KBW FINTECH ECOSYSTEM CONFERENCE - SYNCHRONY FINANCIAL

Good morning. Good morning, everyone. I'm Tom Michaud, President and CEO of KBW, and I'd like to welcome you to our 16th conference. This year, we have really focused on making this the leading fintech ecosystem conference. As you know, at KBOW, we focus on financial services. Financial services is the second largest sector in the United States and the world. And I would describe it as a giant collision. Our firm is very active in researching and advising companies across financial services. What's interesting is, for example, how many fintech players there are that have really had an aim at times to disrupt the banking sector, yet many of them now today are becoming banks. So it's a really interesting moment, and I think in the evolution of financial services, And this conference has been designed to have leading players from all across financial services come talk to us about what they see happening on the horizon. KBW is 64 years this year. I'm delighted to say this conference is the biggest one we've ever had. We have over 2,000 meetings set up around the three days in addition to these events. There's a lot going on around the whole conference. We have 209 companies from around the world, and we have many of the world's leading investors, both in the public and in the private markets here. And we're just delighted to have Brian and Synchrony here to kick us off with the first presentation. I really did want to hype this conference during this introduction because I would like as much pressure as possible on Sanjay. So high bar. So Sanjay Vasu, the research team, does a great job, as well as our investment banking team, and also our event planning team, who I think you saw when you walked in. Putting a conference like this on is a team sport, and I'm fortunate that they do it well. So, Sanjay, I hope I raised the bar high enough. I know Brian's going to do his part, but we're just hoping you'll do your part. I'll do my best. Okay, thank you, Sanjay. Thank you, Tom. I can't believe it's been 16 years since we started this conference. And I think Synchrony has been a big part of these conferences over the years. So thank you again, Brian Wenzel, the CFO of Synchronly, for joining us. Brian has served as CFO since 2019 after previously serving as deputy CFO. Earlier in his career, he spent nearly 20 years as CMO of the company's retail card platform. So thank YOU again for joining US and thank YOU for all your involvement with the Marines. I really appreciate what you do, and thank you for your service. Yeah, Sanjay, thank you, and appreciate the invitation. And again, I'd love to just take a second to thank those veterans and those serving the military. If you think about our country, these are people who voluntarily decided to serve our nation and protect our interests and our values, and we owe them a debt of gratitude. So again, it's for all the veterans out there, and really their families who support them. Thank you for what you've done. Appreciate it. So, Brian, Synchrony's been intentionally reshaping its business over the last several years with a greater focus on diversification, digital capabilities, and credit resilience. Where do you think you are in that journey? Which initiatives do you thing will be the biggest drivers of growth and returns from here? And how should we think about the milestones that will benchmark success? Yeah, you know, Sanjay, it's really important to keep looking. I think as you look in the last five or so years, the evolution in the payment space has really sped up, most certainly faster than my 28 years in this industry. I think where we're investing, the first thing goes around the evolution around products and having that multi-product discipline. And not only having products out there, whether it's an installment product, a closed-end private label product, an open-ended network-type product, commercial, consumer. having the products there, but also how it gets to consumers digitally through a lot of the integrations of mobile wallets and how it gets presented there. So that's number one, is around what's going to drive growth is that digital presentment and having multi-product to meet the needs of our large-scale partners and our merchant base. The second is the evolution around credit. It used to be a very traditional credit model, you get credit scores. We've transformed that a little bit into more data orientation and that's where we work with data shares with all of our partners as we get things so we can see real time who this customer is so we have a much more tailored experience a much surgical experience relative to saying yes and i think that ability to do that and then introduce new wave things things that we're talking about cash flow underwriting path to credit those types of things so when i think about growth it's really going to get into that digital transformation, it goes into the multi-product, it goes into credit. I think when you look at returns, you know, one of the things that would really differentiate our model versus a lot of others is the alignment with our partners around RSAs. And so, you're aligned economically on how do you say yes to the right customers. You're aligned economically on the revenue model and how that may transform over time. You are aligned about the investments that you make into the platform and allows us to move together quickly. And to be honest with you, when they think about competition, we are the best cost of tender, and we serve the most loyal customer of our partners. That gives us staying power in the ecosystem. That's great. So maybe we could talk about the path to double-digit EPS growth next year. Like, what is that path? Is it through NII growth, operating leverage, buybacks, net of potentially higher losses. You know, I think the