Note - I have no bone to pick with Bilt, it is a clever product.
Interesting analysis, but the 'everyone is a bank' labelling confuses the economics of what is going on. The fundamental findings in assertions 4.b and 4.c are wrong.
let's start with 4.c : "Invents value out of thin air (reward points)"
Let's label the Airlines and Starbucks as "point generators" (rather than banks) for clarity. "Point generators are great business models when you can 'sell' points for a high perceived value and fulfill that value at a low marginal cost (or maybe never). An extra seat on a plane - high value to the consumer , low marginal cost to the airline. Extra cup of coffee at Starbucks - same story.
Bilt is not* a "point generator", Bilt is not creating free rent.
Bilt is a "point rewarder" - they are a buyer of points - just like any other credit card issuer that buys points from third parties to grant as rewards for spending on the card. When you redeem Bilt points it is for airlines, hotels, etc. You are not redeeming for a "high value, low cost "service that Bilt is providing.
[* - Yes - there is a very small part of Bilt where they sell points to certain landlords for the landlords to use for tenant rewards, I'm ignoring that part of the business.]
That is okay, lots of card issuers make great money buying the points of others. You cover how it works - if you spend on the card, the banks get interchange, that interchange is used to buy points at a cost less than the perceived value of to the cardholder - win-win-win - for the consumer, the point rewarder (the card issuer), and the point generator. The banks make additional money when the consumers revolve.
Then there is 4.b "b. Monetizes payments (with their card)"
Unlike the points rewarders above, Bilt is not getting paid interchange on the rent payments that it is rewarding. Any rent payment on the Bilt card never touches the card network , it goes via ACH to in-network landlords, they mail a check for other landlords. So there is no incoming interchange revenues on those payments.
Doing the math here, suppose the cardholder has $4K of rent a month and pays 1 pt per $1 spent , let's value a point to the consumer at $0.01/pt and let's be really generous and assume Bilt buys its points at $0.005 / pt. For the year , the consumer gets $480 in perceived point value. Bilt incurs a cost of $240 buying those points (assuming they are redeemed, until then it is an deferred liability on their balance sheet).
Net-net - Basically Bilt is giving this consumer $240 in annual value as a marketing incentive to attract and retain the card holder and relying on the other payments and revolving balances to make any money.
Net-net Bilt is really just a twist how the signing and retention bonuses for premium credit cards work.
Instead of granting a huge upfront point balance "80K for signing up" that is not linked to spend, they grant a reward spread out over the year, linking it to the rent payment and cleverly requiring the user to make 5 other payments to even earn the reward. By spreading the reward this way, they do not need an annual fee to protect themselves from consumers that bag the signing bonus and then fail to use the card.
Rewarding rent is a great marketing play - but characterizing it as "inventing points out of thin air" is misleading - Bilt has a real cost associated with those points and has to hope the economics they earn elsewhere from the client overcomes the cost of point rewarding spend they do not get an interchange on. (Presumably it is better with their in-network landlords, who may grant them some compensation for the benefits of speedier payment you described).
I agree there is some value in the data, but it's basically the data any card issuer has, plus visibiliity into the rent payment.
I would LOVE to see the customer demographics / statistics for Bilt. The value of the card reward is directly linked to how much rent you pay (they cap rewards at $10K of rent a month). I know alot of finance bros with very expensive rent that have a BILT card for their rents and then they buy 5 coffees a month with the card to keep the reward active. Their primary spend card is still a Chase Sapphire or Amex Platinum....
Some other nits on details that I'll leave here:
Bilt is already a credit card.
When a consumer pays rent with a Bilt card, it never goes through the card network for settlement. It's either sent as an ACH or check to the landlord and then debited from the debit or credit card account balance. Sort of an "on-us" txn.
Regarding Finvest's business model, Freetrade are offering Gilt investments in the UK - UK treasuries - https://freetrade.io/treasury ; in this case it's not a wedge, as this is in addition to their existing stock and fund offerings.
