Synchrony sees 'big opportunity' in agentic commerce

• Key insight: Synchrony Financial, which has been stepping further into the AI ecosystem, has a largely positive view of agentic commerce. Company executives said Tuesday that they believe Synchrony will benefit from looming changes in how consumers shop.
• What's at stake: The consumer finance company is working with AI partners to embed its credit cards into the agentic-commerce experience. If it doesn't, it could risk falling behind.

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Synchrony Financial is leaning into agentic commerce, embracing the technology as a way to gain an advantage with consumers who deploy AI agents to assist with their shopping.

On Tuesday, executives at the consumer finance company said they think agentic commerce will reduce friction in the payments system, making it easier for consumers to use Synchrony's credit cards. The less friction, the more business Synchrony will drum up, they reasoned.

In short, agentic commerce is "a big opportunity," CEO Brian Doubles said during the bank's third-quarter earnings call. He predicted the technology will "fundamentally change" the way consumers discover, research and purchase products.

"I think we've got a jump start on this," Doubles told analysts. "It's still very early, but we're working with all the leading AI platforms. We need to make sure that as that purchasing path changes, that our products are embedded in that experience, and I think … our partners have been very helpful here. They're pulling us into those discussions. They've got a big incentive to ensure that our cards are embedded in whatever that experience is."

In a research note following the earnings call, analyst Brian Foran of Truist Securities took note of management's comments, saying that "historically, a key friction is people don't default to Synchrony cards when shopping at the associated retailer." 

Taking a welcoming stance on agentic commerce "presents the opportunity to set it and forget it, potentially driving more volume" to the bank, he added.

The $122.5 billion-asset Synchrony has been stepping further into the AI ecosystem. In August, it announced a collaboration with OpenAI to deliver AI-enabled products, such as a ChatGPT plug-in that allow consumers to search for savings and offers within Synchrony's product lineup.

It's also part of a small group of banks that joined the Personal Agent Protocol, or Poppy, a new multi-industry initiative led by Sierra.AI and Meta that seeks to develop a common, permission-based protocol to enable secure interactions between AI and businesses. Bank of America, Wells Fargo and the Spanish banking giant BBVA are also part of the initiative.

During Tuesday's call, Robert Wildhack, an analyst at Autonomous Research, wondered if AI agents will do such a good job of finding deals and savings that Synchrony's business will suffer, as customers optimize "to the point where they're squeezing every dollar from the card in terms of rewards."

Store-branded credit cards typically charge higher interest rates than general-purpose cards, so AI agents could steer consumers to use their general-purpose cards in many situations.  

Wildhack questioned if there is a "real risk" in agentic commerce.

Doubles responded that "there's a lot of transparency around" annual percentage rates on credit cards, adding that there are several factors that go into consumers' decisions to pay down balances.

"I still see agentic, broadly, as a big opportunity for us and, you know, transparency broadly benefits us, just given the value we provide on our card," Doubles said. "So overall, I think we're positively biased on this and think it is an advantage for us over the long term."

Doubles' comments followed a solid third quarter for Stamford, Connecticut-based Synchrony. Purchase volume, or the total dollar amount of transactions made on Synchrony's cards, rose 8% year over year to $49.7 billion. Purchase volume rose in each of the bank's five core segments, with two — home and auto, and diversified and value — rising at least partially as a result of higher gas prices.

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Period-end loan receivables, or the amount that consumers owe to Synchrony, rose 3.2% from the year-ago quarter to $103.3 billion, as the uptick in purchase volume more than offset the ongoing effects of elevated payment rates. Within loan receivables, credit-card loan receivables rose 3.2% year over year, while consumer installment loans declined by 8.5%.

The bank generated net earnings of $892 million, down 17% year over year, in part because of an increase in credit-loss provisions. For the quarter, provisions rose 10.5%, the bank said.

Earnings per share of $2.68, however, beat the consensus estimate of $2.42 that analysts polled by S&P Capital IQ had predicted. The bank's third-quarter return on tangible common equity came in at 25.2%.

Net interest income rose 1.9% for the three-month period, while the bank's net interest margin was 15.5%. The bank's share repurchases during the quarter totaled $1.1 billion.

Between July and September, Synchrony added or renewed 10 partners, including La-Z-Boy and Fender, the company said. It also launched CareCredit Pay Later, a one-time-use loan for healthcare and wellness that closes when paid in full at the end of the fixed term.