issue I'm having in terms of thinking about successive stocks is obviously there's a confluence of geopolitical stuff and macro stuff. But, you know, when we sort of hit an inflection for the negative in credit, like it's hard to get the stocks to work. So maybe you could just talk about how you intend to get to that desired outcome. Yeah, you Know, obviously we'll talk quite a bit about this in January. We don't see, as we sat there coming out of the third quarter that we are going to have a macroeconomic event, given the uncertainty, given the affordability. We still don't see a true recession in the United States in 2027. Again, a lot can change between now and January. So when you talk about losses, it's a little bit different between migrating up a little Bit on the curve versus going into what you'd say is that recession. So I think when you look at the equation of how we get to double-digit growth, one, it's going to come from the maturity of assets we're putting on this year, which are in the early part of the J curve. Two, you have what I'd say is hopefully a normalization that's happening on the existing asset base and payment rates and revolve. You're going to pick some of that revolve up and late fees as losses migrate up a little bit. So you're going to see it on the revenue side. Again, I think there's a question with regard to depository costs and how competition develops there, but you should see NII kind of grow. Yes, there will be some pressure relative to charge-offs as you move through, and then we have to deliver operating leverage in order to kind of make that equation work, and if you can get the earnings growth of the core business and that PPNR minus that charge-off to kindof grow, then you couple that with a very strong capital return position that we're in, not only through the excess capital, but the best in class, what I'd say, is return on these assets. That throws off a lot of capital that you can invest either in further growth or you're going to turn it to aid that EPS equation. So I think it's multiple levers. There's not a single lever. And, again, I think the rise in that charge-off, you know, given the RSA, shouldn't be a headwind to hopefully getting us to achieve that framework, you're not only next year but in the future. So, I mean, you guys put out your monthly data this morning, And it looked pretty good on the credit side. So to your point, it seems like the consumer definitely remains resilient. I think the one area is just loan growth still remains modest. So I guess maybe you could just talk a little bit about that, and then we can talk a little bit more about Walmart as well. Yeah, you know, if you look at the results that we had this morning, you think about delinquencies, you Know, in line with seasonality. You know, you can look at in the charge off, you have to adjust for 25 cycles versus what we traditionally have around 28, I think will be 30 next month. But we look at that. It's in line with seasonality. And so I think, Sanjay, to take a step back for a second, I think what a lot of investors, a lot of people in the industry kind of sit back and say, OK, I look at one thing, affordability or gas prices. It is one piece of a broader mosaic. And what they don't look at is, listen, you're still seeing pretty good wage growth, right, 3.1. It' s not quite inflation. You're seeing wage growth you're seeing the supply side of labor which is still tight you're not seeing firing so that labor market has some strength into it so that's what's keeping this resiliency out there most certainly the high end continues to pull and i think you watch the folks that are in the middle that probably don't get as much wage growth um but are feeling the effects of affordability so so i i think when you think about that it's it's not a bad setup and you're sitting around saying okay we just gave you october the more we step out here you get a pretty good view of what what the quarter losses will be, you're starting to get a pretty good sense on what the first quarter will be from that. So again, I think credit's in a good space. I think when you look at growth, as we talked about a couple of weeks ago, the growth rate as we exited the third quarter has been pretty consistent. I Think it's fair to say we have not seen a holiday pull forward into October holidays wait so what does that tell you so that tells you hey listen the consumers who are trying to make money go further are kind of going to be more promotional maybe wait a little bit longer into the cycle here to sit back and say okay when are those deals kind of coming I think I think there's this kind of you know between the merchants and the consumers who's waiting each other out so so we'll see and again you know we're optimistic I think you know a lot of people are optimistic about the sales trajectory for holiday but But, you know, it's going to be a little bit more promotional, I think, given where sales are at this point. It's amazing. Like, Christmas has arrived in most of these shops already. Well, most certainly Bryant Park. You got the Winter Village there. Right? It's insane. So I guess consumers are waiting it out. So I think it's like maybe we could talk a little about the winter. I think we could maybe talk a bit about Walmart. It's a big part of the growth discussion. Maybe you could just talk about sort of where you are in the ramp cycle and the framework you thought about growth in terms of your underwriting standards and sort of where you're at right now. Yeah, you know, we are pleased with the Walmart program. I think when you think about that ramp for a second, you know, we just kind of lapped our first year of origination. So, you know, we're happy about that. But I think what's encouraging as you look at that was the way in which consumers adopted the new value proposition, particularly