Wells Fargo Bet on a Flashy Rent Credit Card. It Is Costing the Bank Dearly. (wsj.com) 46
Wells Fargo's co-branded credit card partnership with fintech startup Bilt Technologies is causing the bank to lose up as much as $10 million monthly, according to a WSJ report. The bank agreed to a co-branded program with the fintech startup that most other big banks -- including JPMorgan Chase -- passed on, incorrectly modeled key assumptions and sees no path to profitability. The card, which allows users to pay rent without fees while earning rewards, has attracted many young customers. From the report: There is a reason why credit cards hadn't gained traction in the rent sector until Bilt came along. Most landlords didn't accept them because they refuse to pay card fees that get pocketed by the banks issuing them and often run between 2% and 3%.
Bilt structured the card so landlords won't incur the fees. Wells instead eats much of that. About six months after the credit card was launched, Wells began paying Bilt a fee of about 0.80% of each rent transaction, even though the bank isn't collecting interchange fees from landlords. It appears that the problem for Wells Fargo is that Bilt customers are savvy. They are making the rent payments, but not carrying balances or doing any other transactions through the card.
Bilt structured the card so landlords won't incur the fees. Wells instead eats much of that. About six months after the credit card was launched, Wells began paying Bilt a fee of about 0.80% of each rent transaction, even though the bank isn't collecting interchange fees from landlords. It appears that the problem for Wells Fargo is that Bilt customers are savvy. They are making the rent payments, but not carrying balances or doing any other transactions through the card.
Good (Score:5, Insightful)
Losing $10 million a month? Couldn't happen to a more deserving bank, their sleaze and history of ripping off customers is almost unparalleled.
Re: (Score:2)
Wells Fargo spent $179M in 2023 on legal expenses and $207M on customer remediation, in addition to $797M of "other" expenses, whatever that means.
This bank knows how to lose money, after all money is debt, and you can't get taxed on debt.
Re:Good (Score:4)
I only wish they were losing more money. Wells Fargo was by far the worst bank I ever dealt with.
Re: (Score:2)
It's just history repeating itself:
https://en.wikipedia.org/wiki/... [wikipedia.org]
Re:Good (Score:4)
LOL - They staff at Well's probably collectively spends that much of fancy coffee each month.
Spending 10m a month for a could years while you market test and find out what the real consumer behavior is, part of being a big fish in that business.
Is it a disappointing result sure - and maybe someone isn't get a bonus this quarter, but they are not losing their job either. Meanwhile Wells and their partners will either start closing down the product offering and or restructure it to try to get customers to also use the card for other purchases and maybe run a NET30 balance once in a while. Its just another week in finance...
Re:Good (Score:4)
Re: (Score:2)
Re: (Score:3)
While you definitely have a point, I don't think that BoA ever went so far as to take out credit cards in their customers' names without their knowledge.
Re: (Score:2)
Some history (Score:2)
"Wells Fargo" has not actually existed for more than 25 years. The transition started in 1986, when Wells merged with Crocker Bank, and the combined entity kept the Wells Fargo Bank name, but adopted Crocker's charter, because it allowed them to engage in businesses that Wells' original charter did not.
Wells bought bank after bank throughout the "merger fever" period of the 1990's, but the deal that fundamentally changed its management culture for the worst was its 1998 "merger of equals" with Norwest Corpo
That's ok (Score:1)
The government is sending a check by courier. Thoughts and prayers for Wells Fargo in this difficult time.
Re: That's ok (Score:1)
You arenâ(TM)t joking:
https://www.politico.com/news/... [politico.com]
https://www.cbsnews.com/sanfra... [cbsnews.com]
Rewarding the bank where the family does business, they are also the bank for Owasco, Rosemont Seneca and related businesses.
Burdens of A Financially Responsible Customer Base (Score:5, Insightful)
They are making the rent payments, but not carrying balances or doing any other transactions through the card.
It's sick that this is considered a failure in business. Ya, I get that all the rewards given to people who use a card are funded by the inability of others to make their credit card payments on time, but still... It just seems wrong that an article gets published pitying a company that had HOPED that people wouldn't be able to pay their debts.
Re:Burdens of A Financially Responsible Customer B (Score:5, Insightful)
I get that all the rewards given to people who use a card are funded by the inability of others to make their credit card payments on time
Actually, generally those are funded by high transaction fees inflicted on the merchant. There's a reason other financial institutions passed, they don't want to bet solely on people carrying a balance, it's widely recognized as a bad bet. Certainly profitable, but still bad to risk losing money on each transaction in a systematic way on something as uncertain as carrying a balance.
dude (Score:1)
I know reading comprehension is not required to get tech jobs but you have somehow quoted a single sentence less than 20 words long and failed to comprehend it in TWO different ways. So, uh well done?
The sentence says: "not carrying balances" or "[not] doing any other transactions through the card". Neither of those is "the inability of others to make their credit card payments on time."
It's not so much interest that pays rewards (Score:4)
The idea is that the merchant makes it up because people paying with cards spend more. e.g. you go to best buy for a TV and walk out with a TV, a new Playstation game and a fancy overpriced HDMI cable.
