Inside Synchrony’s Home Brewed, Six-Second Credit Approval Process
By Steve Cocheo, Senior Executive Editor at The Financial Brand
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Executive Summary
- Synchrony Financial has reduced its reliance on traditional credit scores with a system called PRISM, developed by its internal innovation team. The system weighs over 9,000 key data points when someone applies for a credit card.
- This helps the company, which specializes in retailer credit programs, manage credit risk that balances the bank’s risk tolerance with the retailers’ needs to sell goods and services.
- PRISM has helped Synchrony through the pandemic and later challenges that upended credit conventions. More recently, its latest edition is helping many consumers who used to be rejected for credit cards.
Six seconds.
That’s about how long Synchrony Financial typically has to evaluate a new consumer’s creditworthiness while they are awaiting approval at checkout.
How so? Picture a shopper trying to buy $600 of back-to-school clothing at a register at J.C. Penney, one of Synchrony’s longstanding card program customers.
They’ve just been offered a $90 discount if they agree to apply for a card right in the moment. The merchant doesn’t want to blow the sale. The bank doesn’t want to miss the opportunity to lose a new account and the future volume that it represents.
Nor does the bank want to grant credit to a poor risk.
And no one wants to hold up the line.
Synchrony has been making it all happen with a system called PRISM that arose from the need for speed and a realization that traditional credit scores were not enough to prudently support the company’s push for new business. That, and the realization that a portion of consumers who don’t have credit cards — and therefore lacking entrée to other forms of credit like auto loans and mortgages — can be qualified via alternative means, stoking further growth in a highly competitive business. This includes cashflow underwriting, recently added to Synchrony’s process as a “second chance” option.
Want more insights like these? Check out Attune’s content hub: Connected Banking Starts Here: Modernize Lending, Onboarding & Cross-Sell
The roots of Synchrony Financial’s approach lie in the 2017-2018 “card-cession,” as well as policy and spending trends during the pandemic period. Add to that Synchrony’s atypical product structure, emphasizing partnerships with retailers, rather than standalone cards.
The typical mainstream credit card issuer is a B2C provider, giving card accounts to consumers according to their growth needs and risk appetites. Synchrony, on the other hand, is a “B2B2C” issuer, explains Max Axler, EVP and chief credit officer at Synchrony. The company has more than 110 million accounts, including both private label cards as well as dual cards that can be used at the stores of the co-branded retailer as well as anywhere else credit cards are accepted.
What sets Synchrony apart from many other issuers is the range of consumers it strives to serve. As a partner to its retailer clients, the bank is a key element in their sales process.
Among top issuers there has been a flight to quality, with the companies pulling in their risk horns a bit. Not so Synchrony.
“Because we’re a business-to-business-to-consumer lender, we don’t have that luxury,” says Axler. “We need to be a consistent underwriter for our partners.” Part of that means that while, say, an American Express may cut off approvals at a score in the 700s, Synchrony will work with consumers with scores that are much lower.
At the same time, Synchrony is moving beyond credit cards in its partnership packages. This includes typical short-term buy now, pay later programs, longer-term installment payment programs in conjunction with retailer partners, as well as promotional finance programs. In a recent meeting with securities analysts, Synchrony’s Brian Doubles, president and CEO, said these newer forms of consumer credit will be “a meaningful part of the business for years to come.”
Read more: Are Consumers Buried Under Too Much Debt? A New Report Says Maybe Not
Dealing with ‘Card-Cessions’ and Credit Monkey Wrenches
During the “card-cession,” card issuers were seeing delinquencies rise even though the U.S. wasn’t in a recession.
“Issuers had pushed out too much credit to individuals and underneath there was a synthetic fraud problem,” says Axler.
Axler says the company began to look for better ways to underwrite card accounts.
“Our premise became more and better data delivered in real time,” says Axler. The first part, he explains, posed a credit analytics challenge, while the second part is a technology problem.
In 2018, the company set multiple agile development teams to the task. In the process, the company’s new approach grew from evaluating a relative handful of credit factors to considering over 9,000 credit data points. That handled the credit analytics part. The speed required was addressed by moving beyond the mainframe environment the company had been relying on. It was too slow and didn’t permit the rapid addition of fresh credit information that the expanded process demanded, according to David Chau, SVP of credit technology strategy.
“We decided to go through radical change,” says Chau. “We went back and said, ‘If we had built this thing from scratch, what would we do using a modern technology stack?’ And that’s what we did.”
The technology was engineered to lean both on outside data as well as Synchrony’s own past experience with consumers who it was already serving through other cards. Axler explains that for many Americans a store-connected credit card account is one of their first card experiences, so the company has touched many, many people.
Chau explains that the new approach also included use of “dynamic decisioning.” In brief, this means that instead of taking a linear approach to the credit granting decision, the system picks each next bit of data to grab based on what it has been seeing thus far.
“This is a very complex and very fluid way of introducing data, and is how we solved the problem of introducing data to our process in real time,” says Chau. “Our game is fundamentally different, because there’s somebody sitting at the checkout, and if things take too long, it’s going to impact the sale.”
The goal was not only to improve credit evaluation up front, with new consumers, but to monitor creditworthiness on an ongoing basis, in every monthly cycle, as well as within cycles, when warranted. This can result in tweaking credit lines up or down, depending on what PRISM sees.
