So much is changing in the world of retail, from the way consumers search for product down to how they prefer to pay for those big-ticket items. The evolution in consumer finance has made the credit-approval process simpler and much more streamlined, which is a benefit to both the customer and the retailer. We dive into this space with Synchrony Financial’s Senior Vice President and General Manager of Home and Auto Rob Krause.

Rob Stott: All right, we are back on the Independent Thinking Podcast and excited. I get excited easily about podcasts, but when I get to do one with someone that shares a name that makes it even more special. So Mr. Rob Krause, the SVP and General Manager at Home and Auto at Synchrony, appreciate you joining us on the podcast this morning. You’re out there Ohio, is that right?

Rob Krause: Dayton, Ohio, absolutely.

Rob Stott: Okay, all right. So I’ve spent some time. College years were in Pittsburgh so not too far, not terribly … Duquesne was the college so that A-10 out there. Share some territory.

Rob Krause: Okay.

Rob Stott: That’s awesome. Appreciate you joining us. How are things going for you out there?

Rob Krause: Going well. It’s been a good end of ’22 for us and getting off to a hot start in ’23 so I’m excited to support the Nationwide membership.

Rob Stott: Oh, that’s awesome. Well, before we dive into it I know we got some real interesting and fun things to talk about this morning. Before we do that, give us a little background on you. Who’s Rob Krause? Your background, your role at Synchrony, and your path to being there.

Rob Krause: Sure, absolutely. So I’ve been with Synchrony slash GE for 24-plus years now. Really been in risk independent space since 2010 so really enjoy working with independent retailers, and helping them see the value of financing, and reach the goals that they may have set for their business. I’ve been involved with pretty much all home furnishings my whole time here. Buying groups associations as well as just independent retailers that choose to work with Synchrony on their financing program.

Rob Stott: No, that’s awesome. A very interesting space. A space that ebbs and flows. Anything surprise you? What keeps you excited about working with these independent retailers on a regular basis?

Rob Krause: It’s just a resilient group, right? They overcome all the challenges thrown at them, whether it’s COVID or container prices that came out of COVID, et cetera, they’re always energetic. The energy that the entrepreneurial spirit that the independent realtor is really exciting. I think the other thing about the job is it’s great. My job is not … It changes every day. What I thought I was going to do for today might change by 10:00. Retailer gets involved, has some questions. I really enjoy digging in and understanding what their challenge is and then how do we help solve that challenge.

Rob Stott: No, it’s, obviously, a very important partnership to have and something that impacts them on a daily basis we know for sure. We could dive right into it. I mean, there’s a lot. You mentioned the way the year’s started off for you guys. Talk about the last couple of years, what a stretch it’s been just to watch from stores having to shut down to all of a sudden it was tough to find product to all of a sudden now they … Its products coming back, consumers were rearing up to get back out into stores. Now here we are at early ’23 and it’s like well, are we resetting? What’s sort of that mindset? Paint that picture of what the economy’s like today and what you’re seeing.

Rob Krause: I think we saw, obviously, throughout the stimulus-induced portion of COVID consumers wallet’s got very strong, their bank accounts, savings accounts really strong. And as retailers know, they bought pretty much anything you could get in stock as fast as you could get it in stock. A really good couple years there. Call it end of ’20, all of ’21, and really first half of ’22. Obviously, from a credit perspective, the consumer paid down curves, paying down more than they ever have.

But we’re now finally seeing I’ll call it the final dip of where it was going to be to where it’s now ramping back up, and we’re seeing customers pull back a little bit on their payments to us back closer to normal. We’re starting to see some entry rates into delinquency ebbing back up. Nothing to where we were before so we’re not concerned at all, but you definitely can see that the consumer … The stress of the financing and our stress of consumer finances is starting to increase, right? When you also look at some external metrics, their saving rates have slowed, their savings accounts have shrunk, and they’re starting to … Really we started seeing it in the second half of last year, their affinity towards using credit again is growing so they’re leveraging themselves back up with the use of credit. So I think that’s what we’re seeing well, with the space today.

Rob Stott: I mean, all those factors that you mentioned, obviously, they’re … The things that are, I think, most at the forefront of what retailers are also probably looking at too. We’ve heard the early portion of this year dating back to the end of last year people … You get all those ’23 projections and things like that, that our word was thrown around a lot. Is that still on the mind as a possibility? Are you guys seeing that as you forecast out further into the rest of this year?

