Financial services giant Wells Fargo’s (NYSE:WFC) co-branded credit card partnership with Bilt Rewards, a leading loyalty program for renters, has backfired. According to a report from the Wall Street Journal, this collaboration has proven costly for the financial services giant.
In March 2022, Wells Fargo announced a partnership with Bilt Rewards and Mastercard (NYSE:MA), a leading payments technology company, to become the official issuer for the Bilt Mastercard. This innovative co-branded credit card allows renters to pay rent and earn points without incurring transaction fees at any rental property in the U.S.
The goal was to leverage this unique offering to draw younger customers to Wells Fargo’s services and offerings, but instead, it has become a financial burden for the company.
WFC’s Strategy Proved Costly
Despite early success, the partnership is reportedly costing Wells Fargo as much as $10 million per month. This is primarily due to the bank absorbing transaction costs that landlords would otherwise incur. It is important to highlight that Wells Fargo compensates Bilt with 0.80% of each rent transaction, foregoing interchange fees from landlords. Additionally, it pays $200 per new card account.
Wells Fargo’s internal projections, particularly regarding revenue from cardholders carrying balances and potential cross-selling opportunities like mortgages, have proven overly optimistic. With Wells Fargo scaling back its mortgage lending activities and failing to meet its financial expectations, the expected benefits from the partnership have not materialized.
In response to the financial strain, Wells Fargo is renegotiating its agreement with Bilt for more favorable terms. Furthermore, the bank has stopped participating in new co-branded credit card initiatives.
Here’s How WFC and Bilt Responded
In response to the WSJ’s report, a Wells Fargo spokeswoman expressed optimism about their collaboration with Bilt, aiming for mutual success.
Meanwhile, a spokesman from Bilt disputed the Wall Street Journal’s portrayal of their partnership as inaccurate. Bilt is optimistic about the long-term collaboration with Wells Fargo and expects both parties to benefit from the partnership.
For now, it remains to be seen how the situation will develop. Meanwhile, let’s look at the Street’s projection for WFC stock.
Is Wells Fargo Stock a Good Buy Now?
Wells Fargo stock is up about 18% year-to-date. However, Wall Street is cautiously optimistic about its prospects amid industry-wide deposit margin compression.
Wells Fargo stock has a Moderate Buy consensus rating based on 10 Buys and 12 Hold recommendations. The analysts’ price target on WFC stock is $63.59, implying 10.78% upside potential from current levels.
