Synchrony Financial (SYF) Earnings Call Transcript & Summary

Thank you, everyone, and welcome to day 3 of KBW's Annual FinTech and Payments Conference. I'm Sanjay Sakhrani. I lead the consumer finance and payments research efforts at KBW. We're really excited to have you guys back in person after the pandemic. If you recall, we probably had the last physical conference here 24 months ago. And I hope that today marks the end of the pandemic period and brighter days ahead. So we're excited to have our first group of speakers, Synchrony Financial. I'd like to welcome both Brian's back. We have the CEO of the company, Brian Doubles; and CFO, Brian Wenzel. Brian Doubles first stepped into the CEO role at Synchrony just under a year ago and Brian Wenzel, has been in the CFO seat since 2019.

So maybe first question for both of you. Obviously, there's a lot going on in the background. I'm just curious, we're 2 months into the quarter. Any perspectives on how things are progressing?

Yes. Maybe I'll start and then turn it to Brian. I think, look, we're off to a strong start this year. I would say we were pretty bullish back in January, just on the operating environment in general. The strength of the consumer, the trends that we were starting to see on purchase volume and finally getting back to loan growth, which was nice. We saw loan growth across all of our platforms. And I'd say so far, as we look at whether it's growth or credit, I would say generally, we're trending better than we expected a month ago. It's still early in the year, but I think we're really well positioned. There's still some uncertainty, obviously, with what's going on in the world. While we don't have direct exposure to Europe or those areas, obviously, we got to wait and see what that does to the U.S. operating environment. But putting that aside, I think we generally feel really good about how we're positioned. And so far, 2 months in, things are trending a little better than we expected.

Okay. Great. Brian Wenzel?

Yes, just to add some little color to that. As we entered the quarter, Brian talked about, we were in a very strong position. I think about 3 weeks ago, we said we were doing purchase volume that was probably mid-teens. We see some acceleration to that now. So we're actually high teens. And really, it's across all the platforms. All the platforms are performing well, goes back to the diversification that we have inside the platforms. Yes, Brian talked about loan growth when we produced our 8-K a couple of weeks ago. We moved from 4% to 5% loan growth. Again, it's really the purchase volume with a little bit of moderation on payment rates that's driving that. We, again, gives us a good trajectory to be high single digits for the full year. So we're happy on the growth side. On the credit side, again, as we published our metrics back on the 15th of February, what we've seen really the first 2 months has been continued stabilization in the strength of credit, right, which has been good. So we haven't seen any deterioration in roll rates. We haven't seen any discernible deterioration in entry rate other than some accounts have begun to migrate back to 2019 behavior, which we expected. So as we look at that credit environment, if you rolled that forward for another month, you're now set up for the second and third quarters, which would probably give you a credit environment that's more moderate. The bubble that we always talked about or concerned about this off us forbearance accounts. If this environment continues like this, that gets masked and you're more into that glide pattern. So we're working on that now. We'll have an update back in April, but we feel really good about the credit environment from prior where we started 60 days ago.

That's great. Good to hear. So Brian Doubles, you've been in the CEO seat for almost 1 year. Obviously, very abnormal period of time, unfortunately. Maybe you could just talk about some of the lessons you've learned through the pandemic and what you might have done the same or differently through this period?

Yes. I mean it certainly hasn't been what I envisioned as my first as I thought about this job when I -- when we made the announcement back in January, we did the whole thing virtually. So talking to employees for the first time as the CEO over a Zoom call was interesting for sure. But I'm really proud of what we accomplished last year. I think the team did just a fantastic job supporting our partners, really demonstrated the resiliency of our business. We had record purchase volume last year. We signed 25 million new accounts. We renewed 36 new deals and 38 renewals. So when you look at that and doing that all virtually, one of the things we were kind of focused on was how do you support our partners. We are in a relationship business. How do you do that as effectively as we have done it over the last 8 years and how do you do it virtually and how do you still connect and make sure that we are doing everything we can to support our partners, and think the team just did a fantastic job. We also completed a big reorganization, as you know.

Yes.

