Private-label card issuer Synchrony Financial and PayPal Holdings Inc. have expanded their credit agreements.
Announced Wednesday, the deal sees Stamford, Conn.-based Synchrony Financial become the exclusive provider for PayPal Credit, the payment company’s U.S. online consumer financial program, and extends an existing co-branded consumer credit card issued by Synchrony Financial, for the next 10 years.
In conjunction, Synchrony Financial will acquire $6.8 billion in PayPal receivables, including its U.S. consumer credit receivables portfolio of approximately $5.8 billion, and $1 billion held by investors and a financial institution. PayPal expects this aspect of the deal to close in the third quarter of 2018.
The move is intended to aid San Jose, Calif.-based PayPal. “Our expanded relationship with Synchrony Financial will free up cash currently used to fund consumer credit receivables for other uses, while accelerating our ability to deliver engaging credit and payments experiences for our customers,” said Dan Schulman, PayPal president and chief executive, in a press release. “We believe this transaction significantly advances our strategic and financial goals.”
PayPal, which has offered online consumer financing since 2008, said under the expanded agreement it will control the customer-facing activities of PayPal Credit and Synchrony Financial will provide the program-management services.
In a research note, Fitch Ratings Inc. expects the PayPal Credit portfolio to be one of Sychrony Financial’s top five portfolios.
The two companies have worked together since 2004 to offer a PayPal-branded consumer credit card.