when you think about Walmart Plus, right? Something that didn't exist back when we had the portfolio in 2018. So the folks that are engaged with Walmart, that are doing the free shipping, that aren't having the home delivery, that ARE doing more of the groceries, they're engaged. Now they can get extra benefit by having a one-pay Walmart credit card to drive that. So that engagement has been terrific. So we're excited about that. We're excited about the digital app. I think if you go on that OnePay app, it's very, very customer-friendly, very easy to use, very simple for consumers to engage with our product inside that app. Then you kind of go to the digital properties that Walmart has. It's very prominent. It's on the banner ads. It's easy to access. So I think those are things that were all fundamentally different than 2018 and kind of helping the growth. I think this next evolution, right, It kind of gets into we're in stores, most certainly in the money centers, most certainly in QR codes and parts of the store. We need to get it. And it's on a prioritization list with Walmart is I got to get at the front end checkout. And that's when I kind of get to the masses. And that kind of secondary phase. So, again, we're pleased with where we're going now. Now we have to kind of getting to that front end piece. And then I think you sit back and say you really activated the full distribution model of Walmart and the way in which it connects with customers. how difficult is it to get on the front end it's it's more prioritization if you kind of think about any any merchant right you think about how you're touching it the amount of people that go through there the amount technology uh the amount things they're trying to prioritize that you know those point of sale systems do not stand still so it's about them saying okay who who sets the priority so it it's really a walmart prioritization it's less about um ourselves or one pay it's about how they do it and most certainly now you're in a period of time where they don't want to touch because you don't want any issues as you head into the holiday season. But, again, most certainly we have a good relationship with the Walmart senior leadership team, and we're working to make sure that that gets, you know, continues down the roadmap and doesn't get deprioritized. Yeah, it would seem like it'd be in their best interest at some point to get that going because it helps conversion. It helps conversion, and this is why, like, the Walmart Plus piece, you know our products, Sanjay, really kind of go out to the most loyal customers, our merchants and our partners. And so when you think about adding value to that card and that experience to those most loyal customers who are willing to pay for the Walmart Plus experience, it really adds a lot of value. That's why they're behind it. That's what they're allowing on the website and prominent placements, which are very valuable real estate for them. So they clearly see the value. We just need to kind of, you know, continue down their roadmap. Got it. So, obviously, partnerships drive the majority of your loan book at this point. Is there a cadence on the timing for when you guys might target the next big partnership? And are there any specific industries or value props you might lean into? Yeah, you know, listen, I'd sit there and say our business development team, our sales team are constantly out talking to different people. It's important for us to find partners that, you know, really value the program. Go back to what we talk about, loyalty of customers. Why do you want a credit program? What is important to you? How are you going to use it? Where does it sit inside an organization? Number one, if it kind of is you're trying to use the financial mechanism or you're kind of, you're monetizing an asset, that's probably not for us. If you're try to engage with a loyal set of customers, You're trying to expand your business. If it reports into the important part of the C-suite, that's great. I think that the important point when you think about that is, you know, where do you have large install base? You go back to something like a Verizon or a Venmo. You had very loyal customers that were attached to a brand. Then the trick becomes, okay, inside their brand, how do you create a value proposition that engages and drives forward engagement with the car and engagement with the customer, engagement with that brand. There are lots of opportunities. You know, believe it or not, we still sit here in 2026 with, you know, retailers that don't have programs. You have programs that are with other partners that probably, you known, haven't gotten refreshed in a while and we'll continue to pursue those. So I think there's a number of different avenues, but there are certain programs that we're not going to pursue because they don't meet what we would call that strike zone. So there's lots of possibilities. Our salespeople are constantly out and some of these relationships takes a year. If they have an existing program, we're talking to folks, and I'm sure people are trying to talk to our merchants and partners, you know, about what a program can look under a synchrony leadership. Got it. You talked about data and sort of changing the way you guys go to market, and obviously agentic commerce could change the entire landscape of how consumers consume, and obviously how they choose their payment form. How are you making sure that synchrony remains a big part of that sort of interaction and payment? What can you do more, and what are you doing, kind of going back to what you talked about, to take advantage of agentic commerce? Yeah, this is a very wide set of initiatives you have to start, right? If you think about how agentics developing today, right now it's in the, what I'd say, a lot of it's into discoverability phase. And so how