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EPISODE 177

Synchrony CEO Margaret Keane is “Changing What’s Possible” in the World of Payments

52 minutes · May 26, 2020

How have your spending habits changed since the pandemic struck? Fewer in-person dips or swipes of your credit card? More e-commerce? Are these short-term changes temporary, or the beginning of a payments sea change? Margaret Keane, CEO of Synchrony, joins us to explore the future of payments, leading a disparate workforce through difficult times, and how Synchrony is innovating and diversifying to meet the needs of its clients, today and in the future.

Speaker 1 (00:03):

From the library of the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, you're Inside the ICE House, our podcast from Intercontinental Exchange on markets, leadership and vision and global business, the dream drivers that have made the NYSE an indispensable institution of global growth for over 225 years. Each week, we feature stories of those who hatched plans, create jobs, and harness the engine of capitalism right here, right now at the NYSE and at ICE's exchanges and clearing houses around the world.

Speaker 1 (00:35):

Now, welcome Inside the ICE House. Here's your host, Josh King of Intercontinental Exchange.

Josh King (00:46):

I'm a bit of a credit card nerd. It won't surprise regular listeners of this show to learn that I might just have a box of every old expired credit card ever issued to me. Now that I'm sequestered up here in the Catskills with my reams of archive boxes, holding such ephemera, I have been reunited with my 1992 Citibank Master photo card. You might remember it promising a new world of safety and security because you could pass your card to the merchant and have your identity verified by a glance.

Josh King (01:21):

Well, when was the last time you handed your credit card to any kind of merchant? Does that blurry signature in the white tape even count for anything anymore? Our parents and grandparents had house charges at the hardware and grocery store. Your great uncle, if he worked in the city, might have got one of Frank McNamara's Diner's Club cards in the early 1950s. It's a small piece of cardboard used to charge entertainment and travel expenses. He created the Diner's Club famously after forgetting his wallet at a business lunch.

Josh King (01:54):

In more modern days, we've been doing our own swiping using the magnetic strip on the back of our card with readers called point of sale systems from places like Ingenico and Verifone, joined more recently by Clover and Square. All of the POS systems now taking advantage of the EMV chip, that little embedded microchip, which is the 21st century solution to the 20th century problem first tackled by that Citi photo card that I mentioned. But now, amid the coronavirus pandemic, there's frequently no physical contact whatsoever between buyer and seller.

Josh King (02:31):

A few years ago, I got my Amazon Prime store card issued by Synchrony Bank, part of Synchrony Financial. That's NYSE ticker symbol SYF, 5% cash back on all of my Amazon purchases. In the last two months, that card has been getting an outsized workout as my wife and I break up the day in home quarantine with occasional ecommerce breaks. It reminded me of one of our conversations recently with Kevin O'Leary, Mr. Wonderful on shark Tank who shared that his companies were feverishly reworking their models to adapt to changing consumer habits, moving the timeline up on when the economy would transition to more than 50% online.

Josh King (03:16):

Last week, a major credit card company reported, I believe, for the first time that over 50% of credit card use in the month of March was a card not present transaction. Are these short-term effects reflecting extraordinary times or the beginning of the payments see change that will continue even when we return to our regularly scheduled lives? Our guest today, Margaret Keane, CEO of Synchrony, joins us to help answer those questions, a long-time leader in the financial services industry.

Josh King (03:46):

She's helm the company both before its separation from GE and since its IPO in 2014 through the highs and lows of economic times with a focus on some of the innovations like that Amazon Prime card required to keep the company on course. Our conversation with Margaret Keane on the future of payments, how to lead a disparate workforce through difficult times and how Synchrony is innovating and diversifying to meet the needs of its clients and investors, that's right after this.

Speaker 3 (04:21):

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Josh King (04:48):

Our guest today, Margaret Keane, has been the CEO of Synchrony since leading the company through its IPO in July 2014, and its subsequent spinout from GE in November 2015. She's appeared on Fortune's Business Person of the Year list, and has been recognized as one of American Banker's 25 Top Most Powerful Women in Finance for 12 consecutive years, and one of Fortune's most powerful women for the past four years. She began her career with Citi group back in those days that I had my Citi photo MasterCard before joining GE capital, where she held several management roles before being tapped with taking Synchrony, then known as GE Capital Retail Bank Public.

Josh King (05:29):

Welcome, Margaret Keane, inside the ICE House.

Margaret Keane (05:31):

Thanks for having me.

Josh King (05:32):

Synchrony headquarters as most companies are is now several weeks into a fully remote operation. How's the transition gone for you?

Margaret Keane (05:41):

The transition's gone much better than I thought any of us could have imagined. We made the decision to do work from home pretty quickly, and we did that with our exempt workforce, but really, the challenge we faced was our call center representatives, which really is the bulk of our organization. I think for about two weeks, we were working with them working in our call centers. It became pretty clear to me that that was not going to be a long-term solution given what we were dealing with, and quickly said, "Okay, how do we get everyone at home?"

Margaret Keane (06:12):

I think the good news is we had the technical infrastructure in the sense of our network and all the work we had done separating from GE, but the biggest challenge was really getting the actual equipment to each of those reps. They had to come in and pick up their packet of toolkit, if you will, of the equipment they needed to work from home. That was done over a two-week period. It was pretty amazing what our teams did through that process.

