I've gotten tremendous value from Bilt Rewards since the program started three years ago. They have “built” a large customer base by offering rich rewards while solving major distribution problems for merchants, landlords, and banks.
As the first rewards program to offer points for rent payments, the brand was able to reach a highly valued demographic: affluent young urban professionals. As a result, they signed a hefty credit card deal with Wells Fargo (perhaps too wealthy, but Wells was also an early investor and has seen its value soar). And they are in a position to collaborate with some of the best travel brands and retail companies.
This morning, Bilt released a new message to program members that reveals a real turning point in our strategy. The message is: “We're more than just a credit card.” They have partnerships with restaurants, Walgreens, and Lyft, and partner with real estate agents to offer rebates, so they offer more than just rentals.
In this message, they reveal some of their vision for 2025, detail the economics, and drop what I call a bombshell about their plans for Bilt Cards.
Uncovering the economics of built rewards
recent builds Explained the economics of point exchange on Reddit, in an unusually transparent move. As a result, they are concerned about average replacement cost. The more people who redeem points for rent at lower prices or redeem points on Amazon (for 7/10 of a cent), the more they can afford to transfer higher-priced points to programs like Hyatt. .
Bild says the company issues “tens of billions of points to members to pay rent,” and millions of members receive “free elite status on airlines and hotels, free rideshare credits, and more.” He said he was taking advantage of the rent-day benefit. We loved the status offers with United, Hyatt, Air France and Alaska Airlines, as well as the record transfer bonuses with Virgin Atlantic, Air France KLM, Hawaiian Airlines, Emirates and more.
They are sharing a deck with members that describes:
- They receive compensation for processing rent payments, which, in addition to co-branded rent payments with Wells Fargo, funds the points they earn on rent payments. They get paid to process rent payments, reports Bild, which processes more than $36 billion a year, more than tripling year-over-year, and has many more to come. It is expected to double in a month. If you can get even one day's float on these payments at current interest rates, that's profitable too.
- Companies that want to market to a favorable demographic pay a fee and rebate a portion of it in points. Bilt shares that its Neighborhood Benefits merchant partnerships generate up to $3 billion in annual spend, up 50% year-over-year, with food and beverage spending at $1 billion (2.5x year-over-year). $300 million at Lyft (up 50%). $350 million (up 75%) through travel portals. [That only accounts for half the reported $3 billion though of course there’s fitness and pharmacy as well.]
- These are loyalty programs for landlords, and in the same way that real estate agents rebate a portion of the commission they earn for representing home buyers, landlords earn lease commissions based on the points they provide. In both cases, the payment to Bilt is a marketing expense, and it goes through Bilt because it pockets a portion of it.
Some interesting facts are that approximately 15% of Bilt members have a Bilt credit card and its partnership network includes approximately 24,000 local businesses.
15% of Bilt members have a co-brand, which strikes me as a huge number, as most people sign up for this program as a necessary means of paying their rent. We work with 70% of the top 100 landlords that process rent payments). But we know from wall street journal It reports that more than 1 million card accounts were opened in the first 18 months.
Of course, 20,000 of the participating merchants in your neighborhood are Rewards Network restaurants, and Bilt is an option to earn Bilt points instead of airline miles (though Bilt points are generally more valuable, of course). The restaurants that Bild visits in person are generally great, and I eat there regularly. Most Rewards Network restaurants don't.
Besides restaurants, it's great to be able to earn points on purchases at Lyft and Walgreens.
It looks like they want to expand in this area, perhaps because of the economics of credit card contracts and the challenges of what that will look like in the future, but also because of the current credit card offerings. This is also because we want to grow faster than scale.
Of course, their valuation has already reached $3.2 billion. It is said to be profitable. Their deal is good for Bild and good for their members, but they want to grow and the current arrangement where Wells Fargo funds rent payments is too much to keep this way in the long run. It may be too generous for your body (although you're making 3x more money). It's probably more financially sound to pay rent on an Alaska visa).
