay later product, it's less than 2% of penetration. So it really hasn't impacted our portfolio that much in the take-up rate. When you further dive in and look at the performance of those accounts at Synchrony, they actually revolve at a much higher rate than our overall portfolio. And we've not seen any meaningful shift either in monthly spend behavior patterns, payment behavior patterns or any other attributes. Finally, when we look at our applications and really what we're taking in through the door, we have not seen any really distinct or discern change coming from buy now, pay later. So as we look at it, and it's going to continue to grow, but we have not seen any marketable impact on our business.

Thanks, Brian. So with regard to buy now, pay later as well as the broader portfolio. Can you help us understand how we balance the trade-offs between incremental volume, either through new partners or existing partners, and the returns on that volume and where we flex to higher or lower economics based on the opportunity set?

Well, I can tell you, I mean, that is one of the most important things that we have to do as a company, as a leadership team. I can tell you that's where we have our healthiest debate as a leadership team. Our goal is to do both, is to drive significant growth at attractive risk-adjusted returns. That is -- it's easier said than done. Obviously, competition intensity increases, it ebbs and flows. Right now, I think we're in a pretty manageable time period. I think there's good discipline for the most part out there. But that's what we're here to do every day is really to make that trade-off between growth and doing it at attractive risk-adjusted returns. One of the things I will tell you, and we pride ourselves on this, business that we've walked away from, typically, we walk away because we don't price deals for today's environment. We're going to be best ever credit losses again this quarter in the third quarter. You don't price a deal based on that. You don't price a deal based on sub 3% loss rate. You look out over time, you stress it, you say, how is that program going to react in a tougher environment in a stress scenario. And that's how you make good business decisions. And again, at the end of the day, we're trying to drive really attractive growth, but not growth at all costs, attractive growth at really good risk-adjusted returns. I don't know, Brian, if you'd add anything to that.

Yes. The one thing I'd add, Brian, 2 elements. So one, I talked about the relative cost to acquire an account. And the way I think about it and the way the leadership team thinks about it is when you have a SetPay product, it's just a different cost to acquire. When you think about, as Mike talked about, that migration into different products, where they are in their sales journey, it's really important to look at it in that framework. I think then, finally, when you think about customers that have the RSA, we have a broader economic arrangement where we can leverage and move people along that product journey because we're aligned around growth and profitability.

Great. Kathryn, why don't we take the next one?

Sure. How about we shift gears a little bit, and we'll go over to John Pancari at Evercore? He asks Dan Schulman indicated that PayPal plans to do much more with Synchrony. Can you elaborate on the target products, areas of growth with PayPal? Is it primarily greater volume on the Venmo card? Or is the opportunity in newer products?

Yes. Well, I hope all of the above. We have a great relationship with Dan and the PayPal team. I hope you noted that one of the things he said in that video is that he pushes us really hard. He does push us really hard. That team is really creative. They are growing like crazy. They come up with a lot of great ideas on how we can partner. And I think we've done a really good job over the years really expanding our relationship. It started with the co-brand card. Then we took over their credit program a few years ago. We're seeing really good growth there. We saw an opportunity to jointly launch the Venmo card, which I'll ask Bart to talk about in a second. But we're always in there embedded with their team, talking about ways that we can expand our partnership. I can also tell you, whenever Dan brings an idea and his team to us, we take a really hard look at it. We try really hard to make it work. And oftentimes, we can. So it's a very collaborative relationship. We love the push that we get from them. And hopefully, down the road, we'll have some more announcements to make on how we're expanding our partnership. But I'll ask Bart -- maybe just talk a little bit, Bart, about the Venmo card and that experience because that's something I know Dan talked about, but we're really proud of that product as well.

Sure, Brian. If we think about the Venmo product and the extension to the broader PayPal relationship, carol highlighted the technical integration, the seamless customer experience that the Venmo team and the Synchrony team created in the application. I highlighted and talked about the customer experience that we extend outside of that application so that the customer can use world sales and those rewards to drive that value back into the Venmo-branded experience. And I guess as we think about it, we started that program late last year. It was a pilot. We had a scaled rollout. We got to about full scale in February, so it's still a very new program. Applications and accounts are strong. Early spend patterns are great. And as we think about it going forward, I think that activation and that engagement rate will only continue to grow because a big part of the Venmo experience is sharing experiences with friends and family. So travel and entertainment, dining, splitting bills, sharing expenses. And as we go into the post-pandemic period, I think we'll see that engagement continue to grow as people pick up that kind of activity.

