And then we’ve got relationships with different distribution affiliates like Credit Karma, LendingTree, all those kind of affiliates. I think the big shift in consumer behavior we’ve seen in the last several years isn’t so much the channel they show up in but it’s how they want to engage with us. And that’s — we’ve talked a lot about our investment in digital. So 95% of people come in through the website or the app more and more people upload their documents through the app and the website, pick their loan, size, length, term, we’ve built out this co-browsing capability which we use extensively where even if there’s someone in a branch booking the loan, somebody doesn’t need to come in, except to exchange card title or those kinds of things, where we can be on the computer screen at the same time with them and take them through a very disciplined underwriting discussion, discussion about features and put them in the right loan for them.
And then, we have a lot of digital engagement afterwards, whether it’s checking your balance, payments, with our card rewards upgrades to the new card, etcetera. So we, like every other financial service institution or every company has had invest in a multi-channel, omnichannel platform where you can do business with us in person, on the phone or digitally. And we’re continuing to lean into that digital engagement so that we are on par with everyone else and best-in-class for the places where we have competitive advantage. Broadly for the branch, we have less branches now than we did 5 years ago. And we’re not widely growing our branch network but we like our branch network. We think it’s a competitive differentiator. Customers tell us they like to be able to walk into a branch even if they choose not to, it’s part of our brand and being in the community, working closely with people is super important.
So branch will remain important but we’ve also been building out our central call center capabilities and our digital capabilities to complement that.
John Hecht: Okay, that’s very helpful. I appreciate that. And then second question sort of on the ALL balance and Micah, forgive me if you discussed this but it’s been pretty stable. I’m just kind of wondering kind of puts and takes. Is this the kind of proper allowance given the, I don’t know, kind of the uncertainty around the macro outlook? And then kind of what are puts and takes that would cause you to move it one direction or the other?
Micah Conrad: Yes. I think for sure, John. This — I mean, this is absolutely the right allowance ratio for us given the environment. As we’ve talked about, there’s many inputs to the reserve what we are seeking to achieve with this reserve is that we’re — it’s appropriate for the expected losses across the life of the portfolio and also builds in some cushion, if you will, for our expected macro outlook which we’ve said consistently over the last, I think, 4, 5 quarters at least, we have not really changed this, you’ve seen our reserve rate go from 11.44% to 11.66% — or 11.62%, excuse me, over the last 5 quarters. So been very consistent. We’ve included a macroeconomic assumption in the forecast of 4.5% to 5% for a little bit of extra cushion.
I think it’s also important for us to continue to point out that you may not see that reserve need necessarily come from unemployment. It’s also intended to cover other macroeconomic factors like elevated and continued levels of inflation over the lifetime losses in the book. But we talked a little bit earlier, I’ll just reiterate it quickly within the portfolio of losses we’re reserving for — is basically the $21 billion of receivables that we have on the balance sheet, including cards. The vast majority is dominated by the loan book and we’ve got that front book, back book dynamic going on where the lower delinquency in the front book is sort of causing a lower reserve rate for that portion of the book. And the more seasoned back book with that higher level of delinquency, of course, by nature of it being delinquent, attracts a higher reserve.
And so you’re seeing a mix of those two things plus the unemployment level. And so our original CECL allowance on day 1, way, way back in January of 2020 was 10.7% or about 100 basis points higher than that, roughly speaking. So it has credit performance continues to improve, we would expect that 11.6% to gradually move down over time, of course, pending the outlook on the macro economy.
Operator: Our last question will come from Mihir Bhatia with Bank of America.
Mihir Bhatia: A lot of my questions have been answered. But I did want to just very quickly touch on this front book, back book dynamic again. Just want to make sure that — it’s probably more of a clarification question. What I’m trying to understand from your answer to Vincent’s question and the comments about the back book being multiples of the front book. When do you expect the back book to be less of a contribute less very immaterial to your credit performance. Are we talking middle of 2024? Are we talking through 2024, maybe even into 2025. Just trying to understand the seasoning and payment paydown dynamics within that book?
Micah Conrad: Yes. I mean here, I think it’s hard for me to pinpoint that given the — we’re continuing to deal with higher levels of inflation and higher levels of delinquency as a result in that back book. I think you’ve highlighted it but I’ll say it again. The — just because of the seasoning of that portfolio, it’s going to have higher delinquency and so a little small changes in the performance of that delinquency relative to the benchmark is going to cause offset any positive impact from that front book, I think the best I can say is we’ve called out that we expect to be around 75% of the portfolio is going to be front book by middle of next year, that will give you a sense for how much you can think about in terms of the level of contribution.
But without being able to forecast where the absolute delinquency is for both the front book and the back book. It’s hard for me to really pinpoint an answer. And I think we need to have a little bit of humility in that area to say that consumers generally are still struggling with inflation. And for me to be able to predict where things might be 3 quarters from now is not really knowable.
Mihir Bhatia: No, that’s fair. And then just the last question — second question, I guess. Just given the comments about the slower rollout of the card product, any update on full year guidance for card receivables? And do you also think you’re on track for the $100 million in capital generation by 2025?
Doug Shulman: Yes. Look, we haven’t updated the guidance on it. We’re managing the card to be a long-term profitable product for us. We don’t manage the growth. We still like a lot of pockets. And so as you’ve seen, we’re growing some. I think I did mention that we slowed the pace of the rollout given kind of the macro environment that we’re seeing and we’re just going to be cautious. So I think the ending card portfolio this year will be below where we thought they were going to be at the beginning of the year. We don’t have any updates to 2025. We’re going to have to just see how the next year happen. So — but we’re not going to push it, meaning looking out to the medium or long term, there’s going to be a big business for us. It’s going to be very profitable. The timing we will pay based on making sure every card we issue is to a customer who can be successful with that card, use it and also pay us back.
Mihir Bhatia: Okay. Now that’s — I think that’s what investors want you to do. So…
Doug Shulman: Thanks, everyone, for joining us. We look forward to talking to you more offline and hope everyone has a great day.
Operator: This does conclude today’s OneMain Financial Third Quarter 2023 Earnings Conference Call. Please disconnect your line at this time and have a wonderful day.