Margaret Keane (06:40):

We had people literally following around FedEx trucks to get the equipment so that we had it available, people driving in the middle of the night to pick up headphones. It was quite the feet of our organization, but it rallied the organization. I think right now, the great part is our operation is very stable with giving great customer service, and keeping our employees safe.

Josh King (07:00):

Where were these major call centers?

Margaret Keane (07:02):

We have call centers in the U.S., India and the Philippines. We did this around the world globally, which was pretty amazing, but we have call centers in Ohio and Florida, near in Kansas. We have a bulk around the U.S.

Josh King (07:17):

What's the feedback been from your folks in the field about how they're getting on taking these... When I call with my problem with my Amazon Prime card-

Margaret Keane (07:25):

I love that.

Josh King (07:26):

Don't you like that? What's the difference in quality between when they are in cubes across these large call centers versus when they're in spaces like you and I are in today?

Margaret Keane (07:36):

No, I think that's a really good question. I think the first thing we really had to make sure is that wherever they were working from home, they had the right technical capability at their house to serve our customers, the right space. We've helped direct them. We've had a daily help desk that people can call into to ask for advice and help. We had to work through some of that in terms of making sure they had the right environment to work from home. Pretty much, we were able to help people through that transition.

Josh King (08:04):

Do you see any permanent changes as a result of what we're going through now, or do you hope to get them back to their communal locations?

Margaret Keane (08:13):

I think there's going to be permanent change. I think it's interesting. You have these three groups of people. You have people who can't wait to get back to the office. They're like, "I got to get back. When am I getting back?" Then there are a group of people who are like, "I'm not so sure. I like working from home." Then you have people who are like, "Wow, this is really working for me." I think we'll end up with definitely a different footprint of work from home, more work from home, more flexibility, more maybe space where people share and come in a couple of days a week, and then don't have a permanent office.

Margaret Keane (08:45):

We actually have a team really looking at this because we're really talking about how do we transform how we work based on what we learned going through this.

Josh King (08:53):

According to a survey by Experian last month, the average American's wallet has four credit cards over half of them with the name of a retail or travel service company on the front. Many of those consumers will see the name Synchrony when they go to pay their monthly bill like I got here. But beyond that, they don't think much about the complex infrastructure required to connect company with the consumer. Margaret, in my previous job, I was with First Data as some of our listeners know. Your company was our biggest customer for credit card transaction, processing, production and delivery of these statements.

Josh King (09:31):

How has the back office of credit cards changed over the course of not just the last eight weeks, but let's go back several years?

Margaret Keane (09:37):

I think probably the biggest change is just the whole digitization, right? You have a paper statement there. We would love for you to do the statement online, but we've really digitized our capabilities, so what we're seeing is less paper, more digital wallets. That transformation continues and, I think, is actually getting accelerated as we go through the pandemic as people just think differently about how they're transacting in terms of doing everything online. We're going to continue to see that.

Josh King (10:06):

As we've been talking about it, I've shown you my card. I've shown you my paper statement. This thing has got so much more work over the last several weeks. How is COVID affecting the business, and what are you seeing in terms of consumer spending and changing habits?

Margaret Keane (10:22):

Obviously, the consumer has shifted, and probably the biggest challenge is for those partners who had to close their stores don't necessarily all have digital capabilities, so those folks have been impacted. But what we saw and what I talked about on earnings, we saw sales drop about 30%, and it's actually held there. What we are seeing though is areas where sales have accelerated. Amazon is a good example. Lowe's is one of our partners. Lowe's is very busy.

Margaret Keane (10:52):

Sam's Club is very busy, all of our good like Zoo Lilly. We've seen a real acceleration of digital purchasing and digital applications. For the first quarter, we saw our digital applications go up to well over 50%. We're seeing more people apply online. We're seeing more people transact online. I think that behavior change is going to continue to accelerate.

Josh King (11:14):

Contactless transactions is something that I mentioned earlier is something that you've been bullish on, even predicting the end of the presence of the physical credit card in everyone's wallets perhaps within five years. In January 2020, Amazon announced that it had discussed a project with Synchrony and other financial institutions to use a non-contact biometric identification system. Technology has transformed and largely solved the last mile problem in the last decade. Will it have a similar impact on closing the sale to a consumer?

Margaret Keane (11:47):

I think contactless is really going to accelerate and is accelerating. More and more of our partners are asking us for contactless cards. I think the big transformation that has to happen, and you know this from FDR, we could build the technology, but the point of sale has to be able to accept it, so people have to upgrade and get their point of sales in the right position to accept those cards. I think digital wallets are also accelerating, so a combination of the actual contactless card and the wallet.

Margaret Keane (12:16):

I think as people don't want to touch things right now, and more importantly, I think even in the service industry, handing a card to someone behind a counter, I mean, they don't really want to take the card either, right? I think this transformation is really going to accelerate all of that. We were on a call yesterday talking about we need a better way to even tip people because cash is no longer what people want to touch.

Margaret Keane (12:45):

I think people who maybe were afraid to do contactless, or maybe didn't register their card on the wallet, everyone has some time on their hand right now, and we're seeing all of that happen, so I think it's going to... I think this is a big consumer behavior change that's going to carry forward.