That doesn't work with rent & utilities because you can't really tack on anything to them. They are what they are.
It's painfully obvious what this was, Wells Fargo was gonna run this for a bit, get everybody into the ecosystem and used to paying this way, then jack up the fees.
Those fees may or may not get passed onto the renter. On the one hand landlords have pretty much maxed out what they can charge w/o people becoming homeless (they don't care, btw, but they *are* worried about government action) on the other hand they've been pretty bold of late...
Re: (Score:3)
Quite honestly, the land lords should get used to paying the fees and they should like it.
The worst thing about being a mom-and-pop land lord is handling rent collection. You have people paying late, you have people doing strange things like showing up with cash on rent day, rather than a check. Which you then have to deal with or risk having sitting around. You have checks bounce. In the last case ACH drafts don't eliminate the problem either. Its a pain in the butt.
Having your tenants have a card on file
Re: (Score:2)
They are making the rent payments, but not carrying balances or doing any other transactions through the card.
It's sick that this is considered a failure in business. Ya, I get that all the rewards given to people who use a card are funded by the inability of others to make their credit card payments on time, but still... It just seems wrong that an article gets published pitying a company that had HOPED that people wouldn't be able to pay their debts.
It is not that the bank -- which is, objectively, an evil enterprise that should have been destroyed (with prejudice) when its practices of wanton fraud and theft from everyday customers were revealed -- hopes that people can't "pay their debts"; it's that they hoped that a line of credit would encourage people to carry some debt, which is a fairly normal thing for people to do.
To be fair (Score:5, Insightful)
Re: (Score:3)
I'm not sure these cardholders are necessarily "fiscally savvy". If you have to carry a balance on your "rent credit card", you can't afford the rent where you live. That situation doesn't last very long.
That's not what the article says:
It appears that the problem for Wells Fargo is that Bilt customers are savvy. They are making the rent payments, but not carrying balances or doing any other transactions through the card.
They specifically are NOT carrying balances, they're just using the card to get the rent over to their Landlord, and then paying it off right away. Seems savvy enough to me.
Re: (Score:2)
You missed my point. A "rent credit card" was never going to be a big moneymaker, because rent is your big survival expense.
Savvy cardholders are the ones who save up for their occasional or optional expenses instead of paying interest.
The credit card model doesn't work with a large expenditure you have to pay every month.
Re: (Score:2)
Bad bet (Score:3)
Wells Fargo made a wager that they were smarter than their customers. Turns out the opposite was true.
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Gee. (Score:2)
Couldn't happen to a nicer bunch of venal assholes.
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World's-Tiniest-violin.GIF (Score:3)
Disgusting Rentos (Score:2)
I'll bet all the people involved in this card hadn't lived in an apartment since the one their parents paid for in college and assumed they only needed to get this thing into the hands of obviously financially illiterate renters and let the money roll in.
If they're too stupid to buy a home at 23 like I did I don't see how they could possibly have the sense not to run up their cards and carry a balance like I did when my parents bailed me out at 25
--- 31 year old director of whatever at
That's because... (Score:5, Informative)
couldn't have happened to a better bunch (Score:2)
Never be behind on rent again! (Score:2)
Instead you can pay 29.49% APR interest on balance from last month's rent. For an $1800 rent that's $44.24 (1800 * (.2949 / 12)). Not bad, but it's going to really compound if you can't pay off both this months and last months rent before the credit card is due. Then you'll be 2 months behind, and soon you're paying hundreds of dollars in interest every month because you're never able to get ahead.
You know what, fuck these guys.
People refusing to be abused is good. (Score:1)
> it appears that the problem for Wells Fargo is that Bilt customers are savvy. They are making the rent payments, but not carrying balances or doing any other transactions through the card.
Debt is a trap, and Wells Fargo honestly expected its customers to be dumb enough to fall for this trap, and now they're losing money because their customers are smarter than they thought?
This is the best news I've heard all day.
Re: (Score:1)
using the credit card issuer's month for up to a month isn't a trap though. I run $2K a month through my credit cards, with no fees and no interest, just paying off full balance each month.
I have astounding credit rating. docked a few points for not carrying a balance.... which is useless anyway since I won't borrow, lolz
I'm trying to feel bad but... (Score:1)
...nothing is happening.
That's some serious money (Score:2)
Probably a drop in the land lord sea, but still looks like an insane amount to me.
Re: (Score:3)
Just about 1% of net income (Score:2)
I would hardly call that "costing it dearly"...
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Their net income is negative (for that card).
Re: (Score:2)
Yes. So? I was obviously talking about the overall net income. Not everything a complex organization does can be profitable.
Who's the sucker now, Wells Fargo? (Score:2)
What's wrong, did somebody rob the stage coach but you can't call it identity theft? Funny how the customers you prefer and profit from the most no longer accept your terms and head out the door.
Profitable customers are risky... (Score:2)
You can't have both. You either lend to risky customers who carry large balances, or you lend to customers who won't be stupid enough nor need to.
Amazing incompetence (Score:2)
Don't use credit cards transfers. You ARE A BANK. Just use Swift, or another direct transfer, it costs nothing idiots.