Yes. The only thing I would add, Bart, I could tell you the number of positive notes that I get on the Venmo card from customers who just love the experience, they love the value prop in terms of -- they don't have to think about it. They're just always put into the highest reward categories. I mean it's just people are over the moon excited about it. And it's one of the things that, I hope, I wake up in the morning, I get a lot of good notes on Venmo. And it's just a -- it's a terrific product. I think we and the PayPal team think it's absolutely best-in-class out there. So Kathryn, why don't we take the next one?

Sure thing. So maybe let's switch gears on the note of technology. Sanjay Sakhrani from KBW asks about how widely used the new technology is across our partners. Obviously, there are the Venmos of the world, but then there are folks who are not quite as sophisticated as Venmo. So if not 100%, how aware are those partners of its capabilities and when we might achieve full penetration?

Yes. I'll ask Carol to talk about this. But one of the things I -- one point I want to make is what differentiates us here in terms of our technology spend is all of our spend is really geared towards integrating with our partners. That's such a big part of what we do, and that's a big differentiator for us. So Carol, why don't you talk a little bit about how we think about that?

Sure. Thanks, Brian. Our platform, as I talked about earlier, is really designed to scale across the spectrum of partners we have, so meaning from a small dentist office all the way up to a digitally native company. And so in that, the flexibility we build in there meets our partners where they are. And that's really the differentiator for us in the partner space. And then you combine that with working with our commercial teams, who know our partners so deeply, we connect with them in a way so we can bring the right solution to them to meet whatever objective they have and that we can then continue to evolve the platform to meet their needs.

Great. Thanks, Carol. Kathryn, why don't we take the next one?

Sure thing. We've been receiving a couple of questions regarding our third quarter '21 trends. Brian, maybe it would be helpful if you could share some thoughts on what we're seeing in the business and the implications.

Sure. Let me try to provide some additional color for folks. I'm going to start with 2 underlying premises. One, we do have 21 days left in the quarter. And if we learned nothing over the past 18 months, things can change fairly rapidly. But we're -- we have, I think, a fairly good line of sight. Number two, I think, Brian, I would say, as we exited the second quarter, we had a very strong second quarter, and that's really continued into the third quarter. As you think about it, and I'll start really just volume quickly, I said mid-teens. If you think about that relative to '19, again, that's a mid-teens positively. So we're happy with the volume. There is still an elevation in the paying rate. If you think about some of the underlying financial trends, and I want to do this on a sequential basis, second quarter to third quarter, if you think about our net interest margin, we were 13.78% and in the second quarter. I would think about something approximately 15% for the third quarter. When you think about the charge-offs, we are 3.57% for the second quarter. I guided to a full year less than 3.5%. If you think about the third quarter, it will be less or sub 2.5%. So if you stop and just process that for a second, that says we're going to have a positive impact on margin of 125 basis points and a positive impact to net charge-off of 107 basis points. So when you look at that, that 230 basis points of profitability improvement, roughly half of that will go back and increase the RSA payments to our providers. Again, as I talked about earlier, that's as it's designed. As the profitability in the business increases, we will share more with our partners. So with that, I'll turn it back to Kathryn, to you, for another question.

Sure thing. So Ryan Nash at Goldman Sachs says, on your financial targets, first, from a growth perspective. Could we operate above our desired 7% to 10% over a period of time, given, one, pent-up demand; two, rolling out of 3 major partners; and three, the addition of buy now, pay later? And at what point would you expect to operate within those financial targets?

Yes. Maybe I'll start with that. I mean the way Brian and I and the team thought about the 7% to 10% is we felt like that was achievable based on everything that we were seeing, the product set, the new programs, we would certainly like to do better than that. There's no question. Hopefully, you're going to see us do better than that in some periods. We think it averages out to that 7% to 10%. Over time, we think it's a good long-term goal for us. And it really comes back to the point that I made earlier, which it's actually really easy to grow a lending business, right? You can go give credit to everybody. You can grow like crazy. That's never the right decision. We're always looking at balancing really good growth rates with attractive risk-adjusted returns. That is so important. That's how you stay in business for 92 years. That's how you stay in business for another 90 years. So I can't emphasize that point enough. Obviously, that 7% to 10% target we put out there is coupled with a 5.5% to 6% loss rate. We're trying to retrieve both of those and the margins. So we think that's a great attractive financial framework. But it's never going to be growth at all costs for us. We're pretty disciplined around that. I don't know if you had...