Josh King (13:00):

You mentioned the acronym FDR stands for first data resources, which will warm the hearts of so many people in Omaha, Nebraska, and yet FDR became then First Data, and last year was acquired by Fiserv. Even just yesterday, they announced the leadership transition from Jeff Yabuki to the old First Data CEO, Frank Bisignano, who would take over in July. Taking off your Synchrony hat for a minute, and just looking at the broader credit card industry, a lot of consolidation over the past couple years, where do you see the industry headed as a whole?

Margaret Keane (13:34):

The consolidation is happening more because I think you have to make really big technological investments to really accelerate to deal with the changes that are happening. I think the change that was made with FDR and Fiserv is a good move. I think it's going to allow them to consolidate just the data, the customers, the transactions as well as really being able to invest in technology, which is expensive. I think changing your processes driving forward is just what all of us as CEOs have to do.

Margaret Keane (14:05):

I think you'll continue to see some of that as people look to really invest more heavily in technology.

Josh King (14:11):

Talking about the technology investments that you yourself are making at Synchrony, how are you preparing for the changing customer experience that'll remove handing a piece of plastic to an in-store representative beyond what we've already talked about? We can get into the weeds. We're the ICE House here.

Margaret Keane (14:28):

No, I think the good news is we've been on this journey. We didn't just start this journey. I think when we separated from GE, one of the first things that I began to really focus on was really our infrastructure and the technology we were going to need to really compete effectively going forward. Frankly, when we were with GE, we weren't one of the businesses that I would say they were giving us a lot of money to invest in technology, but we made this our number one initiative.

Margaret Keane (14:52):

It's allowed us to really accelerate all the digital things that I've talked about, whether it's dApply, Dservicing, where we've partnered with third parties to help us really accelerate our capabilities on authentication and fraud, because that's a big area. One of the challenge that we have to always think about is keeping customer information safe, and make sure that we're giving the car to the person who's applying. We're spending a lot of money on data, and working with third parties to really accelerate that.

Margaret Keane (15:23):

That's paying off, and we've seen that the investments that we've made have really helped hold us through this pandemic. But I think one of the things we did, and I'm pretty proud when this pandemic happened, we split our leadership team into three parts, a team that was focused on stabilizing the operation, a team focused on what happens when we come out, and then long term. We actually in nine days, we did all of our strategic initiatives, and actually doubled down on some of the things that were on our laundry list of, "We got to get this in from a digital perspective."

Margaret Keane (15:56):

We've pulled all those things forward, and so I'm pretty bullish on our capabilities, and think we're going to continue to be able to accelerate and be part of this transformation that's happening in payments as well as retail.

Josh King (16:07):

Diving into some of those initiatives that you're taking, late last year, you announced a new partnership with Venmo. Then earlier this year, another new deal with Verizon, that's NYSE ticker symbol VZ, to launch the first Verizon credit card. These seem to be programs and partners that are a bit different from some of your traditional retailers. Can you talk about the decision to pursue these types of relationships, and what impact do you expect it will drive to your business?

Margaret Keane (16:36):

First, we're excited about both of these. I think partic... They're different in the sense that Venmo is part of PayPal, which is really a payment network and a social system that I think operates in a different way. I think we're very excited. We have a great partnership with PayPal already to be able to work with them on the Venmo card. I think this will, when we are ready to launch, be very integrated, very high tech, great value prop. I think more importantly, it's a growing opportunity for us in terms of how... I'm sure you saw this week, PayPal's really grown. The Venmo business has really grown, so we're really excited about that.

Margaret Keane (17:14):

Then Verizon, as people become more and more engaged with their tools, their phone and their iPad, and as 5G comes online, that's going to give us some opportunity to connect in a different way. Verizon has bundles of services now. We feel like we can really stay connected with those customers. So yes, it is different, but we'll also be working with them to really make sure the same thing, very integrated, high tech, great value props, so two programs that we think can accelerate growth for us in the future.

Josh King (17:43):

Verizon, Amazon, PayPal, and Venmo must be on the upper end of the size of partner that you work with, but what is the range of companies that Synchrony partners with?

Margaret Keane (17:55):

I think it's an important point, because it's the one area that I think we all have to pay a lot of attention to. Those are all big names. They're great companies. We love them. They're great partners, but this business started during the depression, and it was really done through our old GE appliance business. When people wanted to buy appliances, they used to actually go and pay $5 a week till they could afford the refrigerator or whatever they were purchasing. GE in the midst of the depression said, "Hey, maybe we can finance these things."

Margaret Keane (18:23):

Our roots are very back to that local store on the corner, the guy that sold appliances or the jewelry store on your main street. I think we actually work with people, single proprietorships all the way up to the big companies. In our payment solution business and our care credit business, we have hundreds of thousands of merchants in there that could be a very small Mom and Pop setup. I think as we work through the challenges all of these companies are facing, we have to be able to address all their needs.

Margaret Keane (18:55):

I have to be able to address what Venmo's looking for. I have to be able to address what that dentist office is looking for or the vet office and the jewelry store on the corner. I think it keeps our business really motivated and innovative in terms of trying to figure out how to help that whole set of customers. Look, the country needs small business to be viable. It's a very important aspect of the country and jobs, and so we're very bullish on the small business.

