Good morning. Good morning, everyone. I'm Tom Michaud, President and CEO of KBW, and I would 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 KBW, 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.
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 have 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 are 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.
It's a pretty high bar.
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. Sanjay, I hope I raised the bar high enough.
It's very high.
I know Brian's going to do his part, but—
I know.
We're just hoping you'll do your part.
I'll do my best.
Okay.
The best. Thank you.
Thank you, Sanjay. Thank you for being here.
Thank you, Tom. I cannot believe it has been 16 years since we started this conference, and I think Synchrony has been a big part of these conferences over the years. Thank you again, Brian Wenzel, the CFO of Synchrony, 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 CFO of the company's retail card platform. 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.
Sanjay, thank you, and I appreciate the invitation. Again, I would 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, to protect our interests and our values, and we owe them a debt of gratitude. Again, it is for all the veterans out there, and really their families who support them. Thank you for what you have done.
Appreciate it. Brian, Synchrony has 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 think will be the biggest drivers of growth and returns from here, and how should we think about the milestones that will benchmark success?
Sanjay, it is really important to keep looking at, 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 are investing, the first thing goes around the evolution around products and having that multi-product discipline. Not only having products out there, whether it is 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. That is number one, is around what is going to drive growth, is that digital presentation 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 have transformed that a little bit into more data orientation, and that is 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 can have a much more tailored experience, a much more surgical experience relative to saying yes. I think that ability to do that, and then introduce new way of things that we are talking about, cash flow underwriting, path to credit, those types of things. When I think about growth, it is 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, one of the things that would really differentiate our model versus a lot of others is the alignment with our partners around RSAs. You are aligned economically on how do you say yes to the right customers. You are 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. 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 is great. Maybe we could talk about the path to double-digit EPS growth next year. What is that path? Is it through NII growth, operating leverage, buybacks, net of potentially higher losses? I think the issue I am having in terms of thinking about success of stocks is obviously there is a confluence of geopolitical stuff and macro stuff, but when we sort of hit an inflection for the negative in credit, it is hard to get the stocks to work. Maybe you could just talk about how you intend to get to that desired outcome.
Yeah. Obviously, we will talk quite a bit about this in January. We do not 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 do not see a true recession in the United States in 2027. Again, a lot can change between now and January. When you talk about losses, it is a little bit different between migrating up a little bit on the curve versus going into what would you say is that recession. I think when you look at the equation of how we get to double-digit growth, one is going to come from the maturity of assets we are 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 are going to pick some of that revolve up and late fees as losses migrate up a little bit. So you are going to see it on the revenue side. Again, I think there is a question with regard to deposit 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.
If you can get the earnings growth of the core business and that PPNR minus that charge-offs to kind of grow, then you couple that with a very strong capital return position that we are 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 are going to turn it to aid that EPS equation. So, I think it is multiple levers. There is not a single lever. Again, I think the rise in that charge-offs, given the RSAs, shouldn't be a headwind to hopefully getting us to achieve that framework, not only next year, but in the future.
I mean, you guys put out your monthly data this morning, and it looked pretty good on the credit side. To your point, it seems like the consumers definitely remains resilient. I think the one area is just loan growth still remains modest. I guess maybe you could just talk a little bit about that, and then we can talk a little bit about Walmart as well.
Yeah. If you look at the results that we had this morning, you think about delinquencies in line with seasonality. If you look at the net charge-offs, you have to adjust for 25 cycles versus what we traditionally have around 28. I think it will be 30 next month. We look at that, it is in line with seasonality. 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, "Okay, I look at one thing, affordability or gas prices." It is one piece of a broader mosaic. What they do not look at is, listen, you are still seeing pretty good wage growth, right? 3.1, it is not quite inflation. You are seeing wage growth. You are seeing the supply side of labor, which is still tight. You are not seeing firing.
That labor market has some strength into it. So that is what is 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 do not get as much wage growth, but are feeling the effects of affordability. So, I think when you think about that, it is not a bad setup. You are sitting around saying, "Okay, we just gave you October." The more we step out here, you get a pretty good view of what fourth quarter losses will be. You are starting getting pretty good sense on what the first quarter will be from that. Again, I think credit is in a good space. I think when you look at growth, as we talked about a couple weeks ago, the growth rate for as we exited the third quarter has been pretty consistent.