That's been very successful. I think moving to 5 platforms has brought us even closer to our partners. It's helped us anticipate their needs even better. One of the things that is really helpful as you think about a purely digital partner versus one that's more omnichannel versus what our health and wellness partners need -- they're very similar by industry and business model and the types of products that they sell and their customer base. And that allows us to really anticipate the products that they need, what they need from us around data analytics, what they're trying to achieve is often very similar. And as we have built out our product set with SetPay and Pay in 4 even how they're thinking about those products as part of an integrated product strategy, it is really different as you go from those different partner sets. And so our teams now are even closer to our partners. I think it's helping us deliver a lot faster. Now you asked what I would do differently. I would always say we got to move even faster, right? I've never, in my career, said, we moved too fast on that, right? You're always saying, okay, I got to get even more anticipatory, I think creating the growth organization was a really good move because it brought together marketing and product and technology and capabilities all into 1 group. And so we're able to be a lot more responsive and faster to meet partner demands. So again, as I said, it wasn't how I envision that first year, but I am really proud of what the team delivered. And I think we're positioned now with the -- we have all the pieces in place now, and I think -- I feel really good about the growth prospects going forward.

That's great. Brian Wenzel, I want to dig into some of your commentary on the progress quarter-to-date. I think you talked about the outlook having a number of different scenarios, right, baked in? And Obviously, you know a little bit more now than you did when you gave those scenarios. Maybe you could just help us think through which scenarios are more plausible now. And I know it's still a moving target. There's so much in the background, but is one of the scenarios sort of wiped off the table? Or do the 3 still? Or are they still in the running?

Yes. So when you think about the growth side of the equation, it really came down to payment rate. And what we have seen in our analysis is that if you bifurcate the book into 3 components, subprime 660 to 720 and then super-prime. We've seen in each one of those buckets, migration back of accounts back to 2019 levels, right, with regard to payment rate, with regard to entry rate. So we are more optimistic that today that you're going to have that migration back to the mean. When you look at the top of the house, though, the dollar value of payments is still overwhelming. So the high end of each one of those credit rates still at the top says, your payment rate is elevated from a couple of years ago. So as we see it, we do see the moderation happening, which leads us probably closer to the middle case on the growth side, which is you're going to start to see more moderation in the middle part of the year, which leads you into this high single-digit growth rate on receivables, with the potential to be double digit, depending upon the slope of that migration. On the credit side, we had 2 different scenarios. The first scenario was more around the bubble that came through for accounts that had taken forbearance off us, right, that had got assistance from the government, had gotten assistance from financial institutions and -- but didn't get any forbearance from us. The view was that population would perform worse than the folks that got no forbearance with us. What we see so far is that's slightly true but probably not as severe as we thought. So that bubble that's going to come through is not going to be as large. And the vintage performance that we've seen from the underwriting the last couple of years will overtake that. So you're back to probably more of a glide pattern into our loss rates. So the credit normalization will be much more -- will not be severe, right? What Brian always says and reminds us is that the P&L will react in a way that says, when you start to see that glide, you're going to get revenue to come through and you're going to have the RSA. So for us, it's going to be a buffer. So there should be a nice P&L setup as we move through '22 into '23.

And so when -- like what's changed in the consumer behavior in your opinion through the pandemic? Like why is the consumer behaving differently than what you anticipated in your mind? Is it that the economy is better? Is it that there are more flush with liquidity? Is it both? Probably but...

I think it's both. I mean, look, nobody could have predict -- so stimulus obviously had a massive impact. I mean the payment rate, we've never seen at these levels in the business. I do think that is transitory. I do think it will revert back to the mean. It's hard to tell you exactly what quarter that's going to happen. But we do think we're seeing -- look at the spend we're seeing across the industry, not just us. We're seeing a lot of spend across the industry. That will start to outstrip the savings and people will go back to more of a -- might not go all the way back, I don't know, but it will go back to what historical mean on payment rate. So I think that is a transitory impact on the consumer. What's permanent is more of the behavioral stuff like digital adoption. I mean this accelerated both what our partners were doing on the digital front, but also how consumers interact with us, how they use our products, how they apply for, how they service, that's permanent, right? Once somebody starts to engage with us digitally, they don't go back. I was just looking at our ESG report last year, we mailed 164 million fewer paper statements than we did 2 years ago, right? Nobody goes to a digital statement that says calls up and says, hey, I want to go back to paper, right. So that interaction, that customer experience model has dramatically changed over the last 2 years, and that won't go back. But the -- I think the financial -- the balance sheet of the consumer, those things, the payment rate, I don't think they can stay where they are today. There will be a moderation. We're starting to see signs of that. It's hard to tell you exactly what quarter this year, next year, that goes back to what we've seen historically, but it will happen. And we've -- to Brian's point, we've analyzed it 6 ways from Sunday to make sure that that's what we think is going to happen in the portfolio.