products are presented, whether they're products for consumption or financial products. So the first thing is how do we make sure that our merchants and our partners and our products are appropriately represented there? That algorithm that sits behind a lot of these AI companies, these AIs, is a little bit mysterious. So there's a lot effort that we have with other partners about how do we make sure we feed into that algorithm and how our products are presented. Not only that, but how things that are softer benefits are presented to customers as you make recommendations. So a lot of effort goes around discoverability and things like that. That's why you see things that, that are happening with, you know, our relationship with OpenAI and the plugin we have there and our ability to have the marketplace. How do you build that relationship around the discoverability phase, number one. I think number two, what you're trying to do, and you see with our relationship with Poppy and other things, how do you create the protocols, right? What consumers want in order to really get to the agentic phase is do I have the trust in order to have the agent do that? And on the same side, on the merchant side, you want to have to be able to say, okay, is this transaction authorized and can I authenticate who it is as an individual or even as an agent? So how do you create the protocols as this newly developing landscape? And that's why we're working with financial services partners as well as the AI company, as well as the browsers, et cetera. You also have to kind of work with, you know, our scale partners who are creating their own agents. You kind of go out, everyone has a little agent now that's kind of trying to help you through the journey. So how Do you partner with that people? So now you kind of Go back into, okay, you want you want our partners to be presented in the agentic. now how do our products get there so how do we now tie that together with digital wallets and getting your getting getting access to digital wall the one thing that that's really important about synchrony is you think about the scale yes we send 70 million uh statements a month we got 100 million you know you know kind of customers out there when you talk to someone and say i have 100 million customers that i can get into a wallet you're starting to see private label cards show up in digital wallace which was not happening before and so now you sit back and say, okay, what wallets? Go back to the trust factor. What wallets are consumers willing to engage in? So how do you protect both the closed loop system and your open loop system with the networks in there? So creating that and making sure our merchant partners are brought into that discovery phase, that's where I think the whole landscape, and you have to attack multiple pieces of it. We should have a competitive advantage because we are the best cost attender for merchants. Our merchants prefer our products to be used. Now, how do we make sure our financial a product presented fairly in that seamlessly in that process. So I know a lot of merchants are very reluctant to share their data with the broad wallets and inference engines. I'm curious, like, it would seem like they'd have the preference to share that data with you. So would those go through your agents or would it still go through sort of the industry agents? Do you know what I mean? Yeah, you know, you're 100% right. I think when merchants think about their data, whether it's large-scale partners or the small, medium size, they're wary to let the customer out and have that experience out. So that's why I think they've agreed with data sharing with us, because we are able to demonstrate back to them the value of the data they're giving us, the value the data and credit when we bring marketing or analytics back to them. So if they're going to allow data usage, They'd rather do it through us and have our presence as that wall. I think they do not want to allow, mostly not get compensated for monetization of their data through third parties. That is one of the inherent variables and really strengths of this company is that access to that closed-loop system. And so they value that. They want us to take a lead. They appreciate the fact that we are doing a lot of these activities in the digital space, because that helps do that. But also, you know, a lot of them are trying to create their own. You know, if I look at Tolos and to Ashley and to Amazon and to PayPal, they have their own vision. So now how do we complement their vision and fit it to their long-term, you now, roadmap? Got it. So I guess, like, if we pull up and we think about AI, there's a lot a potential disruption, too, that could occur from gamification of incentives on cards on cards or gamification of deposits and money flowing to the highest yielding deposits. Like how do you think the synchrony model can withstand some of this as we move through time? Yeah, let me start with the easier part of that question. Sanjay, if you kind of go back to the back end of the question, there's this question about, well, would an agent kind of move money around for you in order to optimize your return? And I'd sit back and say, There's already a large population of individuals today who move between financial institutions already get rate. You see that today. You saw it with an example of E-Trade who very much did promotional pricing, ran a bunch of money in, promotional pricing came back, money ran back out. So there's already people that are doing that today, I think there's actually an advantage for synchrony in that model though. Cause you think about money that's sitting with money centered banks that are earning 10 basis points, et cetera, when you sit there and say, hey, I can earn 375 basis points with synchrony and high yield savings or four and a half in a