Rob Krause: I’m not an economist so let’s start there, I’m a salesperson. We do take a look at that. Definitely seeing stress again on the consumer with their savings rates going down, their debt load coming now. I think the inflationary area we’re in right now also has people a little concerned. Consumer sentiment’s getting a little tight. We know the spend in the home is probably going to be a little bit slower this year given the fact that the least that we spent during ’21 and … Or 2021, early ’22. And quite frankly, the data says the consumer’s really still focused on that entertainment and dining dollar right now. For the free funds that they do have, they’re still putting a value on entertainment and dining given that they spent a year and a half locked up. That’s what we’re seeing.

Rob Stott: No, that makes I think a lot of sense. I appreciate that insight. I mean, you talk about those data points. What should a retailer be looking at, I guess? You talk about the shrinking their savings accounts and things like that, the uptick in credit. Are those the big things that you guys keep an eye on that sort of drive your decision-making and should it be the same for retailers?

Rob Krause: Retailers need to be focused on door swings and who they have coming in. I would say they’re probably experiencing less door swings, but the folks that are coming in are probably pretty serious buyers, right? How do you now take that person that’s … You’ve worked all your marketing dollars, et cetera, to get them either into your website or into your store and now it’s the moment of truth. How do you ensure that you get them to close a sale or your team can close the sale for the maximum amount that you can get? What we see is financing’s back. And the question is, is your team ready to handle financing given that you probably had turnover? We have folks that probably didn’t have to really leverage financing in ’21 and early ’22 so is your team ready to have that conversation with the customer because that customer is back?

Rob Stott: No, absolutely. There’s a couple paths we can go here because we’re … The training thing I think is something we absolutely should dive into. At the same time, it’s funny because you talk about other parts of the economy. We know from just talking to retailers, one of the things they’re struggling with is finding and attracting or keeping talent and their staff as well so the turnover’s been a thing for these guys which means that training then becomes crucial. From that training standpoint, can you talk a little bit about sort of the opportunities that exist? Even for staff that have been around a while, things have changed for how you have … As you mentioned, things have changed for how you have to sell these consumers. What options are there? What should a retailer be doing? How can they be trading their staff in an effective way as the economy changes as it has and that sort of stuff?

Rob Krause: Absolutely. So let’s start, first of all, theoretically. First of all, do you train on financing just like you train on the physical products in your store? And I think that’s a question I ask a lot of retailers when they come up to me and they’re talking about “I got high turnover and I got to figure out how to get my team to know how to use financing.” They’ll tell me they … “Oh yeah, we do hours upon hours of product training.” My point is, just because you can’t physically see the finance product you still have to treat it as a product. That’s the first question I have. I think the other thing is, what tools are out there, right? We have an online learning center that they can go pull all little three to five-minute courses for their team.

I think the other thing that we’re really excited about through our partnership with Nationwide is we’ve launched the first-ever-all-member volume rebate. So you as an owner have a little bit of economic incentive to ensure financing’s trained and talked about in your store and you can earn some economic … And I think at the associate level, the retail sales associate level, we have a program now starting in its third year called Ignite where we will … Your team, they register on our Ignite site, we’ll send them little challenges throughout the quarter, usually one each month. It could be a challenge as simple as watching a little video, it could be go take a little quiz for us, it could be take a picture of some POP in your store, and they’ll earn points so your retail associates can actually get some benefit from it for engaging and thinking about training. And you as an owner can get some benefit through increased credit sales and a volume rebate.

Rob Stott: No, that’s fun. It gamifies the training, if you will, but in a way that it’s in the store so you’re turning your store into this whole … I hate to really lean into the gamification but you’re turning your store into that … The gaming world for the retail sales associate. And they’re learning firsthand sort of some of those tools that are available to them or how to go about pitching that customer today. Which then, as you point out, obviously, it benefits everyone, right, because that sales associate’s getting more educated around these tools and opportunities. Obviously, in the end, that’s going to benefit. If you’re able to sell your customers on credit and that sort of thing, obviously, going to benefit the store and you as a business owner in the long run as well.