Yes. The only other thing I'd add on to the consumer behavior is, we use this term contactless. And when the customer goes into the veterinary office, provider office, into a store, they're using QR codes, using direct to device. So the whole digital transformation happens throughout the entire process, not necessarily just doing it offline. It's when you're sitting in a provider's office, you scan a QR code and you get an application that pre-populates that's tremendous for us. And it takes cost out of the system, takes friction out for the consumer. So it's across the entire life cycle of the customer.

Can you just -- on a related topic, related but unrelated inflation. But how does inflation play into your consumer in your mind?

Yes. So in the near term, you will see some upward bias on purchase volume, right? So it costs more. So we'll see that come through. You will see some payment on -- payment rate to come back down. So that will be an accelerant to bring it back down. So it's actually a benefit in the short term to us. 18 months from now, if inflation is very persistent, you could see some pressure on credit, but that's going to be how long is it, is there this tremendous bifurcation between the haves and have not. So we are generally a little bit indifferent to inflation over the next, call it, year and half and what's the long-term effects to us.

And remind us on rates, like sort of the flow-through of higher rates?

Yes. So we're asset insensitive for the most part. So less than 50% of our book is variable rate. When you think about transactors, is less than 30%. So we're not terribly exposed to interest rate volatility. What I would say is, again, 80% of our funding stack comes from deposits. That's going to be more a factor of the market and who needs liquidity and who wants -- who needs to grow, that's where rates and competitive dynamics will really disconnect a little bit from the interest rate environment.

Okay. Got it. Before I dig into all these questions about loan growth. Maybe Brian Doubles, you mentioned ESG. So obviously, our investors, our clients are focused on ESG as a part of their investment process more and more. Maybe you could just give us a couple of minutes to highlight what your company is doing around those factors?

Yes. I'm actually very proud of what we've done on ESG. May I'll break it into the 3 pieces. I think on the environmental side, this is -- there's probably less just given the nature of our business, this is probably a little bit less impactful for us, but we've done a lot to move all of our facilities to LEED certified or energy EPA status, very proud of that. I said all the work we've done around incentives to move to e-bills and e-statements, 164 million fewer this year than 2 years ago. So I feel like we're well positioned there. We've obviously reduced our site footprint. I think our emissions are down 50% from where they were 2 years ago as a function of that. So where we can play a role, we're certainly focused on doing that. Where I'm probably most proud of what we've done around social and what we've done both for our employees and our communities. Back very early in my tenure, we moved to a $20 minimum wage which I think was just frankly game changing for our associates. It was not only -- I think that, coupled with the fact that we're allowing them to work from home is a very significant retention tool. Our attrition rates have gone to practically nothing after those announcements. But it was also just the right thing to do. Obviously, we talked about inflation. This allows our associates want to earn a very attractive industry-leading wage, but also they don't have the cost of commuting and maybe a second car to come to the office, they can work from home, that flexible work arrangement, I think, is really important. We do -- we have very attractive benefits, health and wellness, tuition advancement, skills training, certification reimbursement. So I feel really good about all the things we've done to support our employees -- and then we've made huge investments in the communities that we operate in. Very focused on D&I, one of the most diverse boards, I think, in the S&P 500. And it really starts with the Board and with me. And I think the diversity networks that we have, huge affinity across our employee groups there. So that basket of work is massive, but I feel really good about that. And then we're very focused on governance as well. Obviously, we're a heavily regulated institution. So that was something we built into our foundation when we took the company public 8 years ago. So I am -- you should read our report, it's coming out soon. I think it does a great job of laying out all the things that we're focused on.

Great. So maybe we dig into loan growth. Brian Wenzel, you talked about sort of broad-based growth, I think, in terms of what's outperforming, but you've obviously have these new relationships that have come on over the past few years. Walgreens, Venmo, Verizon, obviously, PayPal is a participant as well. Could you just talk about how those relationships are doing? How much of the growth is being driven by these new channels that you guys are pretty bullish on -- and maybe just -- and the other side of it, too, the other partners?

