The Wall Street Journal published a report over the weekend that there is friction in the relationship between Wells Fargo and Bilt. Both Wells Fargo and Bilt released statements confirming their commitment to their partnership. Did the details match the headline? What did the article actually say and what do we make of it? Find out on this week’s Coffee Break.
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(00:00) The Wall Street Journal reported friction in the relationship between Wells Fargo & Bilt. What was reported and what do we make of the details? Find out in this episode of Coffee Break.
(01:16) What the Wall Street Journal Article says
(02:01) Digging into article details a bit about the Bilt / Wells Fargo relationship
(06:34) Fraud and Money Laundering Concerns
(09:44) The Wells Fargo and Bilt response
(10:34) WSJ article key points quick summary
(11:12) Our take about what this all means
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I’ve had to get a new card 3x already (in 1.5 years) because of fraudulent charges. This has happened maybe once in decades with another of my (many) cards. So of course that makes me less likely to use Bilt for more purchases than the minimum necessary- maybe Wells Fargo should work on that.
Gee, wonder who in the “Club” came up with that scam, lol
I think that we might see some changes like increasing the minimum transactions to get rent points like from the actual 5 transactions to 15 or 20 transactions in addition to rent. This way they may offset partially with swiping fees.
I hadn’t realized until this article and your discussion on it that the Bilt fraud issues stemmed from an inadequate pseudo-random number generator. I’m not in the financial software space to know the specifics on generating card and account numbers but do work in cybersecurity and hang out with enough computer science nerds to feel like… that seems like a glaring oversight for a Fintech. It’s not like mainstream banks have great functional websites and backend systems either (there’s no IT in Citi). But it raises some valid concerns about how well developed Bilt’s systems are when they are focusing primarily on growth. Move fast and break things I guess?
One thing I cannot believe still exists is Bilt Protect, where your rent payment is immediately pulled from your bank account, leaving available credit on the card untouched. I use that exclusively, to preserve my full credit limit; if WF wants to improve the economics of the card, eliminating that option has to be something they start with.
Why would this help? I think it would hurt. One of the problems mentioned was the 35% non-rent usage that they were expecting to be 65%. I’ve already been reading about remarkably low credit lines (WF’s decisions), which I feel is part of the reason for this inversion. This feature theoretically helps, not hurts.
I think you are correct that there is very little risk that Bilt points will suddenly disappear. I am worried though about how all this impacts what makes Bilt points so valuable: the probability of large transfer bonuses in the future. You do not directly address how the info in the WSJ article does or doesn’t affect this probability. I think if anything it reduces the probability of juicy future bonuses what with WF telling Bilt the current business model is not making enough $$$. So that makes me think I should put less spend on my Bilt card unless and until I see more big transfer bonuses. And maybe if we do get another big transfer bonus it might be time to transfer all my Bilt points.
If there is no transfer bonus in August, the quarterly transfer bonuses are likely dead and the best we can hope for is an annual transfer bonus. Nick has a strong argument that Alaska (or any other US-based program) would be unlikely. I’m pulling for Emirates.
It’s interesting that the WSJ article didn’t mention Rent Day at all. I didn’t think to address that on coffee break, but it’s an interesting point to consider. Is it possible that wasn’t mentioned because that doesn’t cost WF anything? I don’t know about the economics of this stuff, but what if the brunt of a big Rent Day transfer bonus is actually paid for by the loyalty program? After all, as I’ve said in the past, these foreign loyalty programs want a piece of the US credit card market pie. Airlines like AA, UA, and DL are making money hand over fist selling miles to banks — if a foreign program can tap into a piece of that market share, it could be a big deal for them.
Bilt purportedly has exactly what they want — young members who mainly reside in major cities (and therefore presumably have higher than average incomes (though I certainly don’t know that to be a fact) and a greater likelihood of living in a city served by Air France or Avianca or whatever). Through a recent conversation (unrelated to Bilt), I learned that one of the roadblocks for a program becoming a transfer partner of one of the major transferable currencies (again, not Bilt) was a need to have a minimum number of US-based members to be able to negotiate with the bank. A program like Bilt at least on paper looks like it gives them the opportunity to tap into a large member base of relatively young members who may eventually have other cards with transferable currencies — so if they provide a big transfer bonus that enables members to make a meaningful redemption now, presumably early in their award travel journey, it perhaps increases the likelihood of those members coming back in the future whether with their Bilt points or other transferable currencies.
I’m just shooting in the dark with all that — I don’t know for sure what’s at play there. Maybe the cost of Rent Day is an issue for WF. Interesting that it wasn’t referenced, but maybe not meaningful that it wasn’t.
Truth be told, I never expected the huge transfer bonuses would be on a regular predictable timeline. I think Bilt long ago pretty strongly veered away from predictability.
Bilt gets a cut of the interchange fees, partly for managing the loyalty program, so it bears the cost of those transfer bonuses. It’s highly likely that Bilt would be forced to renegotiate its agreement with Wells, and a revised agreement will surely leave Bilt with less to fund such promotions that help attract new cardholders and entice existing cardholders to put more spending on the card. Without such promotions, it’s likely that Bilt wouldn’t be able to grow beyond its core base of young creditworthy and travel-loving renters.