Josh King (19:24):

No, I think about all these businesses that over the last five years or so, I see with their Clover devices with their Square readers, I mean, this had been the bull work of the economy. So in addition to authorizing over $5 million for coronavirus relief efforts, Synchrony's set up a number of ways to assist customers who may be suffering financial hardships. In April, I think your CFO, Brian Wenzel, said, and I'm going to quote him here, "We have not seen a tremendous amount of people needing that minimum payment deferral at this point."

Josh King (19:57):

Has that changed, and what assistance programs have you launched for the people who both hold the cards and also take the cards?

Margaret Keane (20:04):

We've done pretty much what all the other banks. We're deferring payments. We're extending promotions. We're waving late fees. What I would tell you is we haven't really seen as big drive for customers. We are still getting calls, but it's not where I think when you look at the numbers of unemployment and where this is happening, we're trying to pay close attention to that. I think this really gets down to a little bit of what we were just talking about. How fast does a business come back?

Margaret Keane (20:33):

I think people have a little bit of a safety net right now. They got money from the government. People are collecting unemployment. I think we really have to watch how they come back to work. I think we'll get a better sense on how hurt, if you will, the consumer is. On the business front, we're doing a lot of things to really try to figure out how to help our businesses get back online. We have the team of people just focused on areas like helping.

Margaret Keane (21:00):

How does the dentist office reopen? What is that going to look like? What kind of things can we do? What kind of webinars can we do? We held a webinar for small business when all of the government programs were coming out, the CARES Act. It's easy for a midsize company who maybe has a big accountant who can help them figure this out, but there were a lot of people who didn't really understand the program. How do I apply? Should I apply?

Margaret Keane (21:25):

We held a webinar working with PWC to actually give that advice. We have a team right now looking at a bunch of other things to try to figure out, "How do we help those small businesses? What can we do to give them advice, guide them, support them as they come back online?

Josh King (21:41):

I mean, speaking for myself, I can't wait until my barbershop opens up again, and I can also get back to the dentist. But as CEO of Synchrony, you're not just responsible for your clients and customers, but also these 17,000 employees that are under your roof, which was the topic of this two-part article that you published in LinkedIn about the leadership lesson that this period has reinforced for you. Starting with communication, how have you been able to remain connected both to the team you interacted with daily at the office and those thousands of employees normally spread through these call centers that we talked about earlier who are now sitting at home like you and I are?

Margaret Keane (22:21):

I think you can never communicate enough. I think in this particular environment we're in right now, it's not just an economic issue, right? Usually, when we went through the crisis, it was an economic issue. This is a whole person issue. It's your work. It's your home life. It's your... At home, you're teaching your kids. You're doing it all. What we quickly realized is that we had to become more of the center where people felt like they could get answers to their questions.

Margaret Keane (22:52):

We started off with the ask us anything call first. Then I quickly realized, "You know, what we need to do video. People need to see us as leaders. They need to see our faces. They need to see we're working from home. They need to see we're okay and we're calm, and we're feeling confident about where we're going to be." I've been quite amazed on the participation in these calls, and we get all kinds of questions, and we answer them all. We don't always have all the answers on the call itself, but then it gives us something to talk about and think about when we come back the next time around.

Margaret Keane (23:24):

We've been doing tons of written communication. We've been doing a weekly call with medical professionals that can answer questions. I think we thought, "Okay, we're going to have this for a couple of weeks. We're getting 2,000 people every week on these calls," and the call shift. You know what I mean? The call shift, and many of the questions are the questions you could get answered on the CDC page, I guess. But again, I just think there's so much information coming at people that they just want to be certain.

Margaret Keane (23:50):

There's a lot of nervousness out there about their families, their children. This week was a lot on the call around, "Do I send my kid to summer camp? What is this new thing that's popping up in children? Should we all wear masks? Where do we wear masks?" Especially as some of the states are reopening, it's creating concern for people. I think as leaders, you have to just continue to be out there out front, and really driving the right communication, so people feel safe.

Margaret Keane (24:20):

I think the other important piece, and this is a really important piece, we have to have hope. People have to feel like there's an end to this, and we should be hopeful for many things. As leaders, we have to keep picking that hope up, and helping people along.

Josh King (24:34):

That LinkedIn article that I mentioned you've just published talked about your family, a lot of which had been centered in New York city. Many, I believe, who followed your father and grandfather into public service as policemen, firemen, nurses, how did growing up surrounded by people committed to public service helped shape you as a leader and managing the hope and empathy and communication that you just talked about?

Margaret Keane (25:01):

I think you're brought up in a certain value system where you're expected to deliver and take care of people around you. I think that's how we grew up, grew up in a big family. There were six of us, plus my cousins, one bathroom kind of thing. We never really complained about it. We just said, "Okay, that's the way it is." I have to say that growing up in a family where pretty much most of my family were police officers, we have a firemen now, who gets teased a lot. They're out on the front lines every day.

Margaret Keane (25:30):

My dad wasn't home Christmas day. My dad wasn't home on a lot of holidays. We didn't expect him to be. It became like we worked around my dad, and that's how my family works now. I text my nephews who are police officers and firemen. My niece is a nurse. I have three teachers in the family. It's rooted into who we are. I think part of what has helped me as a leader is staying grounded in where I came from, and know that you have to respect every single individual no matter what they do and who they are.