Yes. No. You hit on it 100%, Brian. The 7% to 10% is an average over a period of time. Well, certainly, we can operate at a higher level than that in any given period of time, but we're going to do it at the right risk-adjusted returns. So we'll try to grow the portfolio where it makes sense, where it's opportune for us and really try to provide that lift for our partners in their sales. So Kathryn, I'll turn it back to you for the next question.

Absolutely. Still on the topic of financial targets because everyone would love a crystal ball. Folks are trying to understand the time frame to which we could get back to that 16% NIM, the RSA sub 4.5%. Maybe you could give some thoughts there or lack thereof as it were.

Yes. Listen, we're in a dynamic period of time. I think, again, if you go back and think about what we talked about today about our third quarter, our net interest margin of approximately 15%, we're back on that journey. We talked about in prior earnings calls the levers on which we can do to get back there. Again, this is going to be how does the consumer begin to unwind the excess liquidity that they have, what's their spending behavior patterns. And as that migrates, all the metrics will really migrate together when you think about -- in a charge-off rate that will migrate back to the mean. When you think RSAs which will reduce down to the mean and the net interest margin will again go from where we are today more up to the mean. So it's going to be a little bit over time, and we have a system designed to really execute inside that framework.

The one thing I would add is if you just -- Brian said dynamic times, absolutely. We've never seen times like this, right? We are at historically low credit cost. The consumer's balance sheet is in great shape. The payment rates that we're seeing and have seen over the past year are as elevated as they've ever been. That's actually a really good thing in terms of credit. It's obviously created a little bit of an impact on margins. The good news is, as we've dug in and analyzed that, nothing that we've seen, we believe, is permanent. And that's why as we thought about long-term targets, we said these -- as you look at every one of these, whether it's margin losses, payment rates, everything, we believe, will revert to the mean. We're in a really unique time period right here. I think as you start to see the stimulus come off and you get back to a more normal environment, we think those profit drivers come back into what we would call a more normal range. Kathryn, why don't we take the next one?

Sure thing. Thanks, Brian. So along the same vein, but switching gears to the balance sheet. Folks very much appreciate the 11% CET1 target. We are getting a number of questions, though, as to the time line of getting to that 11% and also how the CECL transition could impact that or play into that time line.

Yes. So again, I want to go back. And we've demonstrated the ability, once we started returning capital back to shareholders, we reduced our CET1 by 390 basis points before the pandemic came in, and we stopped our share repurchases plan. We again commenced this year, returned over 600 -- or just under $600 million, excuse me, in the first half. We have $2.5 billion remaining on our share authorization plan. And we're going to continue to return that back to shareholders and reduce the CET1. Now again, we are in times in which we want to be prudent. We want to make sure we understand the impact of the pandemic, the Delta variant. We want to make sure we understand as forbearance wanes at other financial institutions and some of the support from the government wears off, what that does to the consumer, we think that's prudent. But again, right before the pandemic hit, we were on a path, and we did return $3.3 billion over a 9-month period. So we have the capacity and the ability to reduce it when we want to do it. So that's really important. I think the other thing that has to happen is we have to fully develop the capital stack and issue some more preferred shares in order to get down to that 11%. So we see a path to the 11%. I can't provide an exact cadence to it but it's one where we have a demonstrated history where we've been able to reduce it, and we don't see any barriers where we are not going to be able to get to that target operating range that I referred to a little bit earlier. Back to you, Kathryn.

Thanks, Brian. Let's stay on the topic for a moment. if we can. Vincent Caintic at Stephens is wondering, with regard to the use of capital and our treasure trove as it were, are there any inorganic opportunities we're thinking about today? Any products or technical capabilities we'd want to add and at what size? We've certainly been seeing a lot of consolidation in the space recently.

