Synchrony’s POS Acquisition Underscores Paying Over Time’s Appeal Beyond the Cards

In an age where consumers are grappling with ways to manage debt, but also finance the purchases they need, point-of-sale financing is gaining ground.

To that end, and as announced last week, Synchrony will acquire Ally Financial’s point-of-sale financing arm. In terms of reach, Synchrony gets $2.2 billion of loan receivables, where the POS financing is already available at 2,500 merchant locations, and with 450,000 borrowers already in place.

Specifically, the deal will give Synchrony greater scale in home improvement and health and wellness sectors. Ally’s own site notes that POS financing appeals to consumers when it comes to paying for higher ticket items; buy now, pay later (BNPL) for smaller purchases. Just under three years ago, Ally Lending was made available for shoppers using the Sezzle platform for longer-term loan options.

In Ally’s latest earnings results, released last week, the loans originated as part of the POS efforts stood at $2.2 billion, with a yield of roughly 9.9%. The net charge-off ratio was 6.6% at the most recent reading.

We’ll know more about Synchrony’s own loan/receivables performance when the company reports earnings this week. But in the latest 10-Q filings, from the third quarter, and as released late last year, the data and earnings supplementals show that new accounts were down 2% year on year and that purchase volumes were flat in the same timeframe.

Growth Categories

But in looking at the segments where spending is indeed growing, the Synchrony data show that health and wellness account receivables were up 21%; account growth was 13%, purchase volumes gathered 14%. Spending on home and auto-related purchases were up 9% in terms of receivables, accounts gained 5% though volumes were flat.

The use of credit, then, holds appeal for consumers in those spending categories. But by offering POS financing, the company also gains further foothold with those consumers beyond the cards. Synchrony’s borrowers show VantageScore credit scores, and 73% of the card portfolio score 651 of higher; there’s a similar percentage of installment loan borrowers in Synchrony’s portfolio with similar scores.

PYMNTS Intelligence data show that 60% of consumers used an installment plan to pay for consumer products at some point in the last 12 months. The products and services for which consumers turned to installments most often include high-spending categories such as home furnishing and appliances at nearly a third of consumers). Demographic data indicate that 72% of millennials used installment plans, and 64% of consumers earning more than $100,000 annually used them in the last year. Seventy-four percent of installment plan users said they pay this way because it helps them manage spending. And PYMNTS found that two-thirds of consumers have said they want merchants to introduce installment plan options before the checkout process begins but at the point of sale.

The movement of Synchrony more firmly into the POS financing space comes after announcements from the likes of Citi last year, as the bank announced Citi Retail Services would be adding new point-of-sale (POS) lending options to its embedded payment capabilities via Citi Pay.