Wells Fargo (WFC) Mulls to Discontinue Rent Credit Card

Wells Fargo & Company WFC is losing up to $10 million every month as a result of its co-branded credit card partnership with fintech firm Bilt Technologies, according to a WSJ article. After misestimating key revenue generators, the bank is renegotiating the agreement with Bilt Technologies.

Launched in 2022, Well Fargo’s co-branded credit card came with an attractive feature. Cardholders can use it to pay rent without having to pay landlord fees while also earning rewards points that can be spent on travel, goods and so forth.

Wells Fargo apparently expected that the card would appeal to young individuals who would use it for shopping, rent payments and debt carrying, giving the bank the opportunity to generate profit from interchange fees and interest charges.

It turned out that cardholders were wiser with their purchases than anticipated. It has been reported that several consumers charged their rent to their credit cards and then paid it off within a few days, earning them rewards points. It is claimed that just 15% to 25% of the total amount charged to the card was carried over from month to month.

In addition, very few clients used the card for discretionary purchases. Wells Fargo made a significant error in estimating that 65% of purchases made with the card would be non-rental.

Per the WSJ report, the card also reportedly posed fraud and money laundering threats, which Wells Fargo and Bilt are working to address. Considering these factors, WFC informed Bilt that unless the card starts to yield positive results, it will not be extending its agreement, which ends in 2029.

Bilt CEO Ankur Jain stated, “We are only 18 months into the cobrand partnership with lots of opportunity to drive even more everyday spend behavior.” “And are committed to making this a win-win together.”

At present, WFC has eight different types of credit cards available. These cards provide a unique set of benefits to its target audience. The bank is actively introducing attractive products to transform its business credit card offerings.

Last month, the company launched Signify Business Cash World Elite Mastercard — its new business credit card with industry-leading cash rewards. Signify Business Cash cardholders will have access to the Wells Fargo Business Rewards Program, which provides flexible redemption options. Cardholders can redeem cash rewards as a statement credit to their Signify Business Cash account, as a direct deposit into an eligible Wells Fargo savings or checking account, or for gift cards, travel and more.

Identifying the right customers and strategically introducing new credit card products are set to position Wells Fargo for long-term success in the card business.

In the past six months, shares of WFC have jumped 21% compared with the industry’s 16.1% growth.

Zacks Investment ResearchImage Source: Zacks Investment Research

Currently, Wells Fargo sports a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other finance firms are progressing well with the credit card business. In May 2024, The PNC Financial Services Group, Inc. PNC launched the PNC CashUnlimited Visa Signature credit card. The credit card offers simple but valuable rewards with an unlimited 2% cash back on all eligible purchases.

In March 2024, Robinhood Markets, Inc. HOOD unveiled its first-ever credit card in an effort to expand its services beyond mainstream trading. The credit card, known as the Robinhood Gold Card, will be available exclusively to Robinhood Gold customers.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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