Yes. So we're really excited about the 3 new relationships, but really the 5 platforms that we have. If you want to focus on the 3 new relationships, they're all in different stages, right? Verizon was the first one out. For the most part, it was a little bit more challenged from origination standpoint because stores were closed, digital is online. So now we're starting to see the real pickup in the physical footprint there. But that value properly has resonated with the Verizon customer when you think about potentially getting dollars off each phone line, things like that, auto bill. It's a very attractive value prop to help retain the customer and something that Verizon looks at it and says, "This is a great way to reward our best does in place". So that growth is really proceeding nicely. I think when you think about Venmo, here's one that started in February last year. So we just crossed the 1-year anniversary. That's a terrific engagement tool inside the app. It's seamless. The value prop rotates to where the customer spends the dollars. You don't have to think about it. It's been copied by other issuers. So it tells you must be pretty good. And it really resonates and it's driving terrific growth for us across the ecosystem there. And Walgreens are our last one, this is one, over 9,000 locations, 90 million plus myWalgreens customer, a huge base, very fragmented with source counts. So we're continuing to work that. But that's a unique card inside of the health and wellness segment and something that's in parallel. When you look at that value proposition and the rewards it just drives behavior. And 2 of those sit inside our digital segment, our digital segment is really pulling it resonates when you think about the Amazons, the PayPals, 2 of those new programs, doing really well, eBay. Health and wellness is the other segment doing really well. We're up to over 40 specialties. We got over 20 different health systems that are now live. The integration into Epic from an app perspective and the ability to pay and use your card. You've got Walgreens, you have order acceptance. So that business is just doing incredibly well. So those 3 programs -- and those 2 platforms are driving significantly above-average growth rate when it comes to both purchase volume and asset growth.

And I guess like Brian Doubles, you talked about digital engagement improving through the pandemic. What's significantly changed in your business through the pandemic? Like what's different about the way you go to market now versus 2 years ago?

Well, I think one thing that is probably underappreciated is digital is not just -- people said digital is like, okay, how many applications you get in through the phone, right? We have 35%. Okay. Great. But how have we transformed the in-store credit experience for digital like that's a game changer because what it used to be, go back 5 years, you used to check out, they say, hey, do you want to save 15%. Here's your paper application, you'd fill it out while you're sitting in the checkout, you got a line behind you. It just wasn't -- it is what it was, but it wasn't a great experience. Now we're digitally integrated in-store. So as Brian mentioned, there's a QR code, right? So if you're sitting in the waiting room at the dentist, you're getting braces for your kids, you scan the QR code, put in 2 fields and you're approved for a digital card that sits on your phone, and you can complete your purchase with that. Same thing if you're in-store Walgreens digitally integrated, scan the QR code. Nobody wants their checkout line to be slowed down because you're filling out a lengthy application. And so the ease of which you can apply for credit, how seamless it is, how completely embedded it is in not just our digital partners, but the omnichannel partners that we have as well, I think, is a big differentiator. That's been a big area of focus for us and very responsive to what our partners want. They want it to be easy. They want to have -- they don't want it to kind of slow down the process in the store. They don't want to be dependent on people. They want it to be kind of in the hands of the consumer, and that's what we want as well. And so that's been probably just in the last year or 2, one of the biggest shifts.

And I guess it's a good segue into your SetPay product. You guys have ambitions or have launched Pay in 4, and obviously, you have the installment. How is that progressing? Like how is the rollout progressing? Where are we with that?