Rob Krause: And you bring up the gamification. We actually do have in that our learning center as well as driven through our Ignite challenges, we have games. There’s a Jeopardy-type game, there’s … An owner wanted to get their sales team together at a huddle and have a game, it’s absolutely out there.

Rob Stott: That’s pretty cool.

Rob Krause: Trying to make it not just the delivery of some stale banking information, this is exciting content that we could really … That the retail sales associate really could benefit from, right, not only in closing more sales but, assuming they’re on a commission, probably putting more dollars in their pocket.

Rob Stott: No, that’s awesome. Obviously, the training itself is important. I imagine it’s changed a lot too over the last couple years because the … As we’ve talked about at the top, the consumer of today is very different even than it was a year or two ago. What are you guys doing, I guess, you, the team, Synchrony to sort of … What are you doing to … Whether it’s either update or just keep your finger on the pulse of how that consumer has changed?

Rob Krause: We’ve taken good pulse on the consumer. We do a every other year full big purchase ticket study so we understand retailers … Or consumers that have made big ticket purchases in the last X months. We do a survey, we understand how they … What was their shopper’s journey? And I know Nationwide’s focused on the consumer experience and how are the retailers handling a consumer change. Every two years we get a good pulse on just how do people go about shopping? They start online, they then ask friends, then they come into stores, then they typically ask friends some more, and maybe finish some more online. And then, for the most part, in home furnishings it’s consummated in the store, right? So we know the consumer’s mindset as they’re shopping.

I think the other piece that COVID drove is now the affinity towards an easy consumer experience, right? Paper apps were the norm. Paper apps, they’re still out there and you’re going to have a section of the population that wants to use that process, but really I would say the adoption is up to the merchant, right? We have tools now to do the application on the consumer’s phone, we can send it straight from the business center to the consumer’s phone. We prefill on probably 90-plus percent … Actually, everything before data elements we prefill for the application today so we’ve really removed that friction out of that process.

It’s paperless when it comes to the application that you don’t have to maintain that customer-signed application anymore because you’ve pushed it to the customer’s device. And so in that regard, I think the consumer is expecting better technology and solutions and Synchrony’s been investing in those solutions from the apply side to make it really as seamless as possible. Obviously, we still need the retailer to check some IDs for us, help us control fraud, but other than that it can be a very, very slick process.

Rob Stott: No, that’s awesome. Now, correct me if I’m wrong, that relate to sort of … I know a couple years ago now really at the … I want to say either during ’20, the middle of 2020, so right around the start of this pandemic, the Waterfall program and everything out there. So dive into that a little bit. Is that sort of what you’re alluding to with all of this or is that-

Rob Krause: It’s a combination of both. One is just a very, call it, streamlined application process that can be done paperless. So I think that’s one step. You’re right. I think the next step is Synchrony’s working with secondaries. And here in April, we’ll have a tertiary solution available to where every Nationwide member can process a Waterfall solution, right, so to speak. Synchrony takes the first look, if we’re unable to say yes we can pass that off to the second or directly to the third if they would like. Those folks would then provide a pre-approved offer back and you can do it all right there in business center so in one shop you can get that customer approved with something. We know in today’s environment, if you’re using different solutions you may have to go through the application through Synchrony and then you may have to go over and pop to a second or to a third. So we’re just basically streamlining that into one solution.

We have that today, it’s available to all members with secondary providers. Both providers are sponsored by Nationwide. We have that, call it, through the traditional business center process. We also have it to where you can send that application again to the customer’s phone, a Synchrony application gets completed, but in that, we give them the disclosures that if we’re unable to approve we will pass this on to a secondary and the secondary then would pop up their offer. That whole process can be done paperless through the consumer’s device.

Rob Stott: I mean, I think the theme here, right? From everything we’re seeing, that Nationwide across the industry is just streamlining the buying experience, the shopping experience. Whether it’s through websites and the online shopping experience to the actual checkout and getting yourself approved for credit, everything’s getting faster, it’s getting more streamlined, and it’s all about improving that customer’s in-store or online experience from the retailer’s perspective. You want to make it easier for them to not only find the product they want but to be able to secure it, and purchase it, and then whatever means possible for that customer.