CD. Yeah, I think we can be a net beneficiary. Now the question becomes, you know, go back a couple of questions ago, discoverability, when that agent says, hey, listen, you can go into synchrony or bank A, B, or C, how do you get presented there? So I think in the deposit side, we could be a Net Beneficiary to it. But there's also goes back to trust in that equation. Think about this. You say, okay, great, I want to move money. Well, now you have to open an account. Okay, you have to open account. Now you're going to give someone a social security number. Okay, how many people in this room are going to want to give a social security number with your data that goes in there? Oh, by the way, you're gonna have to provide a driver's license or some other form of identification that's gonna have to get uploaded to go through that part of that process. Oh, by the way, that agent's gonna have to access OTP through email or text. So there's a trust factor that has to be developed by the industry in order for people to do it. Now move to the gamification rewards you know there are certain individuals that probably have excel spreadsheets and they're trying to maximize rewards today and so there are people that do that i think for certain certain places you know some cards created i'd say a mechanism by which you had to go through a number of steps to access the benefits go through select the offer if you have two cards in there you have to go in and do it twice one for the other one for one card one for that i think that gets attacked. So I think simplifying a value proposition is going to be a requirement in order to kind of do that. So, I think it levels the playing field. That's why I think when you look at cards like, you know, the WeHap, take the Venmo card, which a couple of years ago was the first leading saying, okay, whatever your spend is, we're going to give you 3% on your highest category, 2% on the next highest category than 1%. And it rotated. You didn't have to do anything. It rotated based on your spend. Now, you kind of go back into that Venmo card, we have another leading point which says, listen, if you split your meal with somebody through Venmo, you get rewarded on that transaction. So making things seamless to the consumer, I think actually can be beneficial to avoid some of the gamification. I think a lot of our rewards, to be honest with you, are pretty simple. The last point I'll make on it, this goes back into how a product's presented. If you want to go in and buy a piece of furniture and you ask you want you want the ai agent say what's the best way to pay for this okay well you can you can open a synchrony account and get 10 off or you can get 24 months financing how that's presented is something we're also working on so yes you can do it this way if you want cash back so that agent is providing the right information to the consumer to make a good financial decision so listen i i think given our system and given the strength of our value proposition, which, again, a revenue is probably a little stronger, but the value propositions are generally richer than general purpose credit cards, I think we're uniquely positioned where we can win, you know, in that environment. Okay, I want to shift gears and just talk about the competitive backdrop, because you have technology first players, I know we've talked about buy now pay later for quite some time. But you have newer players that are sort of entering the private label space like Cardless and Imprint, you know, with these AI integrated platforms, maybe you could just talk about, you Know, what separates Synchrony from them and why you think you guys can still keep winning and if they're having any impact that you see on your potential to grow in the space? Yeah, listen, you give a lot of credit to some of those companies, they've created a solution that can stand up very quickly, right? And is agile from that perspective. I think when you start to kind of push on it, the ability to scale those platforms is a bit more challenging, right? So if you want to take it to scale and take one of our largest partners and say, put that on there, it's going to struggle as we've kind of evaluated that technology with the scale aspect, number one. I, I think number two, a lot of our scale merchants and medium-sized merchants want a ability to customize value propositions a little bit differently than that. They're not very cookie-cutter type things. If you want a cookie-cutter program, a lot of those ones can stand up very quickly and can serve you. If you wants something that drives multiple products, you know, more customized value proposessions, things like that, that technology probably has a little but to be desired when it kind of goes there. So it can play in, I'd say, that smaller space where they can win. Most certainly, we obviously evaluate that. We push our technology partners saying, listen, we need to be faster. That is one of the key things, and I know our partners feel that when we have that conversation. But really, I think they value the multi-product. I think the value of the ability to customize those products, whether it's in the product design or if it's the value proposition. And that's really where we kind of bring our our ability. And again, the other ability is to to consume data and use that data real time in a credit decisioning process for him to take our account management process. OK. And you don't feel like there's been an impact on your growth from any of that? No, because where they generally have succeeded is in places where we just don't go because they're smaller programs. And for us, it's just not worth the effort at times to kind of go with a really small partner and bring what we have. We prefer not to just throw a cookie-cutter type product out there and just say, okay, here's what you get. We're not going