BILT Rewards — A Look
I want to begin this by, thanking all those as always who’ve taken the time to read this piece and more importantly helped in its crafting.
BILT isn’t an anomaly in the fintech space; rather, it’s part of a market estimated to be worth $230 billion worldwide as of 2023, with projections indicating further growth (EMR). This sector is already populated by industry giants that dominate our news and daily lives, such as Affirm, Klarna, and Square, among others. However, as any market expands in size, disruption tends to decrease, and stability becomes the norm. Investors become more cautious, and new entrants find themselves with limited opportunities. So, what sets BILT apart?
First and foremost, BILT recently completed another valuation round, securing $150 million in new funding at a post-money valuation of $1.5 billion. Notable backers include Left Lane Capital, Smash Capital, Wells Fargo, and Greystar, among others. This infusion of capital instills much-needed confidence in customers. While many fintech firms offer compelling alternatives to traditional banking tools, they tend to flame out. It’s evident that support and financial backing are crucial, regardless of a product’s quality.
With high rates, and overall market slow-down VC’s have been cautious more than ever. A preliminary examination reveals some significant trends: overall funding has decreased by nearly $200 million from 2022 ($460 million to $285 million), and deal flow is down by 33% year-over-year. These statistics signify an end to the days of lavish and open spending. All of this to say — BILTS successful valuation round in such markets should not come as a sign of fear but rather *strong confidence.
Understanding BILT Rewards: A Surface Level Look
BILT Rewards is a unique fintech firm that stands out for its first-of-its-kind rewards program. It allows you to earn points on rent payments without incurring any fees, a feature that sets it apart in the fintech landscape. Bilt achieves this feat through partnership programs with leading property owners and real estate firms, enabling renters to accumulate points on their monthly rent. These points can be redeemed for a variety of rewards including travel, future rent payments, fitness classes, exclusive experiences, and more. BILT’s groundbreaking mission is to make rent, one of the most substantial recurring expenses, beneficial to the renter, thereby adding value to an otherwise significant cost.
So How Does This Help Customers?
First any spending done on rent counts as $1 -> 1 point conversion. This is a massive opportunity point for the majority of renters as no other card allows for such excellent utilization. On average renters spend roughly $2,000/month (NerdWallet). This means:
2,000 * 12 = $24,000 spending
Bilt conversion $1 -> 1 point:
$24,000 * 1 pt/$ = 24,000 points (capped to $100,000/yr conversion)
This would provide users who utilize the card for rent to walk away with 24,000 points per annum. A massive moving point for US-Based customers who are reported to primarily fall in this bucket. However, the excellence of the program doesn’t stop there. Users are able to stack up to:
- 3 points per dollar on dining
- 2 points per dollar on travel
- 1 point per dollar on all other purchases
Travel based partnerships aren’t anything new nor does BILT reinvent the wheel here, but what they do bring that others have struggled with is partnership with exclusive brands such as United Airlines (1:1), Hyatt (1:1), and Marriott (1:1) to mention some. All in all to say that BILT Rewards on average provide a 2.00 c per 1 point ratio, aka your getting double your worth (TPG). This puts it in par with some of the giants such as Amex and Chase (staples and widely loved cards).
Whats The Catch?
As with every product not everything is sunshine and rainbows. While BILT does produce great value for its customer and continues to have top of the line benefits. There are some questions about its sustainability and cash-flow. For instance, a significant portion of card users are renters who use their cards exclusively for rent payments. So lets do a thought exercise:
Suppose BILT buys 10,000,000 points at 1 cent each. They would’ve paid an effective $100,000. If we assume that 75% of their customer base are renters and the remaining 25% use their cards for a mix of purchases, this means out of 1,000,000 customers, 750,000 generate no commission, while 250,000 contribute to cash generation.
Understanding Commission Costs: Commission cost refers to the fee credit card companies charge merchants for each transaction (think of swiping your card at Walmart), typically ranging from 1.5% to 3% of the total transaction value.
So lets take a look at the math:
750,000 * $.01 * 1 pt/$ = 75,000 (paid out for rent)
250,000 *$.01 *2pt/$ = 50,000 (paid out for other items on avg.)
This means BILT, on average, disburses $125,000 worth of points against an initial purchase of $100,000 worth of points, leading to a net loss of $25,000. As a new startup you would rather burn a little to accumulate a larger customer base for future activities. However, this model’s long-term sustainability is questionable, raising concerns among users familiar with the volatility of fintech startups.
Beyond the numbers:
There are also minor inconveniences to consider. For instance, compared to competitors like Amex, BILT’s mobile app lacks responsiveness. Payments made through Auto Pay sometimes linger in the “Minimum Payment” box longer than expected. I suspect this is could be due to following: A) BILT’s cash flow is managed by an external bank (Wells Fargo), possibly slowing down system checks; B) Internal data processing might be less efficient within BILT’s system; or C) The mobile app’s performance is inherently slower. Regardless it continues to be a small nuisance that I would rather see gone lol.
Conclusion
BILT Rewards stands out as a prime example of a Fintech firm dedicated to addressing a tangible issue. Although minor concerns exist — as they invariably do in such ventures — I remain highly optimistic about this product’s future. I’m interested in seeing what direction they take and what future developments they’ll look to introduce. It’s noteworthy that many of the challenges highlighted in this article have been proactively tackled, including capital raising, forging new marketing partnerships to enhance cash flow, and ongoing UI enhancements. Understanding the full scope of BILT’s operational model will naturally require time, as is the case with any startup. However, based on current observations, it earns an ‘A’ grade from me.
P.S Let me know if you have any questions. I would love to help answer them!