Yes, maybe I'll start on that. Look, we have a track record of doing acquisitions and making them very successful. We talked a little bit about Pets Best. I think that's one of best examples where we were able to buy a small business, leverage the scale that we have in the vet space, and we've tripled the size of that business in less than 2 years. Those are the types of acquisitions that we love, where we can buy something at a relatively reasonable valuation and leverage our scale to grow it. We've been successful in doing that. We'll continue to do that going forward, both in terms of capabilities where we feel like there's something that we could buy and get to market faster than if we built it ourselves, but we're also very disciplined around valuation. And the one thing the pandemic hasn't provided us in the last 1.5 years is valuations coming back down to reasonable levels. And so we stay disciplined there. We would look at small acquisitions as well as large acquisitions. Our screen and our pipeline has a combination of both. So we're willing to do bigger deals but they have to be at the right price, they have to be accretive, they have to make strategic sense. And so we'll maintain that discipline, but it's definitely in terms of the use of the capital, it's definitely in the playbook. I don't know. Would you add anything to that?

No, you hit it, Brian. We're going to be disciplined and we're going to evaluate things at multiple metrics and how impactful can it be to our business. And we're going to make the right long-term financial decisions and route our capital deployment when we think about either share repurchases or that inorganic growth. Kathryn, back to you.

Thanks, Brian. Yes. So speaking about kind of internally developed competitive strengths, PRISM and use of capital internally, of course. How should we think about loan growth potential and how PRISM has opened that up or created more opportunities and competitive differentiation?

Yes. I'll start, and I'll ask Henry to comment. I think one of the most exciting things about PRISM is the fact that it allows us to go to partners and say, hey, we can give you a better approval rate, we can drive more sales, and we can do it without incremental losses, right, with the same loss profile. And that's powerful because our big partners certainly share in those losses. So Henry, why don't you add some of your thoughts?

Sure. Thanks, Brian. I love the question because it enables me to talk a little bit about how we've organized here around PRISM in order to continue to improve and deliver results. We, along with Carol and Mike, have put together cross-functional teams that their only job is to focus on how do we continue to improve the process. That process, as I said before, is really focusing in on our customers, trying to understand as much as we can about them through data and then using technology and analytics to bring those solutions to the point in which we make decisions. So PRISM is an ongoing process. It's not a -- it doesn't end. And so what I showed you a little earlier was some of the results that we've achieved so far through higher approval rates, better customer experience with regard to authentication and credit line increase growth in terms of more sales. But that's not the end. This will continue to evolve and develop as these teams continue to work, search out, find more data, turn that data into analytics and then deliver that to -- through technology to where we need to use it. So the future of PRISM is bright. And I think, Brian, we'll continue to find opportunities where we can underwrite within that same box, but continue to drive higher sales and better results for our partners.

Great. Thanks, Henry. Kathryn, why don't we take the next one?

Sure. So Moshe Orenbuch at Crédit Suisse asks about more of our technology advantage. So he says, given the strides that we've made in technology for some of our more recent product launches, including Venmo and Verizon, he wonders as these innovations are something that we can share with other programs.

Everything we build, and Carol can talk about this in a little more detail, everything we build, we try to build it in a way that it is scalable across the entire enterprise. And that's easier said than done because we have small proprietors who maybe have 1 or 2 stores all the way through to Amazon and Venmo and Verizon who have massive footprints, both digitally and in-store in some cases. And so that's a big challenge that Carol and the team undertake every day. But our goal is to always build things that are scalable, but that we can also customize to the individual partner, but do it easily. And that, again, easier said than done that's why Carol is so good at what she does. So I'll take it over to her to maybe expand on that a little bit.

Thanks, Brian. I think the only thing to add to that, the differentiation for us is because we have the opportunity to really invest in Synchrony through the IPO as we shed legacy technology. That has really differentiated us because we do not need to build new, modern technology into legacy back-end technology. And that is differentiated. So that allows us to give the speed and flexibility so when we build things that are new and cutting-edge for partners that are leading in cutting-edge, we can then make it available across all of our partners because of how we've designed the flexibility into the platforms.

Great. Thanks, Carol. Kathryn, why don't we take the next one?

Sure thing. So why don't we switch gears a little bit? We'll go -- we'll dive a little bit more into product strategy. Can you speak about whether we have an interest in the co-brand space? And do we see any opportunities with existing private label partners in their co-brand? Do we think that partners like to compartmentalize their products?

