Puppies and Venmo: How the biggest store credit card company is surviving the retail apocalypse

Synchrony, the nation’s largest issuer of retail credit cards, is branching out from its retail roots into businesses that didn’t exist when it originated, back when it was a GE creation in 1932.

In March, Synchrony made a bet on the booming pet industry by acquiring insurance provider Pets Best. It marked Synchrony’s first foray into the insurance industry.

Synchrony expanded even further beyond the tumultuous retail space last month when it was selected to build a credit card for Venmo. It will be the first credit card for the PayPal-owned platform, which lets its mostly young users zip money to each other with the help of emojis that indicate what the payments are for.

“It helps us diversify from just pure retail, which I think is important,” Synchrony CEO Margaret Keane told CNN Business in an exclusive interview.

To win the Venmo business, Synchrony conducted focus groups to learn how its own Millennial employees use the payment platform — and how they would use a Venmo credit card.

“It allows us to design a product that is geared more towards that social, trendy customer that leans more Millennial than old people,” Keane said.

Keane, herself a mother of two Millennials who has been named one of Fortune’s “Most Powerful Women,” said the Venmo credit card will come in handy when users are splitting the bill from bachelor parties or ski trips. Without leaving the app, users can apply for the Venmo card and pay friends for their share of the trip.

“We’re not going to do emoji underwriting, don’t worry,” Keane joked.

Synchrony is also the exclusive US issuer of PayPal credit cards and powers an Amazon branded card as well.

The Venmo relationship helps ease the sting from losing Walmart’s credit card business. After 20 years of working with Synchrony, the nation’s largest retailer inked a deal with Capital One in July 2018. Synchrony’s stock plunged 10% after investors learned of the shift by Walmart.

“We felt like we couldn’t get to the pricing that Walmart wanted,” said Keane. “We decided it was best for us to part ways.”

Synchrony’s stock has bounced back, climbing 57% so far this year. Shareholders breathed a sigh of relief after Synchrony announced in January an extension of its credit card partnership with Sam’s Club, which is owned by Walmart.

Insurance for cats and dogs

Still, that didn’t stop Synchrony from expanding into the insurance industry by acquiring Pet Best, which has 125,000 health insurance policies in force for dogs, cats and other pets. The deal represents a bet on the trend of Americans treating their pets as members of the family, who get sick and need medical care, just as humans do.

“We view this as a real growth market. And we’re really doubling down,” said Keane.

Synchrony already had a foothold in the pet industry through its CareCredit platform, which lets customers use credit to pay for their pets’ health, wellness, personal care and veterinarian bills. CareCredit is accepted at 93% of US vets, giving pet owners a way to pay for emergencies like car accidents or surgeries that they haven’t budgeted for.

Keane wants to continue to push into the pet business by allowing Synchrony’s credit cards to be used for more services outside the vet office, including buying pet food, toys or even on a service like Rover, the pet sitting and dog walking platform.

Pets and Venmo could help insulate Synchrony a bit from the extreme disruption taking place in the retail industry. In addition to Amazon and PayPal, Synchrony issues branded credit cards for the Gap, JCPenney and PC Richard’s.

Synchrony warned in its annual report that its results are impacted “to a significant extent” by the financial performance of its partners. And some of its partners are no longer around.

For example, Synchrony issued credit cards for Toys “R” Us, which filed for bankruptcy in 2017 and closed its US and UK stores last year.

“I’m still sad they went under,” said Keane.

Keane said that Synchrony is mindful of the transformation of retail and works hard to partner with viable brands.

“You have some retailers that have not invested in their stores. Their layout is tired. Their decline is a little bit self-inflicted,” she said.

Spun off from GE, before the turmoil

Synchrony started around 1932 as a unit of General Electric. It was a way for Americans to pay for appliances like GE refrigerators. The company spun off 15% of Synchrony in July 2014 and the rest in the following year.

“A lot of people didn’t want to leave. GE is one of those businesses that people stay at for life,” Keane recalled.

But the spinoff meant that Synchrony avoided the startling decline that GE experienced in recent years.

“Despite all the challenges, there are still great people, products and platforms at GE,” said Keane, who started at GE in 1996. “I hope they can turn this all around. I know a lot of people are watching.”

Keane is one of the few women running a publicly traded financial firm. She thinks that will change soon.

“There are going to be big bank women CEOs,” she said, noting the “talented women” being groomed to potentially lead JPMorgan Chase and Citigroup.

Last month, Citi named Jane Fraser as the bank’s new president and CEO of its global consumer banking division. The appointments made Fraser the heir apparent to Citi boss Michael Corbat.

“The tide is changing,” Keane said. “The Millennial generation is a diverse, global group of kids that is not going to accept not having diversity, at all levels of companies.”

CEOs as role models

Keane pushed back on the recent claim by Salesforce CEO Marc Benioff that capitalism as we know it is dead. However, she did urge companies to fight inequality by making sure they are paying fair wages and benefits to employees.

Synchrony recently expanded its tuition reimbursement program to allow full-time employees to receive up to $24,000 per year if they pursue degrees in healthcare and education.

This program gives Synchrony’s call center employees a way to advance into fields like nursing and teaching which need more workers. And in return, the company gets a motivated and loyal workforce.

“That’s a win for us and it’s a win for the community,” said Keane.

Keane, who grew up in Queens and is the daughter of a New York City police officer, stressed the importance of CEOs acting as role models. She recently volunteered at a shelter in the South Bronx polishing women’s nails.

“It gives you perspective — and reminds you of where you came from,” said Keane. “I never forget that I am a very lucky individual.”