I think it is fair to say we have not seen a holiday pull forward into October. Holidays wait. What does that tell you? 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 there is this kind of, between the merchants and the consumers, who is waiting each other out. So we will see. Again, we are optimistic. I think a lot of people are optimistic about the sales trajectory for holiday, but it is going to be a little bit more promotional, I think, given where sales are at this point.
It is amazing. Christmas has arrived in most of these shops already.
Well, most certainly in Bryant Park, you got the Winter Village there.
Right. It's insane.
Where you can pick up something.
I guess consumers are waiting it out. I guess, like, maybe we could talk a little 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. We are pleased with the Walmart program. I think when you think about that ramp for a second, we just kind of lapped our first year of origination. We are happy about that. I think what is encouraging as you look at that was the way in which consumers adopted the new value proposition, particularly when you think about Walmart+, right? Something that didn't exist back when we had the portfolio in 2018. The folks that are engaged with Walmart, that are doing the free shipping, that are having the home delivery, that are doing more of the groceries, they're engaged. Now they can get extra benefit by having a OnePay Walmart credit card to drive that. That engagement has been terrific.
We are excited about that. We are excited about the OnePay 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. I think those are things that were all fundamentally different than 2018 and kind of helping the growth. I think this next evolution, right, 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 it at the front-end checkout.
That's when I kind of get to the masses, and that's that kind of secondary phase. Again, we're pleased with where we're going now. Now we have to kind of get to that front-end piece, and then I think you sit back and say you've 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 more prioritization. If you kind of think about any merchant, right? If you think about how you're touching it, the amount of people that go through there, the amount of technology, the amount of things they're trying to prioritize, those point-of-sale systems do not stand still. It's about them saying, "Okay, who sets the priority?" It's really a Walmart prioritization. It's less about ourselves or OnePay. It's about how they do it. Most certainly now you're in a period of time where they don't want to touch it 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 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. This is why the Walmart+ piece. Our products, Sanjay, really kind of go out to the most loyal customers of any of our merchants and our partners. 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+ experience, it really adds a lot of value. That's why they're behind it. That's why they're allowing it on the website and prominent placements, which are very valuable real estate for them. They clearly see the value. We just need to kind of continue down their roadmap.
Got it. 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. 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 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 you're trying to use it as a financial mechanism or you're trying to monetize an asset, that's probably not for us. If you're trying 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 the important part when you think about that is, 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 card, engagement with the customer, engagement with that brand? There are lots of opportunities. Believe it or not, we still sit here in 2026 with retailers that don't have programs that are with other partners that probably haven't gotten refreshed in a while, and we'll continue to pursue those.
I think there's a number of different avenues, but there's certain programs that we're not going to pursue because they don't meet what we would call that strike zone. There's lots of opportunities. Our salespeople are constantly out, and some of these relationships take 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 about what a program could 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 agentic's developing today, right now it's in the, what I'd say, a lot of it's in the discoverability phase. How products are presented, whether they're products for consumption or financial products. 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. There's a lot of 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.
A lot of effort goes around discoverability and things like that. That's why you see things that are happening with our relationship with OpenAI and the plug-in 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 it with our relationship with Pumpkin 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?
Then same side, on the merchant side, you want to have the ability to say, "Okay, is this transaction authorized and can I authenticate who it is, as an individual or even as an agent?" How do you create the protocols as this newly developing landscape? That's where 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 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. How do you partner with that people? Now you kind of go back into, okay, you want our partners to be presented in the agentic. Now, how do our products get there?
How do we now tie that together with digital wallets and getting access to digital wallets? The one thing that's really important about Synchrony is you think about the scale. Yes, we send 70 million statements a month, but we got 100 million 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 wallets, which was not happening before. Now you sit back and say, "Okay, what wallets?" Go back to the trust factor. "What wallets are consumers willing to engage in?" How do you protect both the closed-loop system and your open-loop system with the networks in there?
Creating that and making sure our merchant partners are brought into that discovery phase, that is 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 of tender for our merchants. Our merchants prefer our products to be used. Now, how do we make sure our financial products are presented fairly seamlessly in that process?
