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Questions over the future of a partnership between Wells Fargo and Bilt have drawn attention to the viability of US credit card rewards, at a time when the sector is facing increased political scrutiny.

In a report published last month, the  (WSJ) claimed that Wells Fargo is losing as much as $10m a month from its credit card partnership with Bilt, a US fintech, and is considering exiting the deal.

�ճ����, which offers rewards for the making of rent payments, is the first of its kind in the US.

Its generous rewards have attracted a strong customer base among Millennials, and the card has gained more than half a million users in its first 18 months of operation.

Aside from rental payments, the card requires a minimum of five additional spends per month to meet the requirements to gain points.

Although Wells Fargo has denied that it is losing the amount claimed by the WSJ, the report highlights both the commercial and political pressures that the US credit card rewards sector is currently facing.

Officials in the Biden administration, including transport secretary Pete Buttigieg, have warned of credit card reward schemes that seem too good to be true, and can potentially disappear at short notice.

“They’re not just perks,” Buttigieg said in a with the Consumer Financial Protection Bureau (CFPB) in May this year. “They’re increasingly something we think of as part of our savings.

“The difference is, unlike the money in your bank account, there’s a company that can unilaterally decide to change what those points or miles are worth.”

In addition, the Credit Card Competition Act (CCCA), which is currently being considered by US lawmakers, could lead to significantly lower credit card interchange fees.

������covered by 91����ԭ��, these fees could fall by such a margin as to wipe out the revenue used by banks to fund reward schemes.

A committed partnership 

Since the news of the losses broke, both Wells Fargo and Bilt have assured investors and consumers that the partnership is working. 

However, the suggestion is that most users are "gaming the system", maximising reward return but not using the card for day-to-day spending.

This has, reports suggest, led to significant losses for Wells Fargo that are unlikely to improve unless there is a drastic change in user spending. 

In response to these concerns, a Wells Fargo spokesperson  that its co-branded cards are simply one small part of the company’s overall credit card business, and that the Bilt credit card is itself one small component of that.

“The Bilt card offers an innovative and unique rewards platform that has allowed us to reach new and younger customers,” the spokesperson said. 

“As with all new card launches, it takes multiple years for the initial launch to pay off, and while we are in the early stages of our partnership, we look forward to continuing to work together to deliver a great value for our customers and make sure it’s a win for both Bilt and Wells Fargo.”

An unusual feature of the co-branding arrangement is that, since the launch of the partnership in 2022, Wells Fargo has invested tens of millions of dollars in Bilt.

Following its latest fundraising round in January 2024, Bilt’s valuation has increased to $3.1bn, up from $1.5bn in late 2022, which is an indication of Wells Fargo’s belief in the business model. 

Bilt CEO Ankur Jain has also  that Wells Fargo told the WSJ that there has been no conversation among decision-makers about exiting the Bilt partnership, but the WSJ chose not to publish this statement.

Jain also reaffirmed Bilt’s commitment to the partnership, noting that 70 percent of Bilt cardholders are new customers for Wells. He added that the average age of a Bilt cardholder is 31 and the average FICO credit score is a commendable 760. 

“These are highly valuable customers to any bank being acquired at a far lower cost,” he said. “We are only 18 months into the co-brand partnership, with lots of opportunity to drive even more everyday spend behavior. We are committed to making this a win-win together.” 

Cracks in reward schemes’ foundations

The deal between Wells Fargo and Bilt may be working now, but if, as expected, the CCCA passes at some stage during the current Biden administration, the entire rewards environment may be subject to dramatic change. 

If interchange fees fall significantly, banks such as Wells Fargo may struggle to fund generous credit card reward schemes. In a politically turbulent environment, with regulatory action looming, companies should be ready for a worst-case scenario.