Margaret Keane (26:03):

I just hold that very close to my heart and make sure that I think about that whenever I interact with anybody. I always know that people are doing things that are really hard out there right now, and we should just have a lot of respect for those folks that are going out every day and putting themselves at risk as well as coming back home and having to deal with the family that's sitting at home.

Josh King (26:24):

So a clan that found its opportunity on the police force as cops, and the firehouse as firefighters, and the school as teachers, you went into collections for what is now Citi group. How did you decide to divert from that career track, and eventually lead to GE Capital?

Margaret Keane (26:43):

My dad got sick when I was 10 years old. When I told him that I wanted to go to college, he was like... His first reaction is, "Well, then maybe you should be a FBI agent," which is pretty funny. I'm like, "No, I think I want to go down another path," but I ended up working at Citibank, actually in a crisis back in 1980 when New York City was in a [inaudible 00:27:05], and they needed collectors. It was $5.50 an hour, which was a lot of money. You could work whatever hours you could.

Margaret Keane (27:13):

They would just say, "This is how many calls you have to work." I was going to school, and I held three jobs when I went to St. John's University. That was one of them. I worked my way through, and I think one of the interesting things is my family at that time was really struggling. My father had passed away, and a lot of financial challenges because he was sick for so long. I had a lot of empathy for the people who were calling because they were in many cases in a similar situation to my family.

Margaret Keane (27:38):

It's something that I've always paid attention to during the crisis. My first thing that I did when things were turning bad was I asked the team to send me collection calls, and I'd listen to those collection calls. I will tell you, I was like, "Uh-oh. We're in for some big world of hurt right now," because you could just tell from the tone of the customer's voice, and it's something that sticks with you your whole life.

Josh King (28:01):

Sticks with you your whole life, we're going to talk a little bit more about the last 10 years or so of that life. We'll be right back with Margaret Keane right after this.

Speaker 5 (28:14):

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Josh King (28:48):

Welcome back. Before the break, Margaret Keane, CEO of Synchrony, NYSE ticker symbol SYF, and I were discussing the company's response to COVID-19 and her career. Margaret, you led GE Capital Retail Finance and GE Capital Retail Bank through the financial crisis and the subsequent regulatory changes that came out of it. The long-term impact of the COVID economic freeze will play out over the next few years. It's impossible to predict exactly how the recovery will go, but are there any lessons or takeaways from a decade ago that you're contemplating when thinking about what lies ahead?

Margaret Keane (29:26):

I think there are. I think one of the probably and most important is having the right team around you who are experts. I'm pretty lucky to say that a bunch of the team that's with me now were actually with me during the crisis. I think the delicate balance here is you don't want to underreact, but you don't want to overreact. Right now, we're being fairly tempered in how we're thinking about the consumer, and really tightening where it makes sense, but trying not to tighten too much because you could create other problems, right?

Margaret Keane (29:59):

I think one big lesson that I would say is really important for us and we continue to really pay attention to is really staying connected with our partners on what we're doing in the credit card underwriting, how we're addressing it so that we're going along with them and helping them through this as well, because we have to think of both the end consumer and our partner at the same time. I think that's something we learned really well out of the crisis. We didn't make any changes that we didn't talk to our partner about first.

Margaret Keane (30:29):

We are going to continue to do that through this being highly engaged with our partners right now, and thinking through what are they challenged with and how do we help them. Then one of the interesting things now that we've talked a lot about is some of our leaders now that are in pretty big jobs were individual contributors during the crisis, not leading. We're talking a lot about how... I always believe these experiences are the ones where you're going to see those superstars step out, and you see them shine, and we're seeing that.

Margaret Keane (31:02):

I think the lessons for the generation that were in the crisis but not leading in the crisis is going to be something that's really going to set us up really, really well for the future, and making sure I talk a lot about empowering people and getting out of the way. We've had to do that. Guess what, people shine through that experience. I think that's something really exciting to look forward to.

Josh King (31:26):

Thinking about that behemoth of which you were once a part earlier this year marked the passing of GE's longtime chairman, CEO, Jack Welch. The time that you're discussing 2008, 2009, Jeff Immelt was overseeing GE, and more recently, Larry Culp taking over. It's a much smaller business than it used to be. Last summer marked the fifth anniversary of Synchrony's spin out from General Electric a process that you led. At the time, back then, you described it as a brutal and exhilarating experience.

Josh King (32:01):

Looking back, how do you remember those months, and with the experience of running a public company now for half a decade, would you have done anything different back then?

Margaret Keane (32:10):

I think the one thing that I probably should have spent a little more time on, we were trying to spin out in a very difficult period, right? It was right after the crisis. We were newly regulated by a lot of new entities, the fed, the OCC and the like. There was a lot of scrutiny on our separation by the regulators. They wanted to... We were the first to split out, so they want to make sure we were going to be a viable company on our own, so a lot of scrutiny. At the same time, I had GE whispering in my ear, "You got to go. Get going. You got to go. Get going."

