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PayPal and Synchrony Financial are upgrading their relationship when it comes to consumer credit, with Synchrony Financial taking on PayPal's U.S. consumer credit receivables portfolio. This acquisition is valued at $5.8 billion, and in total, they will be picking up $6.8 billion in receivables with the inking of this deal.
What does this mean for this current co-branded consumer credit card program agreement? They will be extending and expanding it, with Synchrony Financial becoming exclusive issuer of PayPal's Credit online consumer financing program in the U.S. This aspect of the deal will be in effect for 10 years. “Providing great payments experiences to our customers is at the core of everything we do,” said Dan Schulman, President, and CEO of PayPal.
“Our expanded relationship with Synchrony Financial will free up cash currently used to fund consumer credit receivables for other uses while accelerating our ability to deliver engaging credit and payments experiences for our customers. We believe this transaction significantly advances our strategic and financial goals,” he said.
The financials
Along with taking on PayPal's U.S. consumer credit receivables portfolio, they are also acquiring just about $1 billion in participation interests in other receivables which are currently held by chartered financial and investors.
This brings the total amount of receivables they will acquire to $6.8 billion as of October 31, 2017. “This collaboration builds on a key partner relationship in the rapidly growing digital payments space and expands our capabilities within the merchant environment,” said Margaret Keane, President and Chief Executive Officer of Synchrony Financial.
“The partnership with PayPal extends our expertise in advanced analytics and underwriting across all digital channels, providing deeper insights into the unique needs of the PayPal customer,” she said.
This deal is set to close during the third quarter of next year, and depending upon regulatory approval and other crucial conditions.
PayPal and Synchrony Bank began working together to provide PayPal-branded consumer credit cards in 2004. These cards were designed to be used both in stores and online.
With the expansion of their relationship, PayPal will keep offering credit cards and credit options, while Synchrony Bank will be managing the program. They are also now including the PayPal Credit online consumer financing program, which is available to their U.S. customers, in the package.
