The international online payment service provider PayPal has revealed that it plans to sell $5.8 billion in consumer credit receivables to Synchrony Financial. As a result of this announcement, it’s been reported that shares of PayPal increased 2% and shares of Synchrony went up by 3%.
The deal will be an expansion of the current ongoing relationship between the two companies, and includes $1 billion in interests in PayPal receivables, which are being currently being held by investors. The deal is still subject to approval, but is expected to be finalized in 2018.
Synchrony believes the move will allow it to take advantage of the benefits of investing in the online shopping industry. With PayPal being such a big name in both online and mobile shopping, the deal is seen as a step forward for the company and will help them to tap into the growing market.
Synchrony Bank has been working alongside PayPal since 2004, and provides PayPal branded credit cards to the sites users which can be used online and in stores. The new deal with give Synchrony exclusive issuing rights of PayPal’s online consumer financing program for the next ten years.
This means that PayPal will lose the income generated from the interest of credit. However the money means that the company can make further investment in other areas of its business which it believes could see much higher returns.
A statement from PayPal’s CEO Dan Schulman said that. “Providing great payment experiences to our customers is at the core of everything we do. 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. We believe this transaction significantly advances our strategic and financial goals.”
Margaret Keane, President and Chief Executive Officer of Synchrony Financial added that “This collaboration builds on a key partner relationship in the rapidly growing digital payments space and expands our capabilities within the merchant environment. The partnership with PayPal extends our expertise in advanced analytics and underwriting across all digital channels, providing deeper insights into the unique needs of the PayPal customer.”
PayPal has confirmed to its customers and merchants that use their services that they will receive the same terms they do currently, as well as the same features and benefits. PayPal Working Capital will operate in the same way, and there will be no changes to any of its terms either. PayPal has also advised that it will continue to integrate its services with Swift Financial, which it acquired earlier in the year to boost its lending to small businesses.