Synchrony says card spending rose as inflation pressure persisted

Synchrony reported second-quarter purchase volume of $49.8 billion, up 8% from $46.1 billion a year earlier, as cardholders used accounts more frequently despite inflation, higher fuel prices and weaker consumer sentiment. Average active accounts were little changed at 68.3 million, while co-branded cards generated $25.8 billion of purchase volume, a 23% increase, according to the company’s results released Tuesday.

Brian Wenzel, Synchrony’s executive vice president and chief financial officer, told PYMNTS CEO Karen Webster that the company’s data showed a more resilient customer base than broad sentiment measures might imply. He said sales accelerated even as gas prices and inflation rose, and that consumers continued to spend in discretionary categories.

Synchrony’s figures indicate that growth came more from repeated use than larger purchases. Wenzel said average transaction values fell on a reported basis because of portfolio mix, but would have increased by just under 2% excluding that effect. Transaction frequency rose by roughly 6% to 9%, he said.

Discretionary spending as a share of out-of-partner co-branded spend stayed broadly steady in the first half across super-prime, prime and non-prime customers, according to the company. Wenzel said portfolio mix helped results, noting that non-prime exposure was down 130 basis points quarter over quarter, but added that Synchrony still saw resilience in that group. He identified middle-prime consumers as a softer area, citing affordability pressure and potentially slower wage growth.

Spending gains were spread across Synchrony’s businesses. Diversified & Value purchase volume rose 12% to $17.2 billion, Digital increased 9% to $14.9 billion, Home & Auto advanced 6% to $12.1 billion, Lifestyle gained 6% to $1.5 billion, and Health & Wellness rose 2% to $4.1 billion.

Credit metrics improve

The company said credit quality improved from a year earlier. Synchrony’s net charge-off rate was 5.43%, compared with 5.70% a year ago. Loans at least 30 days delinquent stood at 4.16%, while 90-plus-day delinquencies were 2.01%. Its allowance for credit losses declined to 10.09% of period-end loan receivables.

Wenzel attributed the credit performance to underwriting changes made in 2023 and 2024 and to changes in customer payment behavior. He said more customers had enrolled in autopay and that the company had used pre-collection outreach to contact higher-risk borrowers before accounts deteriorated further.

On its analyst call, Synchrony reported a 17% payment rate, about 70 basis points higher than a year earlier and roughly 170 basis points above the 2015 to 2019 pre-pandemic average. The company attributed the higher rate largely to new portfolios, changes in product mix and earlier credit actions.

A faster payment rate can signal consumer strength, but it also affects balance-sheet growth because balances pay down more quickly. Wenzel said more than half of the recent increase came from new programs, including Walmart and Lowe’s, while lower promotional balances also contributed. Together, those factors accounted for about 85% of the increase, he said.

Walmart and AI plans draw attention

Synchrony’s relationship with Walmart’s OnePay is beginning to influence transaction mix, according to Wenzel. He described the arrangement as a three-party relationship among Synchrony, OnePay and Walmart, with early adoption concentrated among Walmart+ customers. He told PYMNTS those customers were highly engaged and were buying beyond groceries.

Wenzel also said Synchrony is examining artificial intelligence for commerce and internal productivity uses, while taking a measured view of near-term gains. He said the pace of productivity delivery has been slower than many expected and pointed to token, credit and licensing costs as factors to monitor as AI providers seek returns on investment.

Synchrony’s earnings commentary and investor materials indicated that the company expects strong purchase-volume growth to continue through 2026, receivables growth to accelerate in the second half, and the full-year net charge-off rate to remain in a range of 5.5% to 6%, possibly below that level.

This story draws on original reporting from PYMNTS.