Margaret Keane (32:45):

I think probably the most stark day I remember was the day when we actually did the final split off in November of 2015, where all of a sudden, the phone stopped ringing, and it was myself and my CFO in the office. We're like, "Now, what do we do?" I think what was really interesting is to quickly transform from being very transactional, and focus on getting all the work done to really stepping back and thinking about the future of the company. I think that that transition was exhilarating and fun, but one that I think we probably should have worked even harder on before we did the split off, but we were so, so busy.

Margaret Keane (33:24):

We had eight weeks of quiet, and then we had to really think about the future, which was exciting because now we were on our own, and we had to really decide the destiny of our company and how we were going to spend our money and where we going to invest capital and the like. That transition was one that I think it took us a little while to get everyone's head in the game, because they were used to working for a big company, and people told them what to do versus now we're it as I like to say.

Josh King (33:49):

Last year, we had the CEO of Genpact, which is another spinout company from GE on the podcast. Tiger spoke to us about how his company's structure and style evolved from its time under Jack and others at GE. What did you bring from your time within the GE culture that you applied to Synchrony?

Margaret Keane (34:11):

I think there's probably three key things that I would say are built into GE people. One is execution. GE people know how to take the [inaudible 00:34:21] no matter what. When you get into a crisis like we're in right now, the organization just knows how to operate. It's really quite amazing to watch. I think the second, an important point, is really just the whole succession planning and development of talent. I think we've actually enhanced and expanded that, but I think very quickly out of the gate, and this was really helpful as we thought about the future of the company, was building out that succession planning, and hiring the right talent and bringing those through and the processes around that.

Margaret Keane (34:54):

Then the third which I would say we've actually even expanded much more greatly but was a foundational element, GE did have a number of diversity networks. We've actually expanded that whole process, but it gave us a good foundation to really quickly think about diversity inclusion right out of the gate. It wasn't an afterthought. It was already built in, and we really spent a lot of time thinking about, "What did we want to do, and how do we expand diversity and inclusion inside the company?"

Josh King (35:25):

I mean, beyond talent, diversity and inclusion and leadership development, I don't know if it came from GE, but you and Tiger with Genpact have advocated strongly for reeducating the workforce with the tools they need to succeed in this increasing technological and artificial-intelligence-driven economy. How's Synchrony accomplishing this, and what skills do you think will be in demand in the financial sector in the future?

Margaret Keane (35:53):

I don't know if I brought that from GE, but I would say one thing that is a foundational element of GE that is important, GE is in a lot of communities, right? They're the employer of choice in a lot of communities, and so are we in some of our communities, where we are, right? We are the first or second biggest employer in some locations. I think we owe it to our communities to make sure that we are keeping them viable. We have a responsibility to retrain, so we're doing a couple of things.

Margaret Keane (36:20):

We're doing a lot of technical boot camps where we're actually training them on new skills and hiring them to IT jobs that are inside our company. We're teaching technical skills where they're leaving our company and going outward. Then I think one of the innovative things we did was we expanded our tuition reimbursement program to include anything in healthcare and teaching. The great thing there is you get someone for four or five years as a call center employee, and then they go off to work in the local community, whether a teacher or in a hospital or whatever.

Margaret Keane (36:51):

I think that has worked out really well. I think we're getting... I actually did a round table a couple months ago where we had a couple of people go through the technical bootcamp, and they actually got hired outside of our company. They got pretty nice increases in their base salaries. They were going into some very cool jobs, and yet they all didn't want to leave us because they love Synchrony, but I'm like, "Great, you guys go learn more and come back."

Margaret Keane (37:16):

I think you need to have that kind of thinking to really ensure that you're keeping this viable communities in a good way, keeping them all viable.

Josh King (37:26):

At the time of Synchrony's listing, you created these innovation stations in your offices, which from a newspaper article a few months ago, I understand includes a full car in the Stanford office. What are the stations, and how does a physical car in the office help a financial company like Synchrony innovate?

Margaret Keane (37:47):

I had an opportunity. I was at GE. I had this opportunity to spend... They were doing these things called leadership excursions, and I had an opportunity to spend a week out in the valley, and actually went over to Stanford's engineering school, and was looking at how they were teaching students and the setup. It was like an innovation station where it was this very open format where people were working really hard, different ideas coming forward. I walked away thinking, "Wow, we don't work like this at all. We take our young people coming off programs, stick them in a cubicle, tell them they can have headphones on, and put them to work by themselves."

Margaret Keane (38:24):

I quickly realized, "Wow, can we rethink how we work?" I came back from that event. It was still at GE, and I started this concept of innovation station, and we started in Stanford. We now have four of them. They're really focused on cross-functional, and it was the early days. We didn't even use the word agile. Now, we're 80% agile, right? But it was the beginning of agile, and it was cross-functional, and that's now how we do our technology. It's agile. It's cross-functional, and it's in these innovation stations.

Margaret Keane (38:55):

The reason that we have the car is we actually have made Stanford, which is our prime digital innovation station, to also be an experience station so that customers, partners, future partners could come in and see the things we're working on, and actually test and play around with different things. The car is there because we have something called the auto network, and we are continuing to work on something called the connected car.

Margaret Keane (39:22):

A lot has been talked about this, but as we continue, when we talked earlier about contactless, is there a point where you don't really have to get out of the car to do the payment? You could just sit in the car and hit contactless however that's going to work, and [crosstalk 00:39:37].