I'll say this again. Every partner thinks about this differently. We have a big dual card co-brand program today. We really like it, and we offer it to all of our partners who are interested in it. And part of what we like, and I'll ask Mike Bopp to talk about this in a minute, we love the product journey for our customers, and we think that's the real benefit of having this integrated product strategy. You can start someone out with a secured card, upgrade them to a private label card, a dual card, a co-brand over time. As you get comfortable with that customer, you're comfortable with the payment behavior, the spend behavior. You know that they're -- they have a propensity to use it outside. We have a sophisticated set of strategies and analytics in place to identify customers that we think would be good for that upgrade journey. And it drives a lot more lifetime value, which is on Mike's presentation. So it's available to everyone. We certainly have our commercial teams out there discussing it with our partners every day. And Mike, why don't you add some of your thoughts?

Sure. Yes. The only thing I'd add is that this capability is always on. Meaning, we're constantly scouring. scouring the tens of millions of private label customers that we have to figure out which specific customers would be eligible for a dual card upgrade. And as Brian said, that is a conversation with our partners. Not every customer is going to be economically viable with the dual card product. It may not work for us. It may not work for the partner. So this is an always-on capability that is a huge growth lever for us and really a differentiator.

Thanks, Mike. Kathryn, why don't we do the next one?

Absolutely. Well, actually, I'm going to piggyback on Mike's comment there just based on some questions I'm seeing. So when you talk about greater utility coming from the upgrade and our existing customer base, how should we think about that potential opportunity in terms of size and how long we think it takes to kind of advance that upgrade curve?

Well, it's a strategy we've been employing for years. As Mike said, yes, we're very targeted in terms of who qualifies and the line size and things that we give to those customers that do qualify. It really is -- it comes back to that balance of growth versus attractive risk adjusted returns. And that's something that we're laser-like focused on at all levels in the company. And it's how we think about product strategies as well as upgrade strategies, partner strategies as well. So I don't know, Brian, if you'd add anything to that.

Yes. And also, we built this business over the course of 15 years. We started out at 0 back in the mid-2000s and is now a meaningful percent of 25%. And it's really going to be along where our partners want it, where we see opportunities to really grow the portfolio at the right level. So it's one of the many products we have in the toolkit, and we'll continue to play where it makes sense.

I can tell you for the partners that want it, that are really excited about it, what they love about it is the fact that their customers can use those cards out of store, earn rewards that they have to redeem back in store. So it actually drives a lot of business, a lot of repeat traffic back into the stores, back into the other channels for the partner that has the co-brand or dual card. So that's one of the things that they get really excited about.

Thanks, Brian. So Mihir Bhatia at Bank of America actually has a question that dovetails really nicely into the topic of co-brand, but beyond co-brand. So effectively, he's asking how can we better leverage our technology to drive traffic and sales to our retail partners beyond just that card upgrade or the enhanced utility. Is there an opportunity on the marketing side to expand our data lake and develop deeper insights on our consumers?

Well, one of the things we talked about today that we haven't talked a lot about in the past is our marketplace and our provider locator in CareCredit. These are real competitive advantages for us as well. This is how we bring traffic to our partners and our providers. We showed you how many hits, how many lookups we get. It's a great way to go into a partner and say, "Hey, look, we're bringing you all of these incremental customers, incremental sales." Similarly, with the home and auto networks, another great way for us to create a network and drive traffic to our partners and our providers. And maybe I'll just ask Mike to make a couple of other comments on that strategy.

Yes. Thanks, Brian. And I spoke about the distribution channel for our credit products really changing, right, very, very dramatically. Previously, 5 years ago, it probably was enough to just be at the point-of-sale at the checkout with your credit products. But now we know we have to be way up funnel in the customer's journey when they're even considering purchasing a product. We have to be in our partners' apps when they're considering a purchase. So that's all about making sure we're meeting the customer where they are. The marketplace strategy is a little different, right? That's about organically attracting new customers to our products and to our partners. And as Brian said, it's something that we probably didn't realize how effective it really is until we started looking around. And so we're looking very forward to digging deeper more into that, investing in more of the technologies to actually organically attract those customers to our brand and our partners' brands.

Yes, maybe I'll ask Beto just to comment a little bit. Because the first place we really saw that was the provider locator in CareCredit, which is really powerful. It really does -- somebody with a CareCredit card can go and find out where they can use it and we've had great reception on that. So I don't know, Beto, if you want to add anything.