How do you know that Bilt bears the cost of the transfer bonuses and that the loyalty programs themselves aren’t funding them? I don’t know that the loyalty programs are, I’m just not sure how you are sure that Bilt is?
For what it’s worth, I don’t imagine that Amex or Citi or anyone else is funding the transfer bonuses from those currencies to mileage programs, either. Those redemptions cost them more than when people redeem for gift cards or travel or whatever — I can’t see why the bank would want to overly incentivize those redemptions in general. I think (this is my long-held impression anyway) that the major transferable currency programs offer transfer partners as a way to keep the mileage nerds among us excited about their programs and talking about them, but I have to imagine that Amex would far rather see people book hotels at 0.6cpp than transfer to any of their airline partners, so I would think when we see a 15% or 20% or 25% transfer bonus to an airline, it’s the airline eating the “cost” of that. I don’t know that to be true, but it seems logical to me.
I didn’t mean to say that Bilt bore ALL the cost of those massive transfer bonuses. Loyalty programs do typically incentivize credit card programs to promote transfers to their programs. However, those incentives are much smaller than what Bilt had previously offered on their Rent Days. And more importantly, the rest of the cost is borne by Bilt, not Wells.
Bilt’s current business model relies on rapid growth (which covers a lot of sins). With the negative publicity due to the WSJ article, the pace of acquisition of new cardholders will undoubtedly slow down (perhaps dramatically). It’s highly likely that Wells will be able to renegotiate its contract with Bilt, leaving Bilt with fewer means to fund its growth and offer meaningful enticements to attract new cardholders. Those massive transfer bonuses are almost certainly history. Instead, Bilt is likely to focus on offering incentives so its cardholders would use their cards more often on everyday spending. I’m not worried about Bilt going out of business, unless cardholders all start transferring their points out (which would likely raise the upfront cost to Bilt so much that it can’t afford at this point).
Looks like their response was missed to the WSJ piece. Don’t know when it was recorded but https://www.pymnts.com/credit-cards/2024/wells-fargo-and-bilt-deny-rocky-card-relationship/
If a typical hobbyist is only using the Bilt card for rent (and putting all other spending on other cards), exactly what is at risk to the hobbyist? Points that one would not have otherwise received on any other card?
I disagree with your analysis regarding WF’s cost of customer acquisition. Even though on average banks pay close to 1k per customer and WF is paying only 200, normal card issuers start to make money on interchange fees right away. But with Bilt, WF loses money on each rent related transaction. So they earn fees on only 20% of the volume. Their economics is a lot worse…
Tried to transfer some points for the first time since yesterday. No matter which program, I always get an error:
Oops
Something went wrong and your points weren’t transferred. Please try again.
Several other people are reporting the same issue on Reddit, with some not very helpful canned replies from Bilt (log out, try again).
Are you currently overseas? I know that’s been a problem for people in the past.
Are you linking and transferring to a new account on the other side (like for example my wife had a problem transferring from Amex to an Emirates account when she had just created her Emirates account – I later learned that it was because the Emirates account hadn’t been open for at least 7 days before transferring – different programs have different thresholds there).
No, I am in the US, and the transfer targets I tried aren’t new (or empty) loyalty accounts. They even had been linked to the Bilt account for months. And we aren’t talking about a large transfer, just a few thousand points that have been built up through the Rent Day games.
The problem occurs with my wife’s Bilt account (that I manage). I was able to transfer my own Bilt points successfully, then logged into her account on the same devices (tried phone and iPad). Maybe Bilt didn’t like that.
Thank you! You guys are great.
Disagree with your assessment. Yes, BILT is making big dough. WF is losing their shirt and will find away to drastically diminish its rewards and/or find a legal reason to sue to void the contract. Notice the recent and consistent absence of the previous awesome transfer bonuses (you have mentioned that you’ve noticed). Transfer out now.
I just don’t understand that assessment.
Let’s break it down like this:
1) The article says Wells has been losing “up to $10mil per month”. That tells me not $10mil every month, but let’s suppose it was a full $10mil every month for the 18 months referenced in the article. That’s $180mil.
2) The article says that Wells has gained one million new cardholders in that 18 months.
3) $180mil / 1 mil customers = $180 cost per customer.
When any major bank releases a 100K bonus and offers a referral bonus of let’s say 20K, they are easily losing $1000 per new customer right off the bat. Do you think they make up $820 of that on average in the first 18 months?
I would very much doubt that. An investment like that is considered standard practice by most banks because they’ve done the math to figure that’s going to work out long term.
I think the cost here to Wells sounds entirely reasonable. I certainly wouldn’t characterize that as “Wells is losing their shirt” based on the data in the WSJ article. It sounds to me like they bought themselves a relatively cheap way to test out that market without having to build and maintain the whole thing.
I don’t know what the future of Rent Day will hold, but in the two years since they launched with Wells we’ve seen them add several new partners and only lose one and we were given plenty of advance notice about losing AA, so I just can’t understand where you’re coming from with the “transfer out now” mentality. Maybe you’ll be right to have done it, but I don’t understand how anything in that article would point to it.
Again, “losing their shirt” in comparison to what? What major credit card launch / welcome bonus do you think is losing less money on average over an 18 month window?
*crosses fingers for an Alaska transfer bonus
Wish is granted.