to do it. Again, you think about our smaller programs are in that $100 million range. I don't see us going, that's not really our, you know, we do well there. You know, I think about a lot of those clients, but that's not something where we're sitting around saying, I want to lean in there. And I think that's where they have a probably greater opportunity to play. So, I mean, you obviously ran through all the different AI initiatives that you guys are embarking on, and there's many different parts of your business that it hits, including expenses. As we think about its contribution to earnings and your fundamentals, Like, how do we benchmark how much success you're having with that? Like, and when do we start seeing it? Is it having an effect today, or is it something that's going to affect next year? Like, maybe you can talk about timing. So if you think broadly about the initiatives, Sanjay, you have ones that drive productivity. You have onesthat drive capacity. They're under the same type of umbrella. You have one that drives speed, efficiency, and growth. So if I start out to the far left of that, at least the way I'm pointing, you know, when you think about productivity, this is where you see really demonstrable and measurable type things. When I think about engineering, I can measure the ability to produce code. I can measurement the ability to measure time to get code put into market, things like that. So you can get it. What that generally generates is, okay, what do you want to do with that productivity? Right, you have two choices. Number one, you can take down your agile and technology commitment and deliver the same schedule, or two, you can say, okay, I'm going to accelerate delivery of products and capabilities and features. I'll give you an example. Inside the consumer bank, we were able to create efficiency with how the agents went and performed that, so we effectively created an incremental team without creating an incremental team, and effectively we were unable to get features and functionality to bring us to parity on some of our products faster than we would have, so things that are on a 27 roadmap are being delivered now that's how we measure productivity I think as we move forward you're probably going to see some reduction in the number of technology resources we just harness that then you have capacity which which says okay you know we have a team that does you know credit forecasting and it's a complicated process we're able to use AI and things like that in order to in order to produce that in a fraction of the time, right? That's capacity gets generated. Now we sit back and say, okay, that capacity doesn't necessarily lead to pure incremental costs. Now what we have to do organizationally, and we're beginning to do this now, is okay, as I create a capacity in these jobs, how do I kind of leverage and maybe reorganize differently in order for me to get that capacity out? And that's a journey we're on today. That's something I think you'll begin to see next year into into 28 so I do think you're going to get that you know you'll be able to see the benefit that comes through that reorganization I think then you think about things like merchant onboarding which is a cumbersome process you think About in the health and wellness space we have to go out and get licenses for people and you have to do know your customer all these things if you can automate a process that takes a longer period of time and get that done quicker number one you're gonna get a halo effect because you get the merchant up or the provider up faster to you're taking manual intervention out. So there's a growth aspect to that, and then there's what I'd say is a cost aspect. And then, listen, the longer pole in the tent is the work we're doing around agentic, which is more top-line revenue orientation. That's something you have to invest in now that's probably a couple years out in order to really harness that value. But if you're not doing that today, if you'RE not really investing in that today you're going to be left behind. Fair. Yeah. So I know you're not really involved on the debit side, but recently the debit interchange rule was struck down. And obviously, I think the Fed or the courts are really pushing for lower interchange from the part of merchants. I guess like when you take the pulse of merchants today on your platform, what are they most focused on? Like value props, like the range of products you offer, speed to approval, credit box, you know, how does Synchrony sort of prioritize based on what their needs are? Yeah, you Know, I think the first thing that we hear from our merchants and our scale partners is, I got to have the full product set in order to meet the customer sale, right? So whether it's an installment product, whether it'S an open-ended product that has promotional financing that's in there, whether It's a equal pay promo or deferred interest promo, what great can you can you have a core purchase can i create a card that has utility so our dual cards that are out there they want the full product set because what what what's happening and what's transformed over the last five or six years is is customers they want choice and so you want to give them the choice so someone that can show up with a full product suite that's number one number two i i think it goes back to credit but i think credit has transformed a little bit Sanjay into it used to be just you know we want you to say yes more now it's okay and the focus there was conversion like I could say yes but I want to convert the sale I think now what they're saying to some of us is saying listen say yes, but if you have to take a down payment or something else that's okay so so saying yes where the customer is not disappointed you know they may be a little bit disappointed say okay if you put something down that says