The major private-label issuer saw flat purchase volume annual growth in Q1 2020, per an earnings release. This is down from the 9.7% annual growth it posted in Q1 2019 — a drop likely related to the coronavirus pandemic, considering Synchrony’s purchase volume growth plummeted 26% year-over-year (YoY) from March 18-31 after growing 10% YoY in January, 13% YoY in February, and 14% YoY from March 1-17.

Synchrony's purchas volume growth YoY

Synchrony’s Q1 results help illustrate the struggles merchants and other payments companies are facing.

  • The firms’ sales for travel, restaurants, entertainment, and gas all took a hit due to the pandemic, suggesting that these merchants are largely struggling. From January 29 to March 31, Synchrony’s travel sales dropped 34% YoY, restaurant sales fell 9% YoY, entertainment sales dipped 8% YoY, and gas sales slid 3% YoY. These results can give the industry an idea of what to expect as other firms start to report earnings for Q1 2020, and make it clear that merchants in a number of categories are losing a lot of sales volume from store cardholders, and likely noncardholders too, because of the pandemic.
  • Card networks and other payments companies are likely facing similar drops in purchase volume. Synchrony’s purchase volume growth took a dive at the end of March, and other firms have likely seen similar results considering US retail sales growth plunged in March. The size of other payments companies’ volume growth drops may vary, but it’s likely impossible to avoid posting a lackluster performance in Q1 2020. Payments firms’ popularity in e-commerce could be a key factor in how far their volume drops since e-commerce is currently more accessible than in-store retail, so companies like Synchrony that have had success online could perform better than others.

And the late drop in Synchrony’s Q1 2020 purchase volume growth points toward its performance, and possibly that of others, being worse in Q2 2020. US states only started issuing orders to stay at home in late March, and stores and local governments are still moving to restrict traffic and in-store selection, so purchase volume growth will likely drop further next quarter.

This means firms may face a prolonged period of shrinking purchase volume growth, so they should look for ways to boost purchase volume, like adapting rewards to meet consumers’ needs during the pandemic, to try to mitigate the effects of the crisis.

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