Synchrony’s Acquisition of Versatile Opens Doors for Credit-Challenged Consumers at Checkout

Synchrony recently acquired Versatile Credit a move that makes it easier for customers to be approved for credit products when they are shopping.

Synchrony already issues more than a hundred store cards, but Versatile’s technology enables merchants to provide second chances for the credit-challenged at the point of sale.

It processes quickly: If a customer receives a rejection, the system can pass the application for approval to another lender within seconds. For example, in an appliance company, installation of this service might salvage numerous sales within the course of just one week.

Versatile’s finance portal connects the stores with numerous lenders. The system will automatically provide another application submission instead of pestering customers for new ones after their initial application denial.

Versatile Credit helps boost the consumer approval process by connecting stores to a network of lenders through its point-of-sale solutions.

An individual who purchases furniture but gets turned down by one lender might obtain acceptance at another without having to begin afresh. That will promote the sale.

It handles consumer applications for home improvement projects, as well as auto body shops, medical centers, and jewelry stores. It could pay for the repair of a damaged engine for an auto center or pay for financing at a clinic for patients who go for dental care. Little wins bring about large results.

The system serves as the administrator that oversees the operations infrastructure. Merchants see the benefit through more approvals and fewer lost sales.

Versatile provides several advantages for those lenders who want to help bad-credit customers:

• At the counter: Lenders can reach consumers at the exact moment when they will spend money, for instance when replacing tires.
• Lower costs: Flexible system helps small-sized lenders to operate at lower costs as they don’t invest in building their own system.
• Second looks: Declined transactions can be turned over to the subprime lenders, salvaging sales.
• Assist stores: Retailers prefer more approvals.
• Subprime alternatives capture sales that might otherwise be lost.
• Better data: It provides the lenders with sharper data by reporting approval tendencies as well as default data that the lenders can utilize in their responses.
• Fast customer satisfaction: An approval of borderline cases in an interval of about one minute will improve customer loyalty.

The situation presents obvious risks and possible advantages. The risk of default affects borrowers who take on higher debt and underwriting errors in loans result in major financial losses.

Merchants can increase their sales but lenders take on the responsibility of collecting payments from customers. Multiple companies that use a single platform experience reduced profit margins.

The regulatory environment will exert increased scrutiny because of new fair lending requirements, but other oversight responsibilities will see fewer restrictions.

System outages would create delays in the approval process, which would result in merchant dissatisfaction. Some retailers choose to stay away from doing business with subprime lenders. Safer borrowers select prime options, but high-risk consumers maintain their use of subprime credit channels. 

Buy Now Pay Later programs provide instant approvals, and consumers have grown used to that speed. All Versatile lenders need to operate at the same speed as the platform but they must also handle the increased risk of losing money.

Synchrony acquired Versatile Credit as it sought to concentrate on checkout financing programs. Increased risk exposure for the company happens as it attains higher sales approval percentages. 

Subprime lenders who meet customers at the checkout stand the opportunity to grow through the advantage of reduced upfront costs but only through the use of bright underwriting, strong partners for the stores, and strict discipline at the register.

Proper use of the process instills the company with strong growth. It causes issues when it happens the wrong way.