Yes, sure. Thanks, Brian. The provider locator really is powerful because we have 250,000 locations there. And so when consumers go there, they find what they need to get the care that they need when they need it. And so we see that evident in terms of the repeat sales that are in our business. 60% of our sales are repeat and 80% of those sales are occurring on locations where the account was not open. So really, our providers really love the fact that we're able to bring consumers to them, patients to them by our provider locator. And the number of hits that we get every month, approximately 1.5 million hits, is evidence of the connectivity that we have with our consumers and bringing forth to those providers the opportunity to serve more consumers and more patients.

So I just want to tie that together real quick. So when we go into a new partner, an existing partner, we not only have a comprehensive product suite that we can offer them that they can select what works best for them and their customer and their product, we also can go in and say, look, we can drive traffic to you through the marketplace, through the provider locator of CareCredit. It's actually -- it's a pretty powerful part of that ecosystem that we talked about earlier. Kathryn, why don't we do the next one?

Sure. Thanks, Brian. So again, to just pick up on that thread. Rick Shane of JPMorgan noted that we have about 75% data capture on transactions. He's curious kind of about the historical context to that and the opportunities we see going forward.

Yes. Look, I think it's a huge opportunity. It was a -- I was actually really surprised pleasantly that -- how powerful it was in terms of credit lines, approval rates. And when we share the customers' data and we combine it with ours, it's actually really powerful. Mike talked about some of that. I'll ask him to elaborate a little bit.

Yes, it is incredibly powerful. And it's been a journey over the last 3 years sort of to, Brian said, maybe convincing ourselves and also convincing the partner of the value of it. To tie it, it's one of the things we just spoke about, the product upgrade, right? So we're thinking about a private label customer or a future SetPay customer. That data is unique and proprietary to us and our partner, right? There's no other competitor out there that understands the spending patterns, the kind of information that we look at to be able to figure out which customers are going to be the best ones to drive value for Synchrony and our partners. So it's a really great application. There are several others, like I talked about, up and down the P&L. But the biggest one probably from a growth perspective is around the idea that, that data that we capture from, again, 3/4 of our active accounts, tens of millions of accounts, allow us to figure out the right set of customers to upgrade.

If you go back 5 years, we used to talk a lot about SKU level data. That used to be -- that was the panacea. That's -- and we have that. What we've complemented that with are things like customer engagement: so how often do they visit the store; how long do they log online; digital traffic; annual, monthly, weekly spend levels. That's really powerful because now we know that customer so much better upfront. We can get them the right line. We can get them the right product. And so I think only more to come here, but it's a big growth opportunity for us in the future. Kathryn, why don't we do the next one?

Sure thing. So Betsy Graseck at Morgan Stanley is really curious, I think, going to the point of growth opportunity, but more in terms of our partnership pipeline. She's curious to get a sense of what that's looking like, especially compared to history. Are we seeing more opportunities? And if we can size relative portfolio transitions that are coming up, she'd appreciate it.

Yes. So thanks, Betsy. Look, we have a great pipeline across all 5 of the platforms. I would say right now, it's a combination of start-up programs with new partners. There's a couple, I would say, a couple, maybe a small handful of opportunities with existing programs that we're in discussions with, but it's a healthy pipeline. And I think the good news is that in a really good environment like we're in today, we're still seeing pretty good discipline across the competitive set in terms of returns and growth potential. And so we're pretty bullish on the pipeline, I would say, across the board.

Great. Thanks, Brian. So we'll shift gears a little bit but in a similar vein. Obviously, CareCredit is a great business for us for quite a long time. We have meaningful market share today. John Hecht at Jefferies is wondering if the competitive landscape has changed at all with any of the new entrants we've seen.

Yes. I'll start and ask Beto to comment. I mean CareCredit is one of the businesses we are most excited about going forward. It's taken us 30-plus years to build this business. We have such scale and opportunity. And I'll -- Beto, why don't you add some of your thoughts?

Yes. We spoke briefly here about the robust network that we have. But I would say the investments that we've made in digital and technology, having customizable QR codes, being able to have pre-qual, being able to have a payment provider as well as a provider locator, these are just tools that engage our customer base as well as our provider base in being able to have a very strong position in this area. The fact that we have built this business over 30 years, provider by provider, consumer by consumer and being able to have a relationship with over 100 professional organizations in this space, we're just uniquely positioned to be able to do very well in health care and in pet.

