Synchrony Financial (SYF) Earnings Call Transcript & Summary
February 14, 2023
Earnings Call Speaker Segments
Moshe Orenbuch
analystAll right. Good afternoon, everybody. Very pleased to have with us the management of Synchrony. Synchrony is the largest player in the private label credit card industry. He's been in business over 90 years, first inside of GE, and it's been public now, I guess, about a decade. The company has both partnerships with major retailers and very well-known brands, including Amazon and PayPal. And it's also built its own networks in health care, home and auto, among others. With us is Brian Wenzel, the CFO, who has been with Synchrony well before the IPO, part of the GE management team as well for many years, and we're looking forward to his -- the discussion with him this afternoon.
Moshe Orenbuch
analystSo Brian, you did publish your financial results for the month of January in terms of balances, delinquencies and losses. And maybe could you talk about that, what trends that you're seeing and how that kind of stacks up to the expectations you had just set out a couple of weeks ago?
Brian Wenzel
executiveSure. Well, first of all, let me start, Moshe. Thank you for the invitation. Pleasure to be with you and the investment community today. A couple of things as we think about the [ AKs ], why don't you let me start with the receivables, right? So receivables were down $1 billion, a little better than normal seasonality up 15% year-over-year. If you look at that and say, okay, what's some of the drivers? It's slightly ahead of our expectations. And I'd say there's 2 factors at play there. Number one, the continuation of strength in purchase volume has continued on here in January. So about half of the favorability as we would think about is coming from purchase volume. The other half is coming from payment rate, which again is normalizing at a little bit -- a little bit faster than our expectations but not significantly faster. So when we look at that, that's leading to some very good favorability. When I think about it and I look at it kind of week over week, what's interesting, Moshe, is the last 2 weekends, have been our 2 strongest weekends of the year. So we had some benefit, most certainly on January 1st way the calendar fall, but we had really strength really in the last couple of weeks. It doesn't surprise me this last weekend with Super Bowl. Some people say, let me go out and shop before the big game. [indiscernible] feeds your better half potentially either way. So -- but really there, when we look at inside the portfolio, continued strength inside the digital and most certainly the health and wellness platform, which is really strong in the beginning part of the year. I think when we look underlying that to consumer, no real discernible shift with regards to transaction values where they're spending the money. So from that standpoint, the consumer is continuing to show strength from receivable standpoint and purchase volume. As you start to go down, you think about delinquency for a second, 10 basis points up sequentially. So that's in line with expectations and what we've laid out, most certainly for our expectations for the first quarter, but really how you think about the full year. When you think about the loss rate being at 4.3%, you first look at that and say, well, that number is up significantly from the fourth quarter, you have to look at a cycle adjusted. We -- we balance those cycles. We have more cycles than others. When you look at the calendar with one of our partner processor, it shifts some things. So there's 5 extra cycles sequentially, 2 extra year-over-year. If you cycle adjusted, it's generally on par with that. So again, you'll see a little bit of a hump here in January that you wouldn't necessarily see as you move forward. So we're pleased with credit. We don't see any abnormalities or things where we have to take a broad base actions.
Moshe Orenbuch
analystAnd from a macro standpoint, I think macro indicators certainly don't seem to be worse in perhaps some slightly better, some no worse, I guess, is probably a fair assessment as to...
Brian Wenzel
executiveYes. It's definitely fair. I think some economists actually have called for not a soft landing or a hard landing a no landing. So there may be some upward bias in some of the economists' views. As we see it, we don't see stress coming into the consumer. So it's not playing out any worse than that. It very well could be better. But again, we're only 45 days into the year. We're optimistic. Even in the report this morning on CPI, there were some positive things inside of that. So now you really have to look at the trend data and say, what do you feel is more sticky as you move forward, but we're encouraged by that. And listen, you continue to have a strong labor report. I think last week that continued to show strength in the consumer.
Moshe Orenbuch
analystRight. And when you think about your partners, like what are they telling you in terms of their appetite for growth in accounts for? And how do they view this at this stage?