Rob Krause: I would put that challenge out to members. I think what I would consider the former traditional process of credit in many stores was well, the salesperson offered it, the customer said, “I’m interested,” then they walked him back to the quote-unquote credit desk, whoever that might be, they helped run that process. Sure that works. I’m not saying it doesn’t work, but I’m saying that I think the consumer today is probably looking for a little bit more streamlined process. You can do that through the directed device just send it from the business center straight to the consumer. We have the ability for you to put a QR code on a custom POP and have it right there in your store. Consumer just takes their phone and turns on the camera and voila, the application shows up in their phone. I would challenge the members to think about what is their experience. What experience are you driving with your consumer in your store as it comes to the credit portion?

Rob Stott: No. It’s crazy to think how all of that’s changed. I mean, even from the thinking from the consumer side, the idea of having to be face-to-face with someone and go through that process it’s … You’re no longer having to sweat it out, right? You could do that all on your phone as a customer and it’s done without ever having to really … There’s portions of it I’m sure, like you said, you want to check certain things and make sure it’s not some nefarious situation happening but it makes that process a lot more comfortable for the consumer too. It’s just crazy how all this has changed so quickly.

Rob Krause: And I think that’s another thing. To jump in there. Pre-qual, right? We hear a lot about pre-qualification and soft hit, right? So that solution is available to all members too now where you can let that QR code on some custom POP drive them to a site, and in that site both a pre-qual or a apply now link is available. You’re right. Someone whose maybe knows their credit might be a little concerning, they don’t want to have that negative experience with the sales associate, they can pop in the pre-qual, and if they’re eligible to get approved then Synchrony will come back with a pre-qual offer. That’s a soft hit. We’re starting to see retailers and members having some nice success with that portion.

Rob Stott: I mean, it’s just neat. From the financing perspective, just sort of how things … It seems like a space that maybe the retailer doesn’t think about it too much that how innovative can you really get but there’s tons of room and it’s neat to see it sort of take shape. And I think like every other industry over the last couple years, maybe the gas pedal was hit a little bit because the need to adapt but it’s come out on the other side of this looking really cool. Despite the perception of what financing might be, I think it’s really cool to hear you guys talk about it and see sort of how it’s improved and advanced.

Rob Krause: Right. Again, the consumer continues to change. COVID accelerated adoption of many of these tools. I mean, we’re really excited as an organization. We reorged and we have a product-focused component of our business now that’s really driving new products to the market as quick as they can, not only from a I’ll call it an experienced customer experience process, but also what products are available. So we’ve got an installment products launching here in the nationwide program in the next few months. Not only to pay it forward but also an installment monthly coming down the road. As the consumer demand for types of credit changes, we’re also getting out there to make sure we provide solutions for members.

Rob Stott: A nice little plug to keep the eye on what’s going on at Synchrony, I like that. Whether well professionally trained or not, some journalistic concepts floating in the mind. I like the nugget you dropped there that’s awesome. Also, a nice little nugget to plug, that we’re dropping this right before primetime this episode. If you guys listening are going to be with us in Dallas, an opportunity to stop by, you’ll be there. Learn about all these tools and resources that are available. Of course, if it’s after the fact, know that you can always reach out to the Synchrony team for info and find out what’s going on. It’s a lot of fun. We look forward to seeing you down there in Dallas, and wish you guys a good show, and hope everything goes well.

Rob Krause: Thank you. We’re really excited. We’re really excited about our partnership with Nationwide and how do we help your members win. That’s really what we want to focus on. My whole team’s focused on thinking about that every day. We know members don’t necessarily think about finance every day. And as much as that hurts my heart, we know they got a lot of things on their mind to run their businesses. But let them know we’re here thinking about how do we bring financing to them to make it easy so it can integrate into their customer experience and they can go win in today’s market.

Rob Stott: No, we appreciate that. I can certainly think of a few people at Nationwide that financing’s on the mind every day so we’ll let Mr. Kirk know that he … I’m sure he’s thinking about it right now as we’re talking.

Rob Krause: Exactly.

Rob Stott: No, that’s awesome, Rob, this was a lot of fun. Like I said, look forward to connecting down there. Appreciate your time and look forward to doing this again.

Rob Krause: Thanks, Rob, I really enjoyed it.