Originally Posted by
Caspavio
https://www.wsj.com/finance/banking/...-rent-336dae4b
quite an interesting read and a few thoughts about it
1) given that bilt and wf are the merchant, issuer and potentially acquirer in this scenario, i wonder if they could have avoid the ~1% paid to mastercard by not processing the transaction over the network? they technically dont have to, and the costs will then be reduced to cost of bilt making payments to landlords, cost of wf issuing and some infra/processing costs that are minimal deltas because wf already issues their own cards
WF avoided the interchange to mastercard either way - BILT's rent portal processed the rent transaction closed loop. For non-BILT rent portals it was an ACH direct debit or WF mailed the landlord a check. Problem is, WF collected nothing from these transactions in swipe fees, while still having to pay out 0.80% of transaction total to BILT to fund the rewards. This turned out to be highly unprofitable when BILT cardholders didn't regularly use the card for non-rent spend or carry balances as WF was expecting.
Originally Posted by
Caspavio
2) it also seems like the decision to work with cardless is more due to wf's jun 2026 ultimatum. i dont quite understand cardless, but they seem to mostly earn via af, interchange fees, interests, etc, and they have less opportunities than wf to for alternative revenue streams, so it really begs the question if bilt is going with them and revamping the card lineup, why didnt/couldnt they work something out with wf as that (especially having annual fees) is essentially what wf is asking for
It's the only reason. WF didn't have an out to exit the contract unilaterally. So the lawyers pored over the contract and found nothing in the contract prevented WF from making the card have such an absurd annual fee ($250-$300) that nobody would want it and those who had it already would abandon it. BILT blinked and moved to Cardless over having WF pull that move.
Originally Posted by
Caspavio
3) bilt doesnt have a welcome bonus, instead what it has is the perk of being able to collect points for rent. if this is nerfed, then i dont see why people should get this card; one is probably better off (with caveats) paying rent with a new card and get SUB. someone suggested capping at 1k per month, that is only 12k points a year and you need to accumulate for approx 4 or 5 years compared to a 50-60k SUB. even if you are someone who doesnt like getting new cards, you are much better off simply by getting a new card every 3 years
BILT gets paid $200 by Wells for every approved application; the decision to not offer a portion of that as the SUB is on BILT, not WF. There is one exception to that, which is when WF refused to buy out Evolve's BILT Card portfolio. BILT offered 10,000 points (we'll call that "half" of that $200, although at least for statement credit I understand that Bilt points are something like 0.55cpp) for Evolve cardholders to apply to WF Bilt Card as a new tradeline with a hard pull.
Originally Posted by
Caspavio
wf had expected to profit when cardholders eventually get a mortgage from them. although that didnt turn out so well, it would be harder for cardless because it seems that they would have to compete with other credit card. it definitely doesnt bode well if we look at the bilt survey sent out earlier. the multipliers are mediocre, bilt hotels and bilt dining are poor, and im not even sure credits for bilt travel hotel, bilt fitness and walgreens are useful to the targeted demographics. this is beside the fact that people generally do not like credits in the first place
June 2024 WSJ article on WF losing $10M a month on BILT:
Originally Posted by WSJ
Few projections that Wells had for the card have panned out. The bank assumed around 65% of card-purchase volume would be nonrent, generating interchange-fee revenue. The reality is inverted.
Wells expected that around half to three-fourths of dollars charged to the card would carry over from month to month, generating interest charges. The reality ranges between around 15% and 25%.
[...]
Wells has told Bilt that cardholder behavior isn’t providing a path for profitability for the bank and that more customers who carry balances and use the card for everyday purchases are needed.
Whatever structure BILT 2.0 provides on cardless in the line of Ankur Jain talking to the effect of Bilt 2.0 being creating a program that is more rewarding the more you engage with BILT and subtle complaining about 4 bananas in 4 transactions non-rent spend will be less rewarding. You will see <1x rent rewards, greater requirements to earn rent rewards (more transactions, minimum non-rent spend, or a combination thereof most likely), and/or then lower requirements to get rent on the AF cards.
Whatever rewards structure exists on the 2.0 card will invariably be worse because WF making the sucker's bet on the current product is publicly known via the WSJ reporting at this point. Cardless/First Electronic Bank (as the issuer in the back) are tiny compared to Wells. FEB's total equity is around $150M USD total, they cannot afford to lose $10M a month, and would never agree to the current rewards structure because it'd put them under in less than a year and a half.
Tiered rent rewards on all of the cards based on non-rent spend and a cap on rent rewards would limit the potential downside for Cardless/FEB, and it's ultimately what I expect will be unveiled in BILT 2.0.