Brian Wenzel
executiveYes. So listen, our partners always want to grow accounts and they wanted to. The one thing about our business, if you go back and I looked at this data before I came down here, the number of new accounts we originated. If you go back a couple of years prior to IPO through now, we've been relatively consistent band of number of new account origination. So -- that's one thing they value about our model. We're not on and off the origination engine, and they very much appreciate that. The conversation with our partners continues to be around 2 things. Number one, can you bring me more products so I can approve more get more people to buy, close more sales, maybe upsize the basket, number one; and number two, which is a dynamic that shifted over the last number of years is used to just be grow myself, how do you help me grow myself? How do you help me build loyalty with my shoppers. Now it's, yes, yes, yes to that. And then how can you bring in incremental new customers to my business and some of the things we're investing in our marketplace is provider center in their health and wellness business, payer provider, how do we bring more customers to them. So most certainly, they feel the competition. They really like where we're doing. We're in each of their digital retail channels, et cetera, meeting the customer where they want to be. So they're focused on bringing more customers and continued steadiness in underwriting.
Moshe Orenbuch
analystRight. I was going to ask this later, but I guess it's a good -- it's probably a good time since you just mentioned it, but one of the things when we've had this conversation a year and 2 years ago, kind of very high profile was buy now, pay later. And that's become somewhat less high profile in the discussions, but I'm sure it's still an important part of the toolkit, and you've launched your set pay. Can you talk a little bit about how that's been received by the partners where it's been launched? And how you -- how that will be rolled out as we go forward?
Brian Wenzel
executiveYes. Most clearly, we've learned from the development of that product in the marketplace, really more around customer experience, applications, et cetera. They do operate in a slightly different regulatory regime. We don't have some of the same requirements that we have as a bank in order to do ability to pay, et cetera. But we learned from that customer experience and what our view is we want a multiproduct presentment to the customers. And I think our partners appreciate the fact that we don't look at paying for product or a closed-end installment product and say, that's my only thing. What we want to be able to do is look at those customers and say, how can I migrate you to a product that you can continue that relationship on. So for us, we look at most certainly Pay in 4 as a vehicle in which it's a different cost to acquire. So if it's to a number of $3 or $4, okay, if I can originate 6 of those, and I get 1 or 2 to kind of convert over, I have the same cost to acquire my core business. That's what they appreciate is that ability to migrate that and we demonstrate it through our other products, whether it's secured or private label, private label and dual card. So they're very appreciative that. We've looked at a number of different players in that space and really try to say, okay, what's the best of what they offer. And I think you combine that with some of the things we do really well and it sets up nicely and I think you'll continue to see us expand into a lot of our -- hopefully expand into a lot of our larger partnerships.
Moshe Orenbuch
analystGot you. So we have to have some level of discussion about the CFPB and the late fee rule. Can you talk a little bit about what's happened, what they've said? And your positioning vis-a-vis that any changes there and what might happen over the course of the next year or 2?
Brian Wenzel
executiveYes. So let me start with -- as a firm, we are unfortunately disappointed with the proposed regulation. And there's a couple of things. You're looking at a fee that is most transparent regulated fee in the banking industry to start with. Then you look in and say, okay, as I look at the proposal, there's a couple of things put aside some of the procedural elements about the proposal itself. But there's a rush to kind of get this done going outside of what was traditional time frames to evaluate a rule like this to gather information and put it in play. But there are 2 concepts that we find are fairly deficient in itself. The first is around deterrence, right? The CARD Act really contemplated the terms when you come in here. When you look at the level of late fee, number one; when you look at the failure to be able to apply that at an escalating level to some degree for a deterrence is problematic. Third, even the contemplation rate relative to, let me charge it 15 days afterwards, which is essentially a cycle, it's effectively saying, I don't really care about the turns. And so I tell people we don't look at lease. I look at deterrence, I just want people to pay us back, and that's what we want. So that's one challenge. I think the second challenge that you have is there's a lack of contemplation of what's going to happen to consumer. Most certainly, you're going to see more consumers go into default, maybe not roll to loss, but go into the flow. Now you say, what does that happen? So therefore, you're now going to impact people's credit scores. You're now going to sit back and say, okay, how do I increase the cost in order to collect that. But now you look at other issuers who say, well, late fee isn't big for me, but now they have to take that the consumer delinquency and lower credit scores and say, okay, has that impacted the mortgage model? Has it impacted auto model. It has an impact of private loan model. And what happens in greater risk and uncertainty until they get a sense of how their models work, cost of credit is just going to go up for people and there's going to be a contraction of credit to the extent that we can't solve for some of the deterrents and other things. So what you're going to do is you're going to contract credit, you're going to make cost of credit for almost a large number of people will certainly hire and you're going to have ripple effects outside of just the core credit card business. So I think if you look at that, this is where I think even business -- banks that may not have as much exposure late fees are probably going to be much more interested in looking at this and saying, let's get the data. I encourage people to go back and look at what was done in the CARD Act around deterrent. There's a lot of things that are on the record that were submitted, and we'll continue to work with trade associations and other banks in order to try to advocate for this to hopefully get a better proposed rule. To the extent that, that does not work, put aside the legal piece of this, this is something that could come in play probably mid-2024. I leave people with this thought, Moshe. We started back in April when this first came about, we had a team working on this cross-functionally, has done a lot of great work. with regard to analytics around this, understanding it, understanding our relationships with our partners, how they work. And then really what's happening in the marketplace and other things that we can sit back and say, how do we make sure we have deterrents and what things are available. Two weeks ago, that team has gotten a little bit bigger. We've allocated resources, but they're carved out from the business. So they're working on that. We're going to focus on the core business, and we'll try to work with our partners, and our partners in this fight with us. They're going to lose sales potentially. So I think everyone has a vested interest to try to get to a better solution here.