Yes. I mean we're seeing a ton of interest from our partners on all of our SetPay products, including Pay in 4. I'll tell you, the dialogue just over the last 3 or 4 months has changed a lot. This is -- if you go back to the pandemic, I think a lot of partners were like, hey, I need sales, I'm willing to put -- I'll do a Pay in 4, I'll do a Pay in 6, Pay in 12, even though they're relatively expensive compared to other tender types. I think now a lot of our partners are taking a step back and saying, okay, do I need to rationalize this, right? Am I getting the best economic outcome. Am I really getting incremental sales. Or am I getting disintermediated from my customer? That's what we're hearing more often from our partners, they want the incremental sales, obviously, they want to offer a financing product that their customers want and paying for an installment, they're not going anywhere. They're here to stay because customers want them. But there will be a rationalization over time. And one of the things that we're very focused on is the benefits of this integrated product strategy. So think of a Pay in 4 as almost a customer acquisition tool, right? You start them out with a Pay in 4, then you upgrade them to other products down the road. That allows us to offer a Pay in 4 arguably at a cheaper merchant discount, right, because we're looking at the lifetime value of that customer and other products that we can put them into. It's not all that different when you think about how we built the business over the last decade with starting with a smaller line of private label card and then upgrading them to a bigger line then ultimately to a dual card or co-brand. And when we look at the kind of the economics over the life of that customer, embedded inside of our program agreement is very attractive for us. So we're not focused on just, okay, what are we going to earn on that 1 product. It really is kind of a life cycle customer value model. And that directly responds to our customer as well, who's worried about being disintermediated, right? They're like, okay, I want to have a decade-long relationship with this customer. I want to push them offers. I want to push promotions. And this allows us -- this allows us to do that. So it's still very early days, I think, in terms of how those products will evolve. But I feel very good that the integrated product strategy is the winning one over the long term because it's -- it allows us to cater to partners who want different things. You always say that's the one thing our partners all agree on is they don't agree, right? Some are all in on Pay in 4 or a 12-month installment. Some like, well, I want to see -- do I cannibalize my core financing product and what does that do to the RSA that I earned. So a lot still to be decided here, but I do feel like we've got a very comprehensive product set, and we can definitely cater to the needs of all of our partners.

And so do you think that them taking a pause and reassessing is sort of delaying the rollout of that product the integrated product? Or are we seeing that rolled out?

No, it won't delay the rollout, but what it will do is -- so the rollout will be more of, hey, let's really monitor this daily, weekly so that we know how it's working with the other products, right? So that's what -- and I think you're going to see this too, where we're going to have our product in there with some of the fintech side by side and they're going to be looking at experience and approval rate. And the other thing that has surfaced us in the last 2 or 3 months is how is regulation going to change buy now, pay later. That wasn't a topic 6 months ago, but it's at the top of the list now because how does it change if all of a sudden these are all getting reported to the bureaus, we're actually going to underwrite our SetPay product. That doesn't happen everywhere. So what does that do to kind of the competitive landscape going forward. So that's -- again, that's probably the last new development that we've seen over the last few months. Partners are step back and saying, okay, we know now CFPB is very focused on buy now, pay later how do you think that's going to change? The good news there is that we're heavily regulated already. So we're underwriting it very similar to how we underwrite. We're using our data. We're using our partners' data. We're pulling the bureau data, and we're going to underwrite it like you should underwrite it, like the loan. And so I think that also gives us an advantage.

And do you think that there has been a pretty seismic shift in the way the consumer wants to consume lending because that's sort of the pitch for the fintechs, right, which is -- there's a big segment of a demographic that doesn't want a credit card. Do you believe that? Or?

Well, here's what I would say. The product is here to stay. I've been very clear on that. There is definitely a consumer demand for this product. I don't think that will go away. I do think though that it has a place in the financial ecosystem, but it will not become the financial ecosystem. I think I said at earnings, if you looked at our purchase volume growth in the fourth quarter, we were up with millennials and Gen Z, we're up 42% compared to '19 -- 2019. That's by far the strongest growing segment of our business right now. And arguably, that's in more traditional credit products. And so I do think that while it has a place, it will not replace some of the more traditional financing products. Now the experience and the value props and the things are all going to have to adjust and improve over time, that's still very competitive. That won't change. But that's why I think you got to take a step back and say, depending on the partner and the customer, you have to have all these products, right? If you really want to win, and you're seeing consolidation in buy now, pay later, partly because I think there's a realization that you can't just offer 1 product. We're in there talking to our partners, and they're not saying, hey, I'm all -- I mean what retailers are saying, I'm all in on this 1 product and I'm going to wipe the decks of everything else. No. It's a very crowded space right now. And so I think it will continue to be competitive, but I think we have the product set to compete very well.

Absolutely. And I guess last question on this topic. I mean, PayPal, one of your partners obviously has a buy now, pay later product as well, that they're doing off you? Do you feel like there's any impact to your partnership as a result? Or do you think it actually benefits it?

