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Wells Fargo may have underestimated how savvy young professionals would be when it came to credit cards that offer renter rewards.
In 2022, San Francisco-based bank Wells Fargo partnered with fintech startup Built Technologies to offer a rewards program to encourage customers to pay rent with their credit cards.
For many young renters, the appeal was clear: Built offered a card with no annual fee, and users could earn points with every rental payment without incurring transaction fees. The only requirement was that customers make five transactions per statement period to earn points.
Customers can also earn points on travel and dining, which can then be used toward purchases with Built’s partner airlines, including Alaska Airlines, Virgin Atlantic, Hyatt and SoulCycle.
according to The Wall Street JournalBuilt opened over 1 million accounts within its first 18 months.
But the benefits for banks are yet to materialize.
“A new generation of young, affluent customers”
Built’s customer demographic is decidedly different from the average American, whose average annual income is just under $60,000 and 49% of people carry a monthly credit card balance.
But a report on Built by investment bank Financial Technology Partners said the company was reaching “a new generation of younger, more affluent customers.”
Dave Canty, Built’s head of loyalty and partnerships, said in an interview with The Wise Marketer in February that the company’s core customer demographic is between 24 and 34 years old, with the average age being about 29.
“The average income is about $147,000, so these are high-caliber young professionals,” he said in an interview.
Built Bank CEO and founder Ankur Jain told X that his company is attracting “highly valuable customers” from Wells Fargo at a lower cost, with an average age of 31 and a FICO score of 760, he said.
Kevin and Amanda Sumit, a married couple from Miami, told Business Insider that they’ve been BuiltCard members for about a year after hearing about the program on a finance podcast.
“I’d never heard of it, and I thought, ‘Wow, that’s such a clever idea,’ especially if you live in a big city like New York or Miami, where rent costs a lot of money,” says Amanda, a 32-year-old business owner and nurse anesthetist. “I thought, ‘That makes a lot of sense, because I’m paying a lot of rent every month and I can get points.'”
The pair maintained they were financially responsible and told BI they had never carried balances on several personal credit cards, including Bild’s.
“I learned about this on a financial podcast about investing. I’m a responsible investor, you know what I mean?” Amanda said.
Kevin, 33, who is working on a fellowship as an orthopedic surgeon, told BI that the cards have been fruitful.
The couple saved up 56,000 points over about six months, then redeemed them for 126,000 Virgin Atlantic points through Built Airlines’ program. Kevin said he used the rewards to pay for three flights, two in business class and one on Virgin’s new aircraft.
Her husband told BI that he sees the card as beneficial for general use, given the rewards customers can earn on travel and dining, but for the Smits, most of their other purchases with Built were just to meet the five-transaction minimum requirement.
“Most of the time it’s just like getting a latte,” Amanda says, “or just making small purchases so you can get points against your rent.”
Kevin said he hoped Wells Fargo wouldn’t give up Built, but Amanda interjected, “Actually, we just bought a house.”
“Yeah,” Kevin added. “So it won’t work anymore.”
Costly Programs
The Wall Street Journal reported Sunday, citing unnamed current and former employees, that Wells Fargo is losing up to $10 million a month to keep the Built program afloat.
Part of the problem, according to the report, is that Wells Fargo may have miscalculated how Built Bank customers would use their cards.
The Journal reported that only 15 to 25 percent of what you spend on your card carries over from month to month, which is very significant. Wells Fargo estimated the carryover amount would be between half and three-quarters of the expense in order to earn interest fee income.
Wells Fargo also expected 65% of credit card purchases to be for non-rent expenses, but according to The Wall Street Journal, most purchases are going toward rent, even though Built Bank requires five transactions per statement to earn points.
Wells Fargo and Built declined to comment on the reported figures, and a Built spokesperson told Business Insider that Wells Fargo does not release figures.
A Wells Fargo spokesperson told Business Insider in an email that co-branded cards are “just one part of the company’s overall credit card business strategy, of which the BILT credit card is a part.”
“As with all new card launches, it takes a few years for the initial launch to bear fruit. While we are still in the early stages of our partnership, we look forward to continuing to work together to deliver great value to customers and ensure a win for both BILT and Wells Fargo,” the spokesperson said.
The losses have forced Wells Fargo to rethink its partnership with Built and it won’t renew the contract when it expires in 2029, according to The Wall Street Journal.
A Wells Fargo spokesman said: “There have been no discussions among decision-makers about withdrawing from the BILT Agreement and it would be incorrect to suggest otherwise.”
A Built Bank spokesman said the Wall Street Journal article “does not accurately portray our strategic partnership with Wells Fargo.”
As for X, Built Bank CEO Jain did not comment on the reported losses but repeated the bank’s statement denying that Wells Fargo plans to end the partnership after the contract expires.