Moshe Orenbuch
analystGot it. Okay. So clearly, you've laid out a expected path of credit normalization kind of continuing during 2023. Can we just talk through that a little bit? Like what do you kind of expect to see? What would you like us to be watching in addition, obviously, to the numbers you're going to publish on a monthly basis? But anything else that we should be watching to kind of track that during the coming year?
Brian Wenzel
executiveYes. What we see, Moshe, I talked about this in January on our fourth quarter earnings call is we've seen a very linear progression in delinquency back to pre-pandemic levels where you were moving almost a 10-point increment between 30-plus and 90-plus delinquency back. We haven't seen anything that says that trajectory bends at all. So if you follow that through mid-2023 we should be back to [indiscernible] delinquency, which means early part of '24, you're back to what I would say more normalized losses. Why that normalization, how that path works. Not many people talk about it on the cable channels about the K-shaped recovery, but we do see nonprime and deep nonprime, which is more migration for us. They've normalized back to pandemic levels. And what you're seeing is the top half both in prime and super prime migrate back down to those pandemic levels, right? And that's where the path will come back as they go through excess savings, they're impacted by inflation, et cetera. So the things that you should be looking at -- clearly, we look at the delinquency formation, you will get that. But a leading indicator also goes back into how do you see payment rate evolve, right? You do not see payment rate and entry into delinquency and losses moving in nonlinear fashion. They may be slightly off a little bit, but they will move. So I think to the extent that you start to see a more pronounced normalization of payment rate data be preceding an acceleration in delinquency. That's something we look at. Now again, we go further upstream, Moshe, and we look at what's payment behavior pattern? Are you shifting from statement pay into in-pay? Is there different characteristics? If you have multiple accounts, are you moving multiple accounts at once and how you pay? When you look at consumer spending behavioral patterns, are they shifting into lower transaction values, higher frequency? Is the timing of which you're doing that more aligned to potentially your payroll days, things like those are also indicators that we look at as far as health not as visible to folks, but most certainly, would like to keep people informed with regard to that. So those are some of the things that we see. But again, we didn't open the credit box in '21 and '22 beyond our 2019 pre-pandemic level. So we're not seeing a faster deterioration in the underwritten book.
Moshe Orenbuch
analystGot it. Could you talk a little bit about the development of the RSA in this kind of path? Obviously, your retailers share in the profitability, and they shared very handsomely during the days when profitability was at kind of peak levels, and they're going to share some of that on the way down. Just talk about that here in the protection that affords for Synchrony?
Brian Wenzel
executiveYes. This is always one for me. When I went over 6, a lot of people said, "Well, gosh, does the RSA -- the RSA broken is not working." You're exactly right. It's performing as we intended. We made more money, our partner shared that. And that's what we have is we want to earn within -- to cap our downside, we want to cap the upside and we're willing to provide more. So the partners made more we're making money. So we're over that 6% on an ARR basis. That has trended down as net charge-offs have come up, and we're now kind of sub-5%. I think when you look at it, we've given guidance that you'll be in the 4% to 4.25% for the full year. And I think the other thing, Moshe, I bring you to a back to some of the early guidance back in '14 and '15, we kind of said it was going to be 4.25% to 4.5%. And here we are 8 years later, it's 4% to 4.25%. So everyone who thought, hey, listen, you're giving away economics and things like we've really been in the same place because of the alignment of interest. So I would expect that you see charge-offs begin to, again, rise here and normalize in '23 and going to continue to see the RSA decline.