And the only thing I would add to that is the most positive customer feedback that I get, in addition to Venmo, is CareCredit. The people that we've helped with the CareCredit card just can't say enough positive about it. Beto showed you the NPS scores, they're off the charts. Great feedback from the providers that we support as well as customers. So it's a great platform with tons of growth opportunity going forward. Kathryn, why don't we take the next one?

Sure thing. So I think folks are really trying to get a better read on Q3 and how the environment has been shifting, noting that consumer stimulus has started to wind down, wondering whether we've seen any normalization of payment rates and our thoughts on certainly how low could credit performance or credit losses go and how high might RSA go.

Yes. I guess I'll take that one, Brian. So I think when you think about payment behavior -- and we've tried to cut this all sorts of ways to understand is there anything fundamental, and Brian talked about this reversion to the mean. As we looked at it, there are not fundamental shifts that we see, whether it's in payment behavior patterns, with the way in which they pay us, how -- which they pay us. But when we break it down into segments and different cohorts and start to look at it and we look at the history of the last 18 months when we saw stimulus start to fade and other things, we can see certain trends on how they work through. There are certain cohorts that we see now are beginning to trend back down, right? So we do see some of that. But again, the overall portfolio level, it is remaining elevated. With regard to the second part of the question with the net charge-offs. Again, I think the strength and liquidity, we have seen a stabilization in our credit performance over the last couple of quarters. So I would think about it in that vein. I'm out of the prediction business with regard to how people are going to save and use their spending behavior patterns because it's -- we have to get fully through the forbearance period through the support. But again, at a sub 2.5% loss rate, when we're underwriting now to a loss rate around 5.5%, we wouldn't expect a lot of improvement from here as we [ move forward ].

Well, every time we say losses can't get better from here, they get better from here. We never would have predicted a sub-2.5% loss rate in the third quarter, but that's where we're going to be, which is great. But we will see a reversion to the mean. It's hard to predict exactly when that's going to be, but it will come.

Okay. Great. Thank you. So again, on the vein of crystal balls, but maybe taking a wider view out, and we think about growth of the business and the relative opportunities we see across each of our platforms. It seems like folks are eager to hear where we see those opportunities and try -- they're angling for some order of magnitude here by platform. So let's see what we could give the people.

All right. Thanks, Kathryn. So look, why don't we do this? Why don't I go to each of the platform leaders? They can talk a little bit about the growth opportunities that they see. I doubt you're going to get a long-term growth target by platform because Mr. Wenzel's sitting right here to my right. But Beto, why don't we start with health and wellness?

Sure. Thanks, Brian. We still have great opportunity in the segments that we're in, in dental veterinarians as well as all the specialties that we're in. We're excited about the Allegro acquisition we did recently here earlier in the year. It brings us forth a suite of products that we're excited about in installment and leasing as well as a stronger position in the audiology market that I think we can replicate in other areas of our health and wellness platform. The market expansion in terms of going after areas that we never have done before, like, for example, health systems, being able to have contracts with over 13 hospital systems, we're piloting where CareCredit get accepted there and see how we can provide greater flexibility of payments to those customers that need to have procedures being done at hospitals. We're also excited about the strategic technology partnerships that we're doing right now to be able to get more traction in this more complex organization. And Epic, and was mentioned by Carol, in terms of being integrated there with MyChart is an example of where we think we'll be able to grow our business. And then back to pet. I think we have had a very strong connectivity with veterinarians. We started our journey with including pet insurance a couple of years ago into our basket of products. We've seen that business, how it has grown over the past 2.5 years to over 400,000 pets in force. We're going to use that formula in veterinarians and continue to have a strong foothold in that area. And we think there is -- continue to have quite a bit of runway left in being able to provide pet financing in that piece of the market. .

I always say to Beto, one of the biggest challenges he and the team have is just deciding which growth opportunity to go after first because there are so many in health and wellness. [ Q ], why don't we go to you and talk about diversifying value and lifestyle?

