Key themes

• The spending effects of the pandemic were fully felt in Q2 as most issuers report large declines in purchase volume between 15-30%, and receivables decline between 3-17% YoY.
• Alliance Data and American Express, in particular, experienced a 30%+ decline in spend YoY, driven by the headwinds of store-based retail (ADS) and T&E sectors (Amex).
• Credit quality remains stable, for now, largely as a result of forbearance/government stimulus programs; issuers generally expect losses to increase through 2020 and well into 2021, and most banks are forecasting unemployment rates to remain in double-digits into 2021.
• Similar to Q1, issuers increased reserves significantly to allow for potential future credit loss rate spikes; however, reserve builds were generally more modest than those observed in Q1.
• Issuer profitability continued to be pressured for the second straight quarter as a result of reserve builds and spend/receivables decline, though the average ROA was slightly better than Q1.

Notable happenings

New partnerships
Synchrony added a new PLCC card with Adorama; the Helzberg Diamonds program transitioned from Capital One to Alliance Data; Splitit partnered with Mastercard for global expansion; Klarna announced a partnership with Sephora.

Partnership developments
Synchrony announced that it renewed and extended several key relationships including CarX Tire & Auto.

New products/features
Synchrony and Verizon launched a co-branded Visa credit card; U.S. Bank launched its new Altitude Go Visa credit card with rewards categories tailored to the COVID-19 pandemic; Verrency announced the launch of a new installment lending solution; Apple announced that it will offer broader no-interest payment plans on the Apple Card; Walmart announced enhanced benefits for its reloadable debit card in partnership with Green Dot.

Mobile & tech
Walmart entered into a partnership with Shopify to expand its third-party marketplace site; U.S. Bank launched new B2B payments capabilities such as enhanced receivables visibility and streamlined invoice payments; Plaid launched a new API-management service for banks; PayPal launched a new QR Code functionality for in-store payments; BillGO launched a bill pay relief hub for consumers impacted by the pandemic.

Industry statistics (based on non-retail card issuers in scorecard section)

¹Total receivables for all issuers below at end of 2Q20. ² Total purchase volume of all issuers below in 2Q20, not annualized. ³After-Tax ROA of issuers that publicly report – Citigroup, Capital One, Synchrony, Discover and ADS. ⁴ YoY = Year-over-year change versus 2Q19.⁵ QoQ = Quarter-over-quarter change versus 1Q20.

Issuer scorecard ($billions)—Q2 2020

¹Capital One is US consumer and small business credit cards and installment loans. Purchase volume excludes cash advances. ² American Express changed its reporting method as of 2Q18; all figures are for US Consumer segment (revolving and charge products) which no longer reports net income.³Discover receivables, purchase volume (excludes cash advances), and losses are US domestic card only; ROA includes all of Direct Banking segment (credit card loans represents ~80% of Direct Banking loans). ⁴ All figures include all of SYF’s business lines (i.e., Retail Card, Payment Solutions, and CareCredit). Retail Card accounts for ~70% of total receivables. ⁵ Average receivables of $16.1B (does not include loans held for sale). ⁶ Credit card specific unless otherwise noted. ⁷ Consumer Bank. ⁸ Total company. ⁹ Community Bank.

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