Moshe Orenbuch
analystGot it. Okay. And as you think about some of the new partners that you've kind of engaged, have the terms I mean, have the terms been similar in terms of that the way these partnerships are structured? Are there any differences that you've called out in terms of how kind of some of those new partnerships are structured?
Brian Wenzel
executiveYes. I wouldn't say they're dramatically different. What I'd say, with any de novo program, it's tough to immediately going there because you have no back book. You have to kind of get there. So when you talk to them about sharing mechanisms, it's, okay, you're going to start sharing in your 3 or 4. So for that, it gets a little bit more challenging conversation because they have to understand it and start to feel it. But there's nothing fundamentally structurally that's incredibly different between those relationships in some of our prior ones.
Moshe Orenbuch
analystI mean you did start 3 programs during kind of the tail end of the pandemic.
Brian Wenzel
executivePotential middle of the pandemic.
Moshe Orenbuch
analystThe middle of the pandemic right in the middle potentially large -- really large partnerships. And I know you said and Brian Doubles has said that any one of them would have been significant partner. Any updates that you can share on those 3?
Brian Wenzel
executiveYes. So listen, we look at all 3 of those and say they are kind of 1- and 10-year partnerships. So we're excited to have all 3. And yes, I think our first one launched in June of 2020, which is at the very beginning of the pandemic. Listen, we're excited about each one of the partners. The one thing that that's fundamental to our business model is the connectivity to the customer. We want the most loyal customer, whether you're a TJX customer, Lowe's customer and Amazon, PayPal. We want someone who's loyal to the brand and going to use the product. And I think when you look at Verizon or Venmo or Walgreens, you have incredible loyalty and you have a big installed base. We said we expect a couple of those partners to be top 10 programs in the 3- to 4-year horizon. We kind of consistently said that. I think everyone always asks us that this question is we're kind of a couple of years in. Here's the way I would frame it for you. When we define top 10 programs, we look to interest and fees on loan, right? So when you think about the credit card industry, you balance build first and then interest of fees come in. I think if you look solely at the balance build and the level of assets that we have with that. Two of those are inside the top 15, ones inside top 10 already, right? So now you're going to get the interest and fees that follow off of that. So we're really not to change the metric. It's interest and fees, but we're really excited about the trajectory of those programs. And how we're going to continue. We have lots of opportunities, both with Verizon and Venmo and Walgreens to continue to accelerate the growth there and reach much more of the customer. So we're happy with the programs.
Moshe Orenbuch
analystRight. You've referenced some elements of this a couple of times in a couple of the questions already. But can you talk a little bit about strategies and driving kind of e-commerce sales, and your digital connection to the customer. I'm sure that's something that's got to be increasingly important to your partners. Can you talk about the things that you're doing and how that's having an effect?
Brian Wenzel
executiveYes. The first thing that I'd say, focus on our API and our tech stack, what we are focused on is making the experience incredibly seamless to the consumer. So if you went to Venmo for a second, and you're inside the Venmo app. And you want to do anything with credit, you have no idea that you're on or off the Venmo site. And you're really on the Venmo side, but they're doing APAC cost to us. It's just a tremendously seamless experience. So taking that technology out to other places digitally is incredibly important. Using technology with alerts and other features incredibly important. For ones where we've embedded our apply applications and other things, we call it SyPi, Synchrony plug-in into other apps, we've kind of had the next generation. So now the ability to use these kind of calls and do this, we can do better servicing inside their app. So it becomes much more seamless for the consumer and that's really what our partners want. They want that seamless ability to say, I can service the account. I can buy in the account, I can provision it to digital wallets. This is a real big push now, right, as you kind of look at all the territories. Now it's digital wallet. Can I originate and push something into a digital wallet? And can I get into a digital wallet? And can I get it into default tender type? Those are the things that we're working on with partners and that ability to get front of line because once you're in the default tender type inside a digital wallet or a default tender type inside a wallet with a partner, you really have stickiness with the consumer. And if you make less friction in that, they tend to stay with you longer. So those are some of the investments really around the consumer side. We then are trying to do much more with regard to marketplaces and how we drive consumers to our partners. And then the third angle is even how we're doing marketing campaigns and how we can get a better selection and better execution and better response rate inside of driving things from that contact point to closure of the Sale.