I don't think there's a negative impact. Look, down the road, maybe there's an opportunity to partner or do something there. Dan and I and our teams talk all the time about ideas. We just launched High Yield Savings, which we're really excited about with them. I would say in certain areas where there we're so tightly integrated. It's almost like some things we're going to offer, some things they're going to offer. We definitely are focused on -- is there an opportunity to migrate from a product they offer into the cards that we do for them. I think that could be a bigger opportunity down the road. We share a lot of data. We have a lot of good data that allows us to make really good underwriting decisions there. So more to come, but I would say they're a great partner in terms of how they push us, how innovative they are and our teams work really well together, so.

Well, I think what you guys are doing with them on embedded finance is quite interesting. I'm curious, like, are there other opportunities to do similar things with other technology companies?

In terms of the savings product?

Yes, yes.

Absolutely. Absolutely. I think that is, again, very innovative. There's nothing out there really like it. It was something we worked on together. I think we're still very early days, but -- and PayPal is such a terrific partner. I don't know if we go down the road with somebody else who was a core competitor of PayPal.

Right. Understood.

So that always maybe gets a little full dicey, but -- but we're excited about that, the prospect of that and how do we embed and I want to make a point on technology how do we embed as much as what we're really good at inside of what Dan and the team are trying to do with the Super App. I also think Venmo is a great example of it is our most technologically sophisticated integration. We needed to make it absolutely seamless so that when you're inside the Venmo app, you have no idea if you're interacting with Venmo or it's a call to our API stack, right? And it is completely seamless. We're so proud of it because you really -- you'll never know. And it was a ton of work, joint development and you can imagine that whether it's response time or those things, we're all over and the team did a great job building something that is just completely integrated. But it's a good indication of where this can go in the future. That's on the very bleeding edge of technology. And I think that's where, ultimately, I think partners will start to migrate into those more sophisticated integrations and solutions.

So maybe we'll bring Brian Wenzel back into the discussion, maybe talk about expenses a little. The operating efficiency target here, 32% to 33%. You've said to get there, it would be revenue-driven. Is there a portfolio size, NIM threshold that needs to occur before you sort of hit that target? I mean, how should we think about expenses on a go-forward basis and getting back to where we were?

Yes. The first thing I'd like to start with Sanjay, is the comments that we made back in January to be clear with folks, the way Brian and I run the business is to drive operating leverage. And we will achieve operating leverage for this year. So when you say operating leverage, everything I want to be clear about is we think about it as loan growth and revenue growth. So if that's growing at X percent, X minus is how we want to look at expense growth. And so the targets that we set out for this year, which is elevated from last year is really driven off an operating leverage concept. To the extent we don't get that growth, we will most certainly manage that base down. When you think about getting back to 32% and 33%, which is our operating model, you're going back to the targeted ROA that we had, it goes back to a premise of your interest of the yield being 200 basis points higher, right, which is really where we were historically. But losses were up as well. So it moves in tandem. So it's really focused more on the longer term. If you look at the way we're going to see expense this year, they should be flat quarter-on-quarter, right? So we're not going to see a big ratcheting up. And that's the one thing about our business model is we don't have to ramp up marketing to get 25 million new accounts. We don't have to do these other things. So as revenue growth comes back and it normalizes the expenses grow with this operating leverage, we will get back to that 22 -- I'm sorry, 32%, 33% in I would say the medium term here, maybe a little bit sooner if revenue goes back faster.

I guess, if we think about capital, you guys are not a CCAR bank, you obviously follow the stress test. Maybe you could just talk about how we should think about capital return, understanding, you've got portfolio sale coming? Maybe just sort of level set for how we think about capital return?

Yes. The first thing I'd say, we were on target to be a CCAR bank and then the pandemic hit. So I'm not sure if that's good or bad from a regulatory standpoint that we're at. But the processes that we built from day 1 of the IPO in separation have been around being CCAR ready and executing that process. As we go through this today, we are going through our internal stress runs. We'll have our capital plan approved by the Board in March and we'll submit it to the Fed at the end of March and go through the normal process. I think back in September, we gave a guide to a CET1 target of 11% over the medium horizon. We're going to be, as we call it, aggressive or prudent to get to that target. What's going to be critical there, Sanjay, is the continued development of our capital stack. We have a little bit more preferred to do a little bit more build out on our either Tier 1 or Tier 2. But we're going to do that in a manner, hopefully, if the markets cooperate in a relatively modest time frame. So we'll get there. We want to return capital back. We'd love to deploy it to growth, but we don't see M&A being very attractive right now with the prices. But we'll continue to look at that. So our job is to continue to build the capital stack aggressively return it back to shareholders as we move along that. The great news about our business is it generates a lot of capital each year. So we're able to fund a high single-digit, low double-digit growth and still return capital back to the shareholders. So we expect to be back into the CCAR run probably in 2024 will be our guess, and we're ready for that. And again, hopefully, at that point, using this excess capital, which is a strength for us, in a very positive way.