Josh King (39:37):

As long as the robotic arm puts the fueling pump into your car.

Margaret Keane (39:40):

That's one thing we got to work on. We got to work on that. We think that these are the things that when you see and feel, and we're testing, piloting and learning and using the innovation stations as the key support area of the big initiatives we're working on, which is digital AI, our enterprise operations group, and big data becomes part of this as well.

Josh King (40:04):

So much of this must have come out of some of your frequent trips out to Silicon Valley. I mean, let's dive a little deeper into some of them. How's Synchrony implementing the technology today with programs like dApply, Sydney and more?

Margaret Keane (40:18):

We're doing it a couple of ways. We have our teams, which we know about. We have third parties that we're working with. We're partnering with third parties, and then we're actually leveraging university talent. We have three programs going on right now. We have two at Uconn, and one at the University of Illinois. Each of them are focused on different areas, and we've actually created base and technology labs there that are run by our teams with the students, with the teachers, and so we're getting really great, fresh talent.

Margaret Keane (40:51):

We're getting the newest thinking, because in the universities, they're right on the cusp of the newer technology. Then between our team, that group and our third parties, we're able to accelerate things like Sydney, like dApply, or mobile. We were... I mean, just as an example, we're asking the University of Illinois students to look at how they can help us maybe build out some applications on the testing and tracking of our employees as we come back to work.

Margaret Keane (41:22):

It's great work. These kids are so innovative and talented. It keeps us all young as I like to say.

Josh King (41:29):

A regular topic on this podcast, Margaret, when discussing the convergence of technology and finance is cyber crime, which already costs the global economy millions of dollars per minute, and has also seen a spike during the pandemic. Can you share how Synchrony is protecting its partners and cardholders from malicious actors? I mean, it's no longer that photo on my old Citi card from 1992.

Margaret Keane (41:53):

It's really funny that you mentioned that photo, because I actually ran some branches at Citi, and we had those photo booths in our branches, so I remember that. That was pretty innovative at the time actually. No, I would say that this is the ongoing war we're under, right? The war we're under is data privacy and protection. It's of the utmost responsibility for us to really make sure we're doing all of that. We've continued to invest in technology and tools to really, I said earlier, figure out how to authenticate and make sure we know who you are, but I will tell you it's an everyday battle.

Margaret Keane (42:29):

Each day, you plug a hole, and then there's another hole. I think this is just going to be the way our organizations have to think and operate. It's really about investing in data and technology, and partnering with third parties to really help us. We've been partnering with a company called Payphone that has actually helped us a lot, because they really can authenticate your device and a lot about you. We only need three pieces of information to really give you a credit card now. The less information you have to put in, the better.

Margaret Keane (42:59):

Our biggest challenge, and it's really the social engineering where a lot of identities have been sold, and that's where we run into the biggest trouble is where they're very sophisticated of recreating you for instance, and making you look really good and great credit. We're battling this on every front, but I would tell you it's something that I don't think is going to go away, and it's just something that we got to continue to make sure we're focused on and investing in to really battle that.

Margaret Keane (43:29):

Brought a Cyber, I think, is just up across right now because I'm sure you're seeing there's a lot of phishing and all those malware, and we have all those processes in place to really protect. It's a constant reminder. I mean, I have to tell you, I do not open any attachment of anybody I don't... I mean, I am just diligent about that. Now that people are using the pandemic as a way, I'm getting five emails a day about how I could buy masks and PPE, and half of these are malicious, maybe more than half.

Margaret Keane (44:00):

You just have to be diligent, and you have to invest and not think you're ever done. You're never done in this space.

Josh King (44:05):

Up here in sequestration, our 13-year-old Rhodesian Ridgeback has been experiencing some health challenges. Last year, you added Pets Best to Synchrony's care credit platform to extend, as you put it in your CEO letter, from vet to pet. How large is this pet financial services market, and how is the care credit platform, which was acquired in 2002, helping Synchrony diversify its offering?

Margaret Keane (44:36):

This is one of my favorite platforms, because I think it just has the opportunity for exponential growth from so many areas, but pets being one of them. I'd start with that. We are actually in 93% of the pet offices in the United States, so we're highly connected to the pet community. I would say that when we were looking at Pets Best, it was pretty much a direct to consumer play, where they were out selling to consumers online. We said, "This would be great for us to put it together with our care credit business, and allow consumers to be able to pay for the wellness tracks as well as, any difficulties of operations or difficult things you're dealing with your pet."

Margaret Keane (45:16):

The positive of it is it allows us to find more pet families, and it's a fast growing space. I'm sure you know it's almost impossible to get a puppy now and a cat or kitten. They're sold out everywhere, so everyone is home. Then we're also saying, "Just because people are home, they're calling us more to get insurance." I think as maybe you're seeing your pet struggle, and you're like, "I didn't get insurance. Maybe I should get insurance."

Josh King (45:41):

We are one of those families that did not get insurance.

Margaret Keane (45:45):

We're seeing that. We're getting a lot of phone calls. We're excited. Look, the pet market is about a 80-billion-dollar market. It really has extended way beyond just the vet, right? It's all the toys, the food, the vitamins, whatever. It's a big, big market that is growing. If I have this right, I think 60% or 62% of millennials actually have at least one pet. We know that this is a market that's going to continue to grow, and we want to be part of it.