Moshe Orenbuch
analystYou mentioned marketplaces and certainly, you've got kind of verticals in health care, home, auto. Can you talk about the development of those? And are there others that, that can be significant over time?
Brian Wenzel
executiveYes. We see power in these networks. If you look at auto, the fact that you can have an auto card that works at a tire, a muffler oil and gas, a part store, it just really allows that person to compartmentalize the spend drive value back to them and really resonates with the consumer. And it's really adopted by the partners. They like the fact that hey, I may not sell tires, go get tires. When you don't come back here because I'm selling you a battery. So it really resonates there. Now that has the power what we learned in home and auto, it has power and can be expanded. So would you look down in our lifestyle segment and look at outdoor. And so okay, I just sold you a closed-end secured loan. Is there a network card I can give you that allows you to get accessories and other things you may not have closed on there. So there could be a network card. I think there's a lot of thought in our health and wellness business. We have CareCredit a tremendous brand, strong NPS, great resolution, but -- now as you went to wellness, that's a whole different play. Can you stand something up, whether that's a value prop off the card or a separate card. That's something where you can lean into it. And the important part when you get into these networks is defining what wellness says, you may have a different view than I, really trying to find how the consumer target consumer looks at and how do you create the value prop and targeting that resonates with that consumer.
Moshe Orenbuch
analystGot it. We talked about credit. The other side of that is the loan loss reserve, and this is actually, I think, been one of the potentially positive surprises in 2023 is that -- I think it's led us to understand that the reserves of how strong those reserves are. Just talk a little bit about how you kind of see the reserve developing in your kind of base case? And I guess, what would happen if things got better or worse during 2023?
Brian Wenzel
executiveThe interesting thing about CECL, I think all the industry participants would say we've gotten much better with qualitative reserving, which were probably a little bit more challenging I think, than pre-CECL. So for us, it really goes back into it, it gives us the ability to look at scenarios that say, "Okay, I can look at my basic delinquency formation, I can put in scenarios for unemployment claims, financial obligations, housing starts, I can kind of get a range of output. But it really allows you then the freedom to say, "Hey, listen, if there's a different macroeconomic overlay or take student loan overlay, you can look at those and really measure for that exposure and be prepared. So I think as we look at it as we enter '23 is we had a core model that puts the quantitative outlook. We had a series of overlays that covered us so things of student loans, inflation and macroeconomics. So as I look at '23, while our base model may have taken Moody's at a 4.2% exit rate of unemployment in '23. When you think about the development of going back to your mean loss rate and then a macroeconomic overlay, we're at a 5% effective -- call it, 5% overlay, 5% employment rate as you exit the year. So -- so that allows you to be protective. I think for us, we're probably ones that look at data a little bit more in trends to kind of get into that overlay. So we're not going to probably be peaks and valleys. We're going to kind of be more analytical as we move through it. So as you think about '23, the things that kind of drive it up or down is the outlook going to be -- unemployment is going to go significantly higher than 5%, is unemployment really going to be longer lived and what's that trajectory? If it doesn't, then what you'd expect to see is that qualitative reserve begin to manifest itself in your base model, your qualitative to down, base model comes up and you're essentially equal. I think if we got to a point where we said we don't see the macroeconomic going along the base model, you didn't have potentially a release of the macroeconomic reserve or if you had student loans resolved and we didn't think we had exposure there. So those types of factors we'd look at. But I would expect -- and this is important, I think, for the first quarter, motion and then for the rest of the year. I don't expect release of reserve. I think you're going to see the seasonality piece come back, everyone should think about TDRs because that lowers the coverage, but think about lower coverage last year. You're going to see that rate rise back from seasonality in the first quarter. And we're going to have growth-driven provisioning in the 4 quarters of 2023.
Moshe Orenbuch
analystRight. Got it. From a funding and deposit standpoint, I mean, we've been having this discussion now for some time. And deposit pricing competition has probably been a little hotter than at least I would have thought at the beginning, maybe roughly in line with where you were thinking. Any change of late in terms of that? And talk a little bit about your specific strategies within the deposit base?