Read more: How Credit Reporting Models Are Failing Modern Lending
Going Beyond the Credit Score
As PRISM has been adopted and evolved, “it has made us much less reliant on credit scores,” says Axler. That was particularly helpful during the pandemic period. Axler explains that government stimulus checks, payment and collection moratoria, and other factors resulted in inflated credit scores for many consumers — levels that wouldn’t reflect future realities.
“The pandemic threw a bunch of wrenches into how credit decisions were made for the industry,” says Axler. “I could argue that it was the hardest time to make an underwriting decision since 2008, and, before that, probably back 20 years. The confluence of a lot of dynamics manipulated scores dramatically.”
Beyond those factors, Axler says credit scores have been impacted by credit score improvement programs that use methods such as granting credit and reporting it to bureaus, but not actually advancing the funds to the “borrower.”
“It immediately increases your score,” says Axler, but not in a way that Synchrony considers desirable. In fact, he says, the company now discounts certain third parties’ efforts when encountered in consumers’ credit files.
On the other hand, despite some of the headlines in recent months about federal student loans, Axler says that those borrowers can actually be good risks. A key factor is to recognize that, given the nature of the credit, they are disproportionately younger and at the beginning of their credit journey.
Sifting among each credit population for sub-populations that represent better risks is actually part of what PRISM was built for. Axler explains that just as a glass prism refracts a beam of white light into its component parts, the system is designed to break larger groups into distinct smaller groups.
Related to this is the mission to spot consumers whose use of Synchrony credit marks them as better risks. Such people are offered dual cards, enabling them to tap credit beyond the initial retailer.
It’s a matter of competition. “We don’t want other issuers to come in and pick off our private label credit card customers,” he explains.
Read more: Bundling Debit with BNPL Is the Next Big Thing in Cards
How Retailer Relationships Set Synchrony’s Approach Apart
All this said, if you were to hold raw credit performance numbers at Synchrony alongside other issuers’, you would not immediately see the benefits of PRISM. That reflects how Synchrony’s operation intertwines with its retailer partners, and its goal to not be constantly widening and opening the credit aperture for each retailer’s card program.
“We need to be a consistent underwriter for our partners,” says Axler.
When Synchrony works with a company, the actual credit extended sits entirely on the bank’s balance sheet and Synchrony bears the entirety of the credit risk.
However, this doesn’t put everything on Synchrony. Each major partner relationship is subject to a “retailer share arrangement” — the total impact of which you can find in Synchrony’s income statement.
The financial arrangement between the bank and the retailers hinges on the relative risk the bank is taking to extend credit to the customers the retailer wishes to serve.
“We make decisions based on risk return,” says Axler. By constantly monitoring performance, discussions between bank and client take place when performance starts to impact what the bank sees out of the deal.
The bank may decide it’s time to take less risk in a given portfolio, but brings the matter to the retailer. The retailer could agree to different pricing for a given tranche of risk that it wants Synchrony to serve. Axler says the overall deal has to make sense for the bank’s shareholders as much as for the retailer.
As part of such retailer arrangements, special deals, such as enrollment discounts such as that discussed at the beginning of the article, as well as similar promotions, are picked up by the retailer.
On the other hand, continued expected performance leads to some returns for the retailer under the retailer share arrangement.
“As losses go up, we pay them less,” says Axler. “As losses go down, we pay them more. And in that way, we’re aligned.”
He says PRISM has helped the bank refine how it splits risk with its retailer base.
Read more: How Three Banking Organizations are Leaning into Payments to Power Growth
Moving Forward with PRISM 2.0
Increasingly, the transactions that Synchrony is financing take place digitally. Speed of response is still important, even though there aren’t other shoppers standing behind an applicant at point of sale. Digitally, retailers face the risk of abandoned shopping carts.
Digital purchasing has enabled the bank to try something not yet attempted at the physical point of sale. This is a second-chance effort that it started as part of the company’s participation in Project REACh, a financial inclusion effort orchestrated by the Office of the Comptroller of the Currency. (It stands for Roundtable for Economic Access and Change.)
If a consumer doesn’t pass PRISM’s standard screens — they may not have any prior relationship with Synchrony nor any credit bureau file — instead of automatically rejecting them outright, the bank offers an alternative.
The applicant is asked for permission for Synchrony to consult a system maintained by Early Warning Services (operator of Zelle and Paze). EWS records may show enough about the consenting consumer’s use of their bank account and indications that they are a real person and not a synthetic identify.
“If so, we’re going to approve the applicant for a small line, to get them started and see if they perform or not,” says Axler.
By way of a benchmark, Axler says that within 12 months, more than 60% of the consumers who take this chance have credit scores of 660 or more.
“So we’ve effectively put them into the system,” Axler says.
Synchrony has also been utilizing cashflow underwriting since August 2024. Consumers who don’t qualify are told that they are going to be declined, but are offered the opportunity to give the lender access to additional data, concerning their assets. About 35% of the people offered the opportunity take it, and about 30% of them get a credit offer, according to Axler.
“That means we’re approving more than 10% of the people we used to decline,” says Axler. “That allows them to build their credit history, and we’re really excited about that.”
Read more: Yes, You Can Compete with the Major Card Issuers. But It Takes Creativity and Focus.