Margaret Keane (46:16):

Since we're very integrated with the vets, it really works well. Our goal would be that if you had care credit in your Pen insurance, that we'd actually just do the transaction, and one's for the vet, where the insurance pays the piece, the card does the other, and the consumer walks out with their pet in a happy, healthy way. The vet actually gets paid for their services, so trying to really integrate that process to make it really a seamless process.

Josh King (46:41):

I will certainly take you up on that in the future whenever that transition does eventually come, because this family is always going to be with at least one pet. Now, we have two and lots of them in the extended family. Margaret, as we wrap up, a couple years ago, organizing Frank Bisignano's senior leadership team meeting, big gathering of a couple hundred people in New York, we called it the Art of the Possible thinking about what First Data could do with that very moment.

Josh King (47:10):

You recently introduced a new rallying cry, which is changing what's possible to describe Synchrony's vision to help people in businesses. How's that going to be accomplished?

Margaret Keane (47:20):

It's really around this thought of as we've done research, people have ambitions, and those ambitions are very individual and could mean something as simple as having a great career at Synchrony. It could mean one of our merchants, our partners having a great business model. It could mean the hope and future of having a great home and having all the things I want in the home. We love this tagline, and introduce it as part of our branding to really address all those constituents. We feel it's something that could be used across.

Margaret Keane (47:58):

Look, our products who we serve, a lot of our customers are middle America, people who are working and trying to drive successful lives for themselves. Our cards help them do that when they buy a new home, and they're getting new windows and using Lowe's card, or getting a new roof or whatever that is. Those are all important life events for people. Then on the community side, we want to lift up the community, and are very focused on working families.

Margaret Keane (48:28):

We felt like it fit all our constituents, and it's one that really gives this concept to people to meet all your ambitions that you have in life by working with Synchrony.

Josh King (48:39):

You had your earnings recently. Looking ahead to the rest of 2020, how have you had to adjust your expectations for what a successful year at Synchrony will look like?

Margaret Keane (48:49):

We know that our business will probably be a little smaller because of this. We don't know how small. We're waiting. I think we're not going to have a real good sense until the fall of where we settle in, but I'm really bullish on the company. I'm more excited now coming through this because I feel like if we can come through this situation, and accelerate all the things I just talked about, position ourselves with our partners as, "We're here to help you." I think this is an important part.

Margaret Keane (49:19):

Our partners need us now more than ever. We need to be front and center with them. That creates different kinds of connections with your partners, really making sure they see you as a solution to their challenges as well, and then obviously making sure we're serving our consumers and helping them through this transition, and keeping them whole as we try to work through these really rocky borders. I feel like we're poised to really be in a great position to really accelerate the things we've been talking about.

Margaret Keane (49:48):

Really excited about Verizon and Venmo, because they'll hopefully come on towards some point this year when we think it's the right timing with them, and we're accelerating all our digital. I think this has really allowed us to clear the decks, if you will, and really focus on what's really going to matter.

Josh King (50:05):

We're going to get through these rocky waters, Margaret Keane. You've now come through five successful years since that IPO for Synchrony financial. What do you think lies ahead for Synchrony well past 2020, and what do you hope the next five years will bring for the company?

Margaret Keane (50:19):

I think we have lots of opportunity to win some more partnerships, and grow the ones we have. I think I mentioned I'm very excited about what we're doing in our care credit business. We're really expanding in verticals. We're networking into hospital systems, so I think that platform could be a real big growth platform for us in the future, and then our payment solutions business, which is really the heart of our business, which is the one that started the company.

Margaret Keane (50:45):

Again, we're redefining the point of sale. We're redefining how people shop. We're accelerating digital there. I'm pretty bullish on Synchrony. Then we have the online bank, which has really helped us also expand into other products. I feel like we will come out of this stronger, better, more agile and driving growth.

Josh King (51:06):

Stronger, better, more agile and driving growth. Thanks so much, Margaret Keane, for joining us Inside the ICE House.

Margaret Keane (51:14):

Thank you.

Josh King (51:15):

That's our conversation for this week. Our guest was Margaret Keane, CEO of Synchrony Financial. That's NYSE ticker symbol SYF. If you like what you heard, please rate us on iTunes, so other folks know where to find us. And if you've got a comment or a question you'd like one of our experts to tackle on a future show, email us at [email protected], or tweet us at ICEHousePodcast. Our show was produced by Pete Asch with production assistance from Steve [inaudible 00:51:45] and Ian Wolff.

Josh King (51:46):

I'm Josh King, your host, signing off from the remote library of the New York Stock Exchange in the Catskills of Upstate New York. Thanks for listening, and we'll talk to you next week.

Speaker 1 (51:56):

Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties expressed or implied as to the accuracy or completeness of the information, and do not sponsor, approve or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security, or a recommendation of any security or trading practice.

Speaker 1 (52:24):

Some portions of the preceding conversation may have been edited for the purpose of length or clarity.

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Information contained in this podcast was obtained in part from publicly available sources, and not independently verified. Neither ICE nor its affiliates make any representations or warranties, express or implied, as to the accuracy or completeness of the information and do not sponsor, approve, or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security, or a recommendation of any security or trading practice.