Brian Wenzel
executiveYes, Moshe, if I go back to just kind of frame '22 for a second, what happened is, when you looked at '22 -- what really started was you're in a dynamic, you look at pricing relative to money market mutual funds relative to the money center banks say, "Okay, what's your starting point? We expect a slightly higher beta. And what you somehow the competitive landscape is the beginning part of the year, people were trying really hard to manage beta. They saw outflows and then they got aggressive pricing. And you saw betas accelerate really in the third quarter into I call it the third week of December. The last 8 weeks, it has been more stable, I'd say, from that perspective. And you can theorize a couple of things. One, banks have a lot of excess liquidity in excess deposits, they were going to let go off the beta part of the year, then they want to hold on to it. Now they're wanting to maybe at least a little bit of that. It could be man-driven when you look at demand on the consumer side for mortgages, autos, personal loans, down. Maybe C&I and real estate in the commercial rolled down. But it's been much more stable as we look forward. I think that's one that's encouraging to us, the first 6 weeks of the year, and we hope continues because as I think about margin of the business, the bigger variable for us is that the rate is really the deposit beta. With regard to strategy, I think last year, what you've seen most of the growth came for us in certificates of deposit. people want to lock in rate which we said last year was a little bit more, we thought, you think in the current period, a little more and more painful as people went long. As we think about this year, probably good rates. We'll have some of that reset in the back half of the year, but most of the growth was in that. We went a little bit liability sensitive because of that. I think if you look at some of the growth that we're seeing recently is more balanced between savings and CDs. So I think the consumer is starting to sit back and say, wait a second, I have to lock rates in here. I'm kind of -- I want to keep my options open. So we're saving savings kind of grow up here. The last point I'd sit back and say, if you look at the 29 largest banks, there's a cluster of banks that are digitally -- were in that, that are still experiencing -- even in a stable market deposit growth and you have a large number of banks that are still experiencing, I call it low single-digit deposit outflow. So we like the market where it is now. We hope it remains stable and balanced.
Moshe Orenbuch
analystYes. Okay. Maybe let's talk a little bit about capital. You've been returning capital at a fairly healthy clip. You still got a fairly nice cushion above of your targeted levels. How do you think about that capital return? Asset growth is still strong, not quite as strong as it was, but still strong. So you put all of that together and talk to us about your thoughts on capital?
Brian Wenzel
executiveFirst of all, I'm really proud of the company and what we've been able to do from a capital return standpoint, Moshe. We've had the conversation at one point, we're at 18%. People ever wonder we get to target. Now we're at 12.8% CET1 at the end of December. We bought back 17% of the shares last year, which is more opportunistic in the fact we weren't trading at what I would say is intrinsic value. But it's an important part of our philosophy going forward. So as I look at it, one of the important steps to get to target was the continued maturation of our capital stack, part of which we accomplished a couple of weeks ago with our subordinated debt offering that fully maximized our Tier 2. We have a little bit more Tier 1 to do, not [ interested ] to do that. At some point, we'll come back and get that done. I think we look at things on a measured approach, and we want to get to target. We have a plan. We're working on our capital plan now with scenarios, but we feel good about the resiliency of the company, the loss stresses, what we saw from the CCAR assumptions was probably in line with what we expected. So again, I expect us to file that capital in we're back hopefully in the second quarter with a non-objection to that. And we're going to continue to return capital to shareholders at a meaningful clip. Clearly, our first preference always is to grow RWAs. And so while we're in this period where grows a little faster, most certainly, that will take precedence the capital return. But I think as that normalizes, it throws off even more capital for us to return back to the shareholders. So I think in a measured pace, we should be approaching our target levels.
Moshe Orenbuch
analystSee maybe there's a question or 2 from the audience. If you do, would like to ask a question, raise your hand and someone will bring a mic to you. Go on over here.
Unknown Analyst
analystIs there a risk that when the -- your retail partners start making less money from the RSA, they'll just want to go back to you and renegotiate?
Brian Wenzel
executiveYes. So listen, I think there are cycles with the RSA where people make more sometimes they make less. I think when they're making less they're going back to historical norms. Is there a risk that they may come back and say, "Hey, let renegotiate?" Of course, there's a risk they can ask, there's not a right to do that. And I think the same way we didn't go and say, "Hey, when RSAs were over 6%, can we do something about it, we want to reinvest in the program." So while there is a risk, I don't really view that as something that we're particularly top of mind for us. I think the RSA is really alignment of interest. And I think as we go through the process of the CFPB and some of the mitigants both from a cardholder perspective and how we're going to deal with it. The RSA will be there, but I don't view that as a big risk for us as I sit here today.