Yes, sure. So as I said in my presentation, for diversified and value, one of the great opportunities, we've got 5 partners there, $100 billion plus of sales and we're at an 18% pen rate. So for every 1% penetration increase, that's roughly $1.5 billion in credit sales to us. So the team is laser focused. We've got great relationships. We're delivering digitally, digital certificates, rewards for TJX. We're embedded in Scan & Go at Sam's Club, and those are examples where the team is focused to continue to drive growth there. For lifestyle, I would say, again, big market, $400 billion roughly, highly fragmented. Nobody has more than 4% share so we think that's a big opportunity. We're playing with big partners. We've got -- we're playing in certain verticals that we like that where financing is certainly a key ingredient to win. And we've got 20,000 dealers enrolled where 12,000 are active. So we look at that as a big opportunity. In both of these platforms, it's all about delivering that partner-centric model that you heard about today and all the capabilities. I won't go into all of them again. You've heard them all morning. That's what we do in both of these platforms, and we've got significant growth opportunity in both places.

Great. Thanks, [ Q ]. Curtis, why don't we go to you to talk about home and auto?

Sure, Brian. When you think about home and auto, as I mentioned in my presentation, there are really 3 growth pillars that we're focused on. The first pillar is focused on core growth. And that's all about going deeper with our existing partners, helping them to drive growth, helping them to develop products and capabilities to help them increase sales and also leveraging our data and analytics capabilities to say yes more often. We think this is going to be critical not only to increase sales both with our existing partners, but also will help us attract new partners in our core space. The second pillar that I spent some time talking about was our network. And Brian has talked a little bit about the home and the auto network for us. It's an early stage event. You've heard Beto talk about the network effect of his business. We're headed down a similar path over time. Again, early stages, but our focus in home and auto from a network perspective is really on 2 things. One is increasing the number of partners that we have that will go into the network; and then two, increasing the level of acceptance that we have outside of the network. And then the third area focus for growth for us is all around adjacencies. Whether you think about smart home, maybe new home improvement areas that we haven't really tapped into, rideshare, auto insurance, these are areas that we're going to invest in, pilot, test into to make sure that we're building a robust suite of product offerings to meet the broad needs of our partner base.

Great. Thanks, Curtis. Bart, finish us up with digital.

Sure thing, Brian. Like several of my colleagues, certainly grow with the partners we have, increasing share. If you think about the digital platform, we have a couple of programs that are still very new with huge installed and loyal bases so we have great opportunity to continue to penetrate those customers, convert those customers. We have many programs that have been around, as I highlighted, for 15 or more years, and those programs continue to grow both with the partner but also opportunities to expand our product set, continue to evolve that customer experience and work with that partner to create that truly in-brand experience and extend the relationship that they have, that we have along the credit journey.

All right. Thanks, Bart. Kathryn, why don't we take the next one?

Sure thing, Brian. As I spoke about before, our platform leaders sure are passionate. They've used up just about all of our airtime. But I do have 1 last question that I'm going to sneak in because -- well, I've gotten it asked 5 different ways already. And this is likely for Mr. Wenzel. Folks would like to better understand what the drivers of the sequential increase in NIM are.

Sure. Thanks, Kathryn. I'm glad this is the last question. Hopefully, you enjoyed today. When you think about the net interest margin -- and I talked to you about there's a couple of fundamental levers. The first is the excess liquidity or liquidity we have in the portfolio, or it's a percentage of ALR as a percent of our average earning assets. That has increased. We've worked hard over the last couple of quarters to reduce that excess liquidity, so you'll see an increase in the ALR percentage. When you think about interest and fee yield, we have seen an increase in late fees and some of the interest yield off the portfolio. So you'll see an interest and fee yield increase. And there's the benefit of having a lower charge-off environment, so the reversals that go back through the margin. But obviously, the biggest driver for us is that, that reduced excess liquidity that we've talked about for the last several quarters. So with that, I'll turn it back to you, Kathryn.

Well, thank you, sir. In fact, I'll turn it back to our other Brian for any concluding remarks.

Great. Thanks, Kathryn, and thanks to all of you for joining us today. I hope you got a real sense for the advantages of our business model and how we're positioning Synchrony for the future. I can tell you the team and I are so excited to continue to execute against the strategy that we laid our today and the incredible growth opportunities that we have ahead for us. And so thank you again for joining us. Kathryn and the team will be available to answer any additional questions you have. So have a great afternoon.