In the world of miles and points, many of us are familiar with the Bilt Mastercard® (review). This is a valuable no-annual-fee card that allows landlords to pay rent with a credit card and earn rewards without having to pay rent with a credit card. We usually accept credit card payments with no fees.
Bilt offers great value to our members, but I think many of us are interested in how sustainable our business model is. The company's valuation continues to rise (into the billions of dollars), but growth and high valuations don't necessarily translate to profitability.
This week's build is Published a letter of about 1,700 words It was also sent to members with the signature of the company's CEO. This is interesting on several levels.
- Signals changes coming to Bilt Mastercard
- Hints at new opportunities to earn points, including on mortgages and more
- Explain Bilt's business model and how the company makes money.
What I don't understand is whether this letter is really meant to be as positive as it sounds, or if it's just a big ( The question is, are they just hinting at a negative (negative) change?
Bild plans changes to Wells Fargo credit cards
Bilt's co-branded credit cards are issued by Wells Fargo, and we learned a few months ago that Wells Fargo was reportedly losing $10 million a month on this product. As cardholders know, you can earn points on your rent payments at no additional cost. Here's what we learned about card economics back then.
- Although Wells Fargo does not collect exchange fees from landlords, it pays Bild a 0.8% fee on all rental transactions (Bild does not issue rewards to members for these transactions). Wells Fargo pays Bild because
- Wells Fargo will pay Bilt $200 for each new card account issued, similar to what is seen in co-branding agreements with airlines and hotels.
- Wells Fargo had predicted that approximately 65% of the purchase price of Bilt Mastercard would be non-rental expenses and would generate interchange fee income. reality is reversed
- Wells Fargo predicted that about 50 to 75 percent of purchases charged to the card would be rolled over and accrue interest monthly, but it's actually 15 to 25 percent.
In other words, Wells Fargo is losing money on this deal. It is therefore notable that the letter repeatedly attempts to downplay the importance of this card, noting that only 15% of Bild members have one.
- “While our award-winning co-branded credit cards are getting a lot of attention, they are still just one part of our business.”
- “For the first two years, Bild Mastercard provided a bridge for us to reward our customers with rent payments while we built something bigger.”
- “With the guidance of industry legends Ken Chennault (former CEO of American Express and chairman of Bild) and Philip Reese (former president of American Express Consumer Cards), we We are building towards 2.0.”
- “The next evolution of our card program will focus on tiered services that better meet the needs of our diverse members while increasing value through new benefits on home spending and neighborhood networking.”
It's also interesting that Bild is basically blaming Wells Fargo and accusing Wells Fargo of not really providing the “support” that Bild needs.
“We have read and shared your feedback and requests for the current Built Card program, issued and operated by Wells Fargo. We understand that many of you want a way to earn money and need core technology features such as approval rates, line of credit size, authorized users, long-term payments, and automatic payment integration. I have also heard about the issue of having a rent limit that is too low. ~ Some people say they can't cover more than 2 months, leaving little room to maximize the card's benefits, especially considering these members' average FICO is over 750. All of this requires support from our issuing bank partners, and we are actively working on solutions.”
We'll have to wait and see how this develops, but I don't think it will be good news for cardholders. After all, card issuers are losing money on their products, and that's not sustainable in the long run. But describing this card as basically a “bridge” for the first two years doesn't give me much confidence.
Bilt also highlights how you can earn points on your rent payments even if you don't have a Bilt Mastercard. That's true, but note how little it rewards. Instead of earning 1 point per dollar spent, you can earn a total of 250 points each month for on-time payments, but only if you live in a Bilt Alliance network property. It's objectively probably worth a few bucks (better than nothing, but not that exciting).
Bild wants to offer points for mortgage payments
The letter further explains that beginning in 2025, Bild will begin offering the opportunity to earn points on mortgage payments. At this point, we don't know what will happen, and we don't necessarily expect it to be as lucrative as the opportunity to earn points on rentals if you have a co-branded credit card. In fact, I think you can bet that it won't be that profitable. But still, something is better than nothing.
Bilt also plans to expand the opportunity to earn rewards on rent payments, whether you use a Bilt credit card or another card, but there are no further details.
Bild explains its business model.
The main part of Bilt's letter is devoted to explaining how Bilt's business model works and how essentially the three businesses are interconnected. The letter says that while credit cards get a lot of attention, they are only one part of the business, and that the company's three strong, interconnected businesses form “the nation's largest home rewards platform.” states.
This can be summarized in the most basic way as follows (see slides below for more details).
- Part of the company's business is housing payment processing, with $700 billion in rent payments processed annually in the United States. Bilt receives fees for processing these payments and passes a portion of those rewards back to members.
- Another part of the company's business is connected commerce, where Bilt gets paid when people eat at certain restaurants, take a Lyft ride, or get their prescriptions refilled at Walgreens. Then members will earn some rewards
- The final part of the company's business model is leasing and home purchase incentives. This allows the company to profit from the incentives that both property managers and agents spend to acquire customers.
There's no denying that these are all potentially great sources of revenue. Bild has the advantage of growing both its membership base and network of partner facilities. However, I think it's pretty notable that Bilt fundamentally doesn't consider co-branded credit cards to be the core of its business.
While Bilt generally offers value, it's definitely the credit card that's most appealing to consumers. Because credit cards have the potential to earn you the biggest rewards.
conclusion
Bild sent a letter to members explaining how the company makes money, what changes are coming to the credit card, and whether it hopes to offer more points-earning opportunities starting in 2025. Explained.
Reading between the lines, what strikes me most is that big changes to credit cards could happen sooner rather than later. Even with the changes, it's hard to imagine the core value proposition of a no-annual-fee card that lets you earn 1 point per dollar spent on rent payments to be as good as it is now.
What do you think about this letter from Bild?