Moshe Orenbuch
analystGot you. Any others in the room? Okay. So maybe if you think about kind of priorities over the course of the next 12 months? I mean what would you kind of put at the top of the list and leave the CFPB and thing off the list for now. But when you think about the things that Synchrony wants to get done to really kind of maximize your relationship with your partners, growth in assets and earnings, what are those things at the top of the list to do?
Brian Wenzel
executiveYes. That's up 2 or 3 things I think about, Moshe. Number one, we have an incredible franchise in health and wellness. You look at a vertical that has a broken ecosystem that really has a need to help patients through the shifting responsibility from health care providers or health insurance, excuse me, to consumers about being there for the consumer so that when they need to finance an emergency or to finance something for dental or vet, that we're there for them. So I think you're going to continue to see us lean in to try to help consumers in that space. There are verticals inside of there and specialties inside of there, which we haven't really tapped yet, but that we're going to be cautious into such as, let's say, behavioral health. So I think there's a lot of opportunity. We're over allocating resources into that segment, which we think from a margin and otherwise is a good investment for our stakeholders. So that's one big piece as part of our strategy. The second big piece is around, we call it accelerating our customer experience. So these are things around the marketplace we talk about. We have a lot of people go to mysynchrony.com. How do we enhance make that more robust? And how do we target more inside of there to drive consumer adoption and behavior for our customers. When you look at things we want to do with Clover, how do we get our distribution to the masses. I think when you think about going to market, how do we get there faster. This is really where we had a benefit around reorganization almost 2 years ago into verticals and in defining organizations that were around growth, technology and operations. So enhancing that customer experience and driving that, so they want to stay inside the Synchrony ecosystem on the partner base big for us, we'll continue to invest there, and then we'll lean into that over the next couple of years. And then finally, it's -- we continue to invest a lot in digital in our underwriting. So digital is around -- go to the back end of the business, digital-first servicing. So we do everything that we can to allow the cost for however they want to be serviced, wherever they want to be serviced, allowed them to do as much as they want in that. How do I get people never to have to call and I'm predictive with regard to their concerns. When I think about how to service the account online, is it the best in class? And then how do I make -- again, the digital shopping experience through digital wallets, while provisioning into the default tender in the wallet, it's continuing to invest in that technology. Really be there for the cost for in that. So those are the big areas of focus. I think if we can do that, if you can make the customer experience better, you can drive more customers to our partners we're going to continue to drive value for them and that's something that helps us renew with our partners almost every day.
Moshe Orenbuch
analystRight. And you've talked about the fact that now you've got a vast majority, I think it's 95% of your partners there by revenue kind of protected through 2025, right? One of the things that's kind of occurred to me, we talked about it a little bit last night is this idea that -- I mean, do you think in the next cycle, some of the partners that perhaps went elsewhere would kind of rethink that? I mean is that something that could happen? I mean, are there -- I'm assuming you still talk to some of those -- some of the people there.
Brian Wenzel
executiveYes. When I sit back and say, we had a couple of small examples in our home space that came back to us in the fourth quarter, and we highlighted those for folks. What I'd say with the folks that have left both in the recent term and a little bit longer, it wasn't about capabilities. It was more about price and that risk-adjusted return trade-off, which is very difficult for us or the company. We never want to fire a customer. We never wanted not to agree with the customer on price, but you sometimes get to that, we have to do what's best for our stakeholders. That said, if a partner wants to go back to us because they value what we brought to them from an analytics perspective, from a digital asset perspective, from a credit perspective, and we can get on terms. Absolutely, we go back and look at relationships and do that. We don't look at any of our people who are with us in a negative way in, and we clearly want to continue to grow our business. We're in the partnership business. That's why when we ended those partnerships and even when transition, we try to really take the high road because I've realized been in this business 24 years, it is a short track and you run it to partner. So never say never. We'll continue to look for other relationships.
Moshe Orenbuch
analystGood deal. With that, we are actually out of time. And so join me in thanking Brian and the Synchrony team for being with us today. Thank you.
Brian Wenzel
executiveThank you.
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