I know a lot of merchants are very reluctant to share their data with the broad wallets and inference engines. I am curious, it would seem like they would have the preference to share that data with you. 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 are 100% right. I think when merchants think about their data, whether it is large-scale partners or the small, medium size, they are wary to let the customer out and have that experience out. That is why I think they have agreed with data sharing with us, because we are able to demonstrate back to them the value of the data they are giving us, the value of the data and credit when we bring marketing or analytics back to them. If they are going to allow data usage, they would 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, a lot of them are trying to create their own. If I look at Lowe's and Ashley and Amazon and PayPal, they have their own vision. Now, how do we complement their vision and fit into their long-term roadmap?
Got it. If we pull up and we think about AI, there is a lot of potential disruption too that could occur from gamification of incentives on cards or gamification of deposits and money flowing to the highest yielding deposits. 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 is this question about, well, would an agent kind of move money around for you in order to optimize your return? I would sit back and say, there is already a large population of individuals today who move between financial institutions already to 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. There are already people that are doing that today. I think there is actually an advantage for Synchrony in that model, though, because you think about money that is sitting with money center 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 4.5 in a CD," yeah, I think we could be a net beneficiary. Now the question becomes, go back a couple questions and go discoverability. When that agent says, "Hey, listen, you can go into Synchrony or bank A, B, or C," how do you get presented there? I think in the deposit side, we could be a net beneficiary to it. But this 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 an account. Now you are 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 are going to have to provide a driver's license or some other form of identification that is going to have to get uploaded to go through that part of that process. Oh, by the way, that agent is going to have to access OTP through email or text. So, there is a trust factor that has to be developed by the industry in order for people to do it. Now, move to the gamification rewards. There are certain individuals that probably have Excel spreadsheets and they are trying to maximize rewards today, and so there are people that do that.
I think for certain places, 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 the other. I think that gets attacked. I think simplifying a value proposition is going to be a requirement in order to kind of do that. I think it levels the playing field. That's why I think when you look at cards like, that we have, take the Venmo card, which a couple years ago was the first leading saying, "Okay, whatever your spend is, we're going to give you 3% on your highest category, 2% your next highest category, then 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 reward 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 where it 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 the AI agent say, "What's the best way to pay for this?" And it says, "Okay, well, you can open a Synchrony account and get 10% off, or you can get 24-month financing." How that's presented is something we're also working on. 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. Listen, I think given our system and given the strength of our value proposition, which again, our 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 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, with these AI-integrated platforms. Maybe you could just talk about 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? 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 think number two, a lot of our scale merchants and medium-sized merchants want an 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 want something that drives multiple products, more customized value propositions, things like that technology probably has a little bit 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, and we push our technology partners saying, "Listen, we need to be faster," right? 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 they value the ability to customize those products, whether it's in the product design or if it's in the value proposition. That's really where we kind of bring our ability. Again, the other ability is to consume data and use that data real time in a credit decisioning process for, I'm going to say, our account management process.
Okay. 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. For us, it's just not worth the effort at times to 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 some of our smaller programs are in that $100 million range. I don't see us going. That's not really our. We do well there. 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." I think that's where they have a probably greater opportunity to play.
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, how do we benchmark how much success you're having with that? When do we start seeing it? Is it having an effect today, or is it something that's going to affect next year? Maybe just talk about timing.
If you think broadly about the initiatives, Sanjay, you have ones that drive productivity. You have ones that drive capacity. They're under the same type of umbrella. You have one that drives speed, efficiency, and growth. If I start out to the far left of that, at least the way I'm pointing, 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 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. We effectively created an incremental team without creating an incremental team. We were able to get features and functionality to bring us to parity on some of our products faster than we would have. Things that are on a 2027 roadmap are deemed to be 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 if we just harness that. Then you have capacity, which says, okay, we have a team that does credit forecasting, and it's a complicated process. We're able to use AI and things like that 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 cost." Now what we have to do organizationally, and we're beginning to do this now, is, okay, as I created capacity in these jobs, how do I kind of leverage and maybe reorganize differently in order to get that capacity out? That's a journey we're on today. That's something I think you'll begin to see next year into 2028. So I do think you're going to get that. 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 and 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 going to get a halo effect because you get the merchant up or the provider up faster. Two, you're taking manual intervention out. So there's a growth aspect to that, and then there's a what I'd say is a cost aspect. Then, 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. 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, 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? How does Synchrony sort of prioritize based on what their needs are?