that's different that has transformed, I think, over the last five or six years than it did 10 years ago. So I think there is that ability to say, how do you get to yes? And it may not be just a straight yes. I'll give you credit. Maybe, hey, listen, I can do credit in this term. We're going down a path to credit which says, listen. I can't say yes today. But if you do these three things, you're going to get a yes. That creates a bond with the consumer. So credit, I Think, does come number two. Number three, they're focused on cost. And most certainly, I think, as they think about interchange and they think about debit, you know, they look at it as a cost, but they look at our products, and this is where we are incredibly well-positioned against buying out, pay later. I am the best form of tender for our partners. I'm the lowest cost of tender of our partners, lowest being a lot of times they actually get money from us versus paying. So, you know why they offer choice? They're offering choice to really pull through the sales. They understand they're not going to cannibalize us that much because at the end of the day that hurts them because again loyal customer and number two we you know there's an economic reality to them so so again i look at that order multi-product um credit and the depth of credit and can can you be there for them not only today but if things get tough in the macroeconomics they go are you going to be there with them when things get top we've done this 94 years and we can stand by you know our partners and have the balance sheet to stand by our partners. And then the economic model, especially where the RSAs, they get the best economic deal versus all their cost attenders. I think that's kind of the priority that we see. And you guys invested pretty heavily in your own buy now, pay later solution, SetPay. I'm just curious, does that come up a lot, that they want a buy now pay later. Is that a buy later solution from you guys or not really? Yeah, no, the pay later product does come up. You know, again, this is one where the brand, you know, at times we may go underneath our partner's brand versus our brand. I mean, that's where we're more agnostic. We're not sitting around saying, okay, I'm going to take you, give you this installment loan. I'm gonna yank you around to four different merchants. That's not our model. If you want to put your brand on it, we'll find a way to label it on you. If you wanna our brand on, we will do that. So I think we give them the option to sit side by side with our brand or use theirs. So again, now we've invested heavily into some of the uniqueness where we sit. So if you're in the home improvement space, you need to have stage funding so you have that ability to take incremental charges over time. If you're în spaces where the loan amount may change, you have to have the flexibility to change the loan account. That's not traditionally what you'd see in an installment product. So tailoring that product in order to meet our merchants and verticals requirements is really important. So, again, it's part of a full suite, and we think it has relevance. And I think where we've done with our partners, I think, you know, they've accepted it. Now, again. There's at times when they may say, listen, there may be a different brand that attracts a different type of customer that we don't necessarily attract. That's fine. Because they're playing in a different space. Got it. So, I'm going to open up to the questions after my next really doozy of a question. And so, please think about your questions. Just remember what your boss said. Be easy on them. You know, come on. Easy. Sometimes I got to go against the grain. I guess really, this fireball question, democratic tsunami, right? Everyone's sort of thinking about all the progressive actions that could be on the horizon. And one of the things that comes up is credit card APR caps and the like. Maybe you could just talk about how you guys are thinking about dealing with the political climate and what's ahead. Yeah, the one positive thing about our company is we've been around for 94 years. We've seen a lot of different administrations, congresses, different forms of administrations and congresses different regulatory regimes etc. So we're somewhat agnostic to it to be honest with you. If I take a step back I do think that the regulators in the last couple years have been well certainly on the Fed side I'd say very cooperative. I think they've listened, particularly when you think about the stress test rules and some of the things that they put in place. We'll see what happens with Bosley. I think they've listened to folks that haven't said yes to everything, but they've listened, I think, and that's been a more balanced conversation. I think some of the things that have happened with our prudential regulators around focus around what's really important, I think has been great. I think even if you have an administration change down the road, but you had this change that has, there'll be greater oversight of those organizations in Congress and that's you know we never dismantled what was under the previous administration so again we sit back and say you know pendulum swing but you probably need to be there what we focus on is what's doing right fair and transparently for the consumer you continue to focus on that I think you'll be fine you know there is a lot of focus around the CFPB to some degree we think a effective CFPb that operates within its charter mandate is actually a good thing because right now you're dealing more with 50 AGs, and I'd rather deal with one person. Again, dealing with here's the charter, here's the rules, we believe that we should be fair and transparent, because I actually wish that the focus is on those that are on the outskirts of some of these fintechs that aren't as fair and