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Bilt Rewards, a co-branded credit card from Wells Fargo, allows users to earn rewards by paying their rent.
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Bilt’s core target group are young professionals with high incomes.
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The company may have misjudged how its customers would use the card.
Wells Fargo may have underestimated how savvy young professionals could be with a credit card that rewards renters.
In 2022, San Francisco-based bank Wells Fargo partnered with fintech startup Bilt Technologies to offer a rewards program that encourages customers to pay their rent with a credit card.
For many young renters, the appeal was clear: Bilt offered a no-annual-fee card that allowed users to earn one point for every dollar they spent on rent, with no transaction fees. The only requirement was that customers make five transactions per billing cycle to earn the points.
Customers can also earn points for travel and dining. These points can then be used toward purchases at all of Bilt’s partners, including Alaska Airlines, Virgin Atlantic, Hyatt and Soul Cycle.
According to the Wall Street Journal, Bilt opened more than 1 million accounts within its first 18 months.
But the return for the bank is still pending.
A “generation of young, affluent new customers”
Bilt’s demographic is very different from the average American, who earns an average salary of just under $60,000 and 49% of whom carry a credit card balance each month.
But a report on Bilt by investment bank Financial Technology Partners said the company wants to appeal to a “generation of young, wealthy new customers.”
In an interview with The Wise Marketer in February, Dave Canty, Bilt’s director of loyalty and partnerships, said the company’s core target audience is between 24 and 34 years old, with the average age being around 29.
“The average income is about $147,000, so these are successful young professionals,” he said in the interview.
Ankur Jain, founder and CEO of Bilt, said on X that his company was able to attract “high-value customers” at a low cost to Wells Fargo. He said the average customer is 31 years old and has a FICO score of 760.
Kevin and Amanda Smidt, who live in Miami, told Business Insider they heard about the program on a financial podcast and have been Bilt cardholders for about a year.
“I had never heard of it and thought, ‘Wow, this is so clever,’ because — especially if you live in a big city like New York or Miami — you spend a lot of money on rent,” said Amanda Smidt, a 32-year-old business owner and registered nurse anesthetist. “I thought, ‘This makes so much sense because I have this huge payment to make every month, but now I’m getting points.'”
The two described themselves as financially responsible and told BI that they never carried a balance on their numerous personal credit cards, including the Bilt card.
“I heard about it on a financial podcast about investing. I’m a responsible person who invests, you know what I mean?” Amanda said.
Kevin Smidt, 33, who is doing a fellowship as an orthopedic surgeon, told BI they earned 56,000 points in about six months and transferred them through one of Bilt’s programs to convert their earnings into 126,000 points with Virgin Atlantic. Kevin said they used the rewards to pay for three flights, two in business class and one on Virgin’s new aircraft.
Kevin also said the card could be beneficial for general use, as a customer can earn rewards on travel and dining. But for the Smidts, most of the purchases they made with Bilt that weren’t rental-related were to meet the minimum five-transaction requirement.
“It’s often like a latte,” Amanda said. “I just make small purchases to get the points off the rent.”
Kevin said he hoped Wells Fargo didn’t get rid of Bilt, but Amanda chimed in, “Well, actually, we just bought a house.”
“Oh yeah,” said Kevin, “so we can’t use it anymore.”
A costly program
The Journal reported on Sunday, citing anonymous names of current and former employees, that Wells Fargo was losing up to ten million dollars a month by maintaining the Bilt program.
Part of the problem is that Wells Fargo may have misjudged Bilt customers’ use of the card.
The Journal reported that only 15 to 25 percent of the amounts spent on the card were rolled over from month to month, which is crucial for Wells Fargo to generate interest income. The bank predicted that the rollover would be between half and three-quarters of the amounts spent.
Wells Fargo also expected 65 percent of credit card sales to be for expenses other than rent. Instead, the Journal said, most purchases were for rent payments, despite Bilt’s requirement that five transactions per statement be made to earn points.
Wells Fargo and Bilt declined to comment on the numbers. A Bilt spokesperson told Business Insider that Wells Fargo does not make the numbers publicly available.
In an email, a Wells Fargo spokesperson told Business Insider that co-branded credit cards are “a small part of the company’s overall credit card business strategy and the BILT credit card is a component of that.”
“As with all new card launches, it takes several years for the initial launch to pay off. While we are still in the early stages of our partnership, we look forward to continuing to work together to deliver great value to our customers and ensure both BILT and Wells Fargo benefit,” the spokesperson said.
The Journal reported that the losses have forced Wells Fargo to reconsider its partnership with Bilt and that the bank may not renew the contract, which expires in 2029.
The Wells Fargo spokesman said that “there have been no discussions among decision makers about exiting the BILT agreement. To claim otherwise is false.”
A Bilt spokesman said the Journal article was an “inaccurate representation of our strategic partnership with Wells Fargo.”
At X, Jain did not address the reported losses but reiterated Wells Fargo’s statement denying the bank’s plans to end the partnership after the contract expires.
Read the original article on Business Insider