Yeah. 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 an equal pay promo or deferred interest promo, great. 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's happening and what's transformed over the last five or six years is customers, they want choice, and 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 think it goes back to credit, but I think credit has transformed a little bit, Sanjay, into It used to be just, "We want you to say yes more." Now it's okay, and the focus there was conversion. I can 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 saying yes where the customer's not disappointed, they may be a little bit disappointed and 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. I think there is that ability to say, "How do you get to yes?
It may not be just a straight yes, "I'll give you credit." Maybe, "Hey, listen, I can do credit in those terms." We are going down path to credit which says, "Listen, I cannot say yes today, but if you do these three things, you are going to get a yes." That creates a bond with the consumer. Credit, I think, does come number two. Number three, they are focused on cost. Most certainly, I think as they think about interchange and they think about debit, they look at it as a cost, but they look at our products, and this is where we are incredibly well positioned against buy now, pay later. I am the best form of tender for our partners. I am the lowest cost of tender for our partners. Lowest being a lot of times they actually get money from us versus paying.
They offer choice, they are offering choice to really pull through the sales. They understand they are not going to cannibalize us that much because at the end of the day, that hurts them because again, loyal customer, and number two, there is an economic reality to them. Again, I look at that order, multi-product, credit and the depth of credit, and can you be there for them? Not only today, but if things get tough in the macroeconomics, like, are you going to be there with them when things get tough? We have done this 94 years, and we can stand by our partners and have the balance sheet to stand by our partners. Then the economic model where, especially where the RSAs, they get the best economic deal versus all their cost of tenders. I think that is kind of the priority that we see.
You guys invested pretty heavily in your own buy now, pay later solution, SetPay. I am just curious, does that come up a lot, like that they want a buy now, pay later solution from you guys or not really?
Yeah, the pay later product does come up. Again, this is one where the brand, 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 going to 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 want our brand on it, we'll do that. I think we give them the option to sit side by side with our brand or use theirs. Again, now we've invested heavily into some of the uniqueness where we sit.
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 in spaces where the loan amount may change, you have to have the flexibility to change the loan amount. That's not traditionally what you'd see in an installment product. Tailoring that product in order to meet our merchants and verticals' requirements is really important. Again, it's part of a full suite, and we think it has relevance. I think where we've done with our partners, I think they've accepted it. Again, there's the 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. I'm going to open up to the questions after my next really doozy of a question, so please think about your questions.
Just remember what your boss said. Be easy on me, Sanjay.
No, 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, et cetera. 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 Basel III. I think they've listened to folks. They 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 have this change that happens, there'll be greater oversight of those organizations in Congress. We never dismantled what was under the previous administration, so again, we sit back and say, "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. There is a lot of focus around the CFPB. To some degree, we think an effective CFPB that operates within its charter and 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 transparent, that don't play by the same rules. If you can get that, we're all for it. I think we, again, we'll work with people in Congress and we'll work 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 with regard to transparency and the treatment of customers, and I think we'll be fine. Again, there will be things that come up. 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 and for consumers, and we'll do the best job we can trying to do that. Again, we're ready for it. We've been through a lot, and we'll continue to proactively engage.
Fair. 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. 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 capital allocated for growth, capital allocated for acquisitions, and obviously share buyback.
Yeah. 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 at attractive returns, right? Most certainly, that's why you see us trying to lean into our health and wellness platform, some of our digital capabilities and assets in the digital platform, and some of 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. Our leadership team's focused on that.
If I can get organic RWA, particularly at the long-term goal of 2.5% or better, we will allocate as much capital as we can there, because that just makes a ton of sense for us. The second thing we want as a financial institution is maintain a steady dividend and to make sure we have yield for our investors that goes there. That said, 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 repurchase. When I say inorganic, 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 Ally Lending in the home specialty space, those are things that we are talking about. Capabilities, when we bought GPShopper almost a decade ago, that gave us our dApply 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 are very disciplined on price. We are not going to overpay to do that. We would rather return capital to shareholders. That is the lens we look at, and 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 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. It's interesting. People talk about the K-shaped economy. We talked about it a couple 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?" We see that movement across generations and across credit grades moving equally. 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 the baby boomers, and even the non-prime, because they're confident, they're getting wage growth. They are growing faster than, I'd say, prime and super prime. We're much more balanced, and I think that's the benefit. When you look at this company, there's really only two full spectrum lenders in the U.S. It's Capital One and us. That puts us in a unique position to serve our partners. We're not necessarily pulled by the high end. It's not something we're targeting. It's 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.