PayPal, which has offered consumer financing since 2008, is selling $6.8 billion in receivables to Synchrony Financial, with which it is expanding its consumer credit relationship. The Wall Street Journal called it a long-awaited deal that will give PayPal significant cash that it can use for acquisitions or share buybacks.
The deal allows PayPal to continue arranging loans for its customers without taking on as much credit risk, according to the Journal. “But while unloading credit risk, PayPal could also be forgoing a strong contributor to earnings.”
PayPal encourages shoppers (including eBay buyers) to make purchases using PayPal Credit, and as part of the expanded deal, Synchrony Bank will become the exclusive issuer of the PayPal Credit online consumer financing program in the US for 10 years.
Merchants who offer PayPal Credit will continue to receive the same benefits.
PayPal has partnered with Synchrony Bank to offer PayPal-branded consumer credit card since 2004, and as part of the new deal, they will extend their existing co-brand consumer credit card program agreement.
PayPal Chief Commercial Officer Gary Marino said, “Our business financing solutions like PayPal Working Capital will continue to operate as they do today and we will continue to integrate Swift Financial into our business.”
The deal is subject to regulatory approval and other customary conditions and is expected to close in the third quarter of 2018.
Press release follows:
PayPal Holdings, Inc. and Synchrony Financial announced an agreement to significantly expand their strategic consumer credit relationship. Under the terms of the transaction, Synchrony Financial will acquire $6.8 billion in receivables, including PayPal’s U.S. consumer credit receivables portfolio, which totaled approximately $5.8 billion in receivables as of October 31, 2017, and approximately $1 billion in participation interests in receivables held by certain investors and a chartered financial institution. Subject to regulatory approval and other customary conditions, this transaction is expected to close in the third quarter of 2018.
In addition, at closing, PayPal and Synchrony Bank will extend the existing co-brand consumer credit card program agreement, and Synchrony Bank will also become the exclusive issuer of the PayPal Credit online consumer financing program, in the U.S. 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.”
“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.”
Since 2004, PayPal and Synchrony Bank have partnered to offer PayPal-branded consumer credit card options that enable cardholders to shop online and in stores. PayPal and Synchrony Bank will be expanding their program agreement to include the PayPal Credit online consumer financing program available to PayPal’s U.S. customers. Through this expanded relationship, PayPal will continue to provide access to innovative consumer credit products, while Synchrony Bank will provide program management capabilities. This transaction enables PayPal to control customer-facing activities, which aligns with PayPal’s strategy of enhancing the consumer experience, while simultaneously allowing for more efficient capital allocation.
Online consumer financing has been a strategic offering of the PayPal platform since 2008, and is a proven driver of consumer and merchant engagement. The expanded agreement with Synchrony Bank for both the U.S. PayPal Credit online consumer financing program and the U.S. PayPal-branded consumer credit card program complements PayPal’s successful partnering strategy and allows PayPal to collaborate with an industry leader to enrich and expand PayPal’s consumer credit offerings. The expanded relationship will enable innovative customer experiences by leveraging the joint capabilities and strengths of each company.
BofA Merrill Lynch acted as the financial advisor to PayPal. Morgan Stanley & Co. LLC acted as the financial advisor to Synchrony Financial.
See the full announcement below.
SOURCE: PayPal Press Release