Great. So we have a couple of minutes left. I figured let me see if the audience has any questions. If you have a question, please raise your hand. One right there.

Tim Morgan from KBW London. Just wanted to go back to buy now, pay later briefly, you guys compete directly with buy now, pay later guys, not just for the payment processing, but also to the degree that they go after the marketing departments end and talk about incremental sales. Can you -- have we got enough experience at this stage to talk about whether you can go in front of the marketing departments and say that per dollar they're spending with you or with a competitor and Buy Now, Pay Later, who is getting the better incremental results? And secondly, Sanjay keeps talking about having to have the 2-sided network effect. Can you just remind us about the restrictions or lack of in your ability to leverage your data and consumers across all your retailers to cross-sell? Or is it just limited to your co-brand cards that you can do that?

Yes. So on the first one, we built our business on going into our partners and the marketing departments and saying we're bringing in incremental sales, and we have fantastic data around that, and it's proven over decades. And so that, I think, is actually a real advantage that our partners know exactly what they're getting. We can show them, here's what your average consumer is spending. Here's what they're spending if they have a private label card. Here's what they're spending if they have a dual card. And that supports that migration strategy that we've largely built the business on. So that's very proven. I think what they're questioning now is for the other tender types, am I really getting incremental sales, right? That was the belief or the premise going back a couple of years ago when you saw a big adoption of buy now, pay later. And I think they certainly believe it intuitively, I'm getting more incremental sales, which is why I'm willing to pay this higher merchant discount. I think to the point that I was making earlier, they've now taken a step back and said, okay, how do I really know, right? Our -- on our cards, our customers only shop there in some cases. So it's very clear. The data is irrefutable. We can show them even for certain customers, they were spending this. We put in the card, they're now spending X, right? And it's a very significant lift. So I think in a lot of ways, our data is a real advantage in that it's a lot clearer. The question they're asking now more on the buy now, pay later side, not necessarily on our products is, okay, so you brought me sales, but how many customers in mind did you take to somewhere else? How many customers did you take? And now they're really your customer that they're going into your marketplace and their spending with my competitor. And so that's really, I think, the big question mark. And we're hearing that a lot from our partners. Our data is clean in the sense that we don't take that customer anywhere else, right? It's in their ecosystem. They do life cycle marketing, regular promotions, et cetera. The big question is, okay, what happens after I get that 1 purchase from the buy now, pay later they go somewhere else, how do I know where they're going? And also I'm paying quite a bit to get that 1 sale? So I think that's a big piece of the rationalization that's going to happen over the next year or 2.

And I guess what Tim was getting out with the 2-sided platforms, is this more big tech, right, like Apple, offering embedded financial services and directing you a certain way because they have I mean do you feel -- and a lot of fintech sort of pitched that as do some buy now, pay later companies. Like do you feel like that's a real threat? Or ultimately, the U.S. population set sort of conditioned a different way?

Well, I think value still matters. So I do think that consumers are very savvy around maximizing the value. So even our cards are accepted in Apple Pay, and they may steer towards a certain card and Apple Pay to save on the value prop. I use a general-purpose card for some things, but everything I buy at Amazon goes on, my Amazon Card, I say 5%. And so I do think that can't get experience matters, no question, right, and ease of use and how easy it is to apply and use credit is -- has never been more important than it is today, for sure. But value still matters. And that's what I think we hear from our partners, we hear from our customers. They are, I think, more than ever, they're looking for a deal. They're willing to bifurcate their spend to save like Walgreens, you save 10% on Walgreens products. That's not in consequence where a lot of folks who were buying quite a bit at Walgreens, 90 million Walgreens customers. That value prop is going to, in our mind, outweigh the convenience of some of the other tender types.

Perfect. I guess we've run out of time. Thank you guys so much. I appreciate it. Nice to see you again.

Absolutely.