Bild's destination
Bild says the following will happen in the year ahead:
- Earn points on both your monthly mortgage payments and refinances. This is great because right now there are very limited options to earn points on your mortgage payments without the 2.9% fee. Even if you follow Alaska Airlines' model, a 3% fee on 3x earnings would be great, especially since Alaska Card usage counts toward status. I predicted that points would also be awarded for originating and refinancing mortgages. We've seen this before (I've earned this point myself over the years) and it ties in nicely with the points in real estate transactions.
- New credit card partnership for rent payments Like the Alaska Visa, this will likely be done with a variety of credit and debit cards (either using a built-in card or using other credit or debit cards that you may already have). We're expanding our partnership to help you get more with your rent, no matter what you use it for.''
- Added ability to earn points at supermarkets, gas stations, and parking lots. I'm not sure how much you care about parking, and a gas station's frequent flyer program may have fewer perks than the gas station's own program, assuming you have to choose for yourself. But since United Airlines' GroceryMiles program with Safeway ended in 2010, they've been missing out on income at grocery stores.
- Expanding and Improving One-Tap Restaurant Payments and Automated FSA Processing at Walgreens. These are great innovations that make life easier.
- Lease renewal offers even more benefits.
At Avenue5, one of the largest property management services, we found in our pilot program that 95% of residents renew their lease early if offered perks incentives, and these benefits shows how valuable it is to our members.
Introducing a new value proposition for credit cards
There are signs that the direction of co-branded credit card partnerships will change significantly.
His contract with Wells Fargo runs through 2029, but it looks like things aren't going as well as Wells had hoped. Wells has been aggressive in investing capital into entering co-branded businesses and is very generous with initial deals as an investment to build a portfolio and experience that will serve as a platform for exploring other larger deals. did.
To back it up, there were aggressive assumptions about how people would spend on cards and how much consumers would rotate. And this was done during the ZIRP era. Since then, they appear to be heading in a different strategic direction, leaning more into their own card portfolio (e.g. launching their own lucrative Autograph Journey product).
Mr. Bild letter to members Downplaying the importance and role of cards as a transitional period,
For the first two years, Bilt Mastercard served as a bridge to reward customers for paying rent, while we also built something bigger: a payments platform that rewards members no matter how they pay their rent. .
It also talks about new products coming in 2.0, which it expects to have the potential to increase membership by 15% to 25% beyond its current offering (“Bilt Card is expected to increase membership by 15% to 25%”). We expect it to remain the preferred payment option for ~25% of our members).
It's unclear whether the “tiered service” they're talking about means the introduction of premium cards at different price points in addition to the current cards, or if it means a different value proposition. But the “we know you want more premium service” letter sounds like a second annual fee card.
What's really surprising about the letter is that it's even more candid. – “All of this requires the support of our issuing banks, and we are actively working on solutions,” they say. This sounds like throwing a major conspiracy at Welles and doing it publicly. But when I read that sentence, my eyes nearly popped out because such candor about large partnerships rarely comes across in carefully crafted public statements.
With guidance from industry legends Ken Chennault (former CEO of American Express and Chairman of Bild) and Philip Reese (former President of American Express Consumer Cards), we are on track for Bild Card 2.0. We are proceeding with construction. This next evolution of our card program will focus on tiered services that better meet the needs of a variety of members while increasing value through new benefits on home spending and neighborhood networking. As we continue to innovate and enhance the card experience, we expect the Bilt card to remain the preferred payment option for 15-25% of our members.
But more importantly, we've been reading and passing on your feedback and requests for the current Built Card program issued and operated by Wells Fargo. We know you want more premium products and a way to earn points on your mortgage payment. We also hear about the challenges many of you are having with the need for basic technology features such as approval rates, line of credit size, authorized users, long-term payments, and automatic payment integration. Credit limits are too low to cover more than 1-2 months of rent, leaving room to maximize the card's benefits, especially considering these members' average FICO is over 750. Some people say that there is almost no Loud and clear. All of these require support from our issuing bank partners, and we are actively working on solutions.
Something big is happening with Bilt's credit card partnership. I don't know that yet. But it's amazing how quickly they built their business with funding from investors and diversified beyond just a card program, expanding into restaurants, pharmacies, residential real estate, and more with their partnerships. Not.