apparent, that don't play by the same rules. If you can get that, we're all for it. So I think we, again, we'll work with people in Congress, and we'll worked with the regulators the same way we have in the past, and part of it's around making sure people understand how the businesses work, show what we do, you know, with regard to transparency and the treatment of customers, and I think we'll be fine. And so, you Know, again, there will be things that come up, you know. You talk about the interest rate cap. Again, part of it will be engaging with legislators to explain how the marketplace works, what that means for the economy, for consumers, and we'll do the best job we can, you Now, trying to do that. But again, we're ready for it. We've been through a lot, and we'll continue to proactively engage. Fair. So I want to open it up to the audience, see if anyone's got questions. If they want to raise their hand, we can come around with mics to the extent there are questions. Must be doing a really good job. All right. So could we talk about capital allocation? You mentioned early on that capital return is a big priority, and that's one of the ways that you're going to get to the strong growth profile that we discussed earlier. Maybe you could just talk about how we should think about, you know, capital allocated for growth, capital allocated for acquisitions, and obviously share buyback. Yeah, you know, we are incredibly consistent. Our capital allocation strategy has not changed, right? I want to number one, number one and number one invest in organic RWA growth and that has to be an attractive returns right most certainly that's why you see us trying to lean into our our health and wellness platform some of our digital you know capabilities and assets in the digital platform and some of the the fragmented place where we have really attractive returns it is not lost on us there's a point which if you go lower on the return spectrum I'm somewhat indifferent from a cost of capital so we don't want to do that we're focused on that we talked to the board about that we our leadership teams you know focused on that so if i can get organic rwa particularly at the at the you know long-term you know goal of two and a half or better i will allocate as much capital as we can there because that that just makes a ton of sense for us um the second thing we want is a financial institution is maintain a steady dividend and to make sure we have yield for our investors that it goes there you know that said you know this model because we have such a high return throws off a lot of capital. Plus, we have excess capital. Today, as we move down towards the target, we will deploy that capital either through an inorganic opportunity or through share of purchases. When I say inorganics, I would not expect something big here. These have been generally bolt-on things that have been highly successful. When you think about our investment in the pet insurance business, that really brings together the insurance side with the payment side. When you think about our Allegro product that gave us distribution and a really installment product into the health and wellness space, terrific acquisition. When you think about the consolidation that happened with Allied Lending and the home specialty space, those are things that we're talking about. Capabilities, when we bought GP Shopper almost a decade ago, that gave us our de-applied capabilities. Those are things that we want to invest in. To be honest with you, we look at a lot of companies and a lot of things, prices are expensive and we're very disciplined on price. So we're not going to overpay to do that. We'd rather return capital to shareholders. So that's the lens we look at. We look at all our investments through the same type of lens. But again, the first focus is we have a very attractive returning set of partners. To the extent we can leverage that, that is our best use of capital. Cool. You talked about the resiliency of consumers. And when you look at the spend growth recently, it seems to be strongest among prime consumers. Is that sort of a function of your focus on that segment, or does it reflect this broader K-shaped economy theme? Yeah, you know, it's interesting. People talk about the K-shape. We talked about it a couple of years ago, probably before others. I think we felt it more in our non-prime back then. Less so today. I think now people who maybe are not as full-spectrum lenders talk about it. I think if you go back and I point everyone back to a chart that we had in our third quarter earnings on page three, which broke out spend and said, listen, if you look at it either generationally or credit grade, how are things moving? So we see that movement across generations and across credit courts moving equally. So it's not really pulled on a dollar value basis. It's pulled by the higher end because we're a little bit more credit restrictive today than we were three years ago. but at the end of the day we're seeing all levers grow particularly in that younger generation of population they're actually growing faster than than the baby boomers and even the non-prime because they're confident they're getting wage growth they are growing uh faster than then i'd say prime and and and super prime so we're much more balanced and i think that's that's the benefit when you look at this this company there's really only two full spectrum lenders in the united States. It's cap one on us. And so that puts us in a unique position to serve our partners. So we're not necessarily pulled by the high end. It is not something we are targeting. It is a little bit on our credit aperture right now. But again, we want to service all customers broadly. Cool. Brian, I think we are out of time. But thank you so much for joining us. Appreciate it. Thank you. Good luck with your conference.