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Walmart-Synchrony Breakup Pinned To Applicant Underwriting

Synchrony Financial's run as the exclusive credit card issuer for Walmart came to an end in July, with reports that Walmart decided this past summer to switch to Capital One Financial.

According to a report in The Wall Street Journal, citing people familiar with the situation, Walmart executives wanted Synchrony to share more of the revenue from the cards and approve more applicants. The paper noted that the end of the relationship underscores how retailers are changing the game for store credit card issuers, requiring the likes of Synchrony and Citigroup to change how they operate.

With the number of retailers declining, the store credit card business is shrinking, requiring the credit card companies to compete more aggressively for the business that is available. Retailers like Walmart are discovering that they can demand more from the card companies to land their business, noted the report.

Walmart had expected to get more out of the Synchrony deal, but sources told The WSJ that loan losses – which stood at about 9 percent of outstanding balances on Walmart cards as of this past spring – impacted the amount it received over the years.

In 2017, Walmart started offering loans from Affirm, the FinTech, as an alternative after asking Synchrony to approve more applications for credit. Walmart even introduced Synchrony to ZestFinance, which makes software that helps lenders approve consumers who otherwise would be denied credit.

The end of the relationship with Walmart is a blow for Synchrony, given that Walmart accounted for about $10 billion, or 19 percent, of the retail card balances at the company.

Synchrony told the paper that it has "worked very hard" in talks with Walmart and negotiated with the retailer in "good faith," and added that it is diversifying into growth areas, pointing to a partnership with PayPal as one example. “While we always want to renew our relationships and the loss of the Walmart program is unfortunate, we view the situation as an outlier,” a spokeswoman said. Walmart declined to comment on the relationship with Synchrony.

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The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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