Note - I have no bone to pick with Bilt, it is a clever product.
Interesting analysis, but the 'everyone is a bank' labelling confuses the economics of what is going on. The fundamental findings in assertions 4.b and 4.c are wrong.
let's start with 4.c : "Invents value out of thin air (reward points)"
Let's label the Airlines and Starbucks as "point generators" (rather than banks) for clarity. "Point generators are great business models when you can 'sell' points for a high perceived value and fulfill that value at a low marginal cost (or maybe never). An extra seat on a plane - high value to the consumer , low marginal cost to the airline. Extra cup of coffee at Starbucks - same story.
Bilt is not* a "point generator", Bilt is not creating free rent.
Bilt is a "point rewarder" - they are a buyer of points - just like any other credit card issuer that buys points from third parties to grant as rewards for spending on the card. When you redeem Bilt points it is for airlines, hotels, etc. You are not redeeming for a "high value, low cost "service that Bilt is providing.
[* - Yes - there is a very small part of Bilt where they sell points to certain landlords for the landlords to use for tenant rewards, I'm ignoring that part of the business.]
That is okay, lots of card issuers make great money buying the points of others. You cover how it works - if you spend on the card, the banks get interchange, that interchange is used to buy points at a cost less than the perceived value of to the cardholder - win-win-win - for the consumer, the point rewarder (the card issuer), and the point generator. The banks make additional money when the consumers revolve.
Then there is 4.b "b. Monetizes payments (with their card)"
Unlike the points rewarders above, Bilt is not getting paid interchange on the rent payments that it is rewarding. Any rent payment on the Bilt card never touches the card network , it goes via ACH to in-network landlords, they mail a check for other landlords. So there is no incoming interchange revenues on those payments.
Doing the math here, suppose the cardholder has $4K of rent a month and pays 1 pt per $1 spent , let's value a point to the consumer at $0.01/pt and let's be really generous and assume Bilt buys its points at $0.005 / pt. For the year , the consumer gets $480 in perceived point value. Bilt incurs a cost of $240 buying those points (assuming they are redeemed, until then it is an deferred liability on their balance sheet).
Net-net - Basically Bilt is giving this consumer $240 in annual value as a marketing incentive to attract and retain the card holder and relying on the other payments and revolving balances to make any money.
Net-net Bilt is really just a twist how the signing and retention bonuses for premium credit cards work.
Instead of granting a huge upfront point balance "80K for signing up" that is not linked to spend, they grant a reward spread out over the year, linking it to the rent payment and cleverly requiring the user to make 5 other payments to even earn the reward. By spreading the reward this way, they do not need an annual fee to protect themselves from consumers that bag the signing bonus and then fail to use the card.
Rewarding rent is a great marketing play - but characterizing it as "inventing points out of thin air" is misleading - Bilt has a real cost associated with those points and has to hope the economics they earn elsewhere from the client overcomes the cost of point rewarding spend they do not get an interchange on. (Presumably it is better with their in-network landlords, who may grant them some compensation for the benefits of speedier payment you described).
I agree there is some value in the data, but it's basically the data any card issuer has, plus visibiliity into the rent payment.
I would LOVE to see the customer demographics / statistics for Bilt. The value of the card reward is directly linked to how much rent you pay (they cap rewards at $10K of rent a month). I know alot of finance bros with very expensive rent that have a BILT card for their rents and then they buy 5 coffees a month with the card to keep the reward active. Their primary spend card is still a Chase Sapphire or Amex Platinum....
Some other nits on details that I'll leave here:
Bilt is already a credit card.
When a consumer pays rent with a Bilt card, it never goes through the card network for settlement. It's either sent as an ACH or check to the landlord and then debited from the debit or credit card account balance. Sort of an "on-us" txn.
Regarding Finvest's business model, Freetrade are offering Gilt investments in the UK - UK treasuries - https://freetrade.io/treasury ; in this case it's not a wedge, as this is in addition to their existing stock and fund offerings.
Love the Bilt analysis. Very interesting case...