Wells Fargo had hoped to build its young customer base through a partnership with rental payment platform Bilt. It succeeded in that, but the card is costing the bank millions.

Wells Fargo is losing as much as $10M a month from its deal with Bilt Rewards, a fintech startup that allowed users to pay rent with a credit card without incurring fees. The partnership has attracted more than a million customers, but incorrect assumptions about how the new clients would use the cards has led to losses, The Wall Street Journal reported.

Astute cardholders are using the no-fee rent payment to stack up reward points but aren't carrying the balance forward. Wells Fargo assumed at least half the dollars charged to the card would be carried over month to month, but the reality is between 15% and 25%, according to the WSJ.

The bank assumed around 65% of card purchases would be for things other than rent, but the opposite is the case.

The partnership's losses have led Wells Fargo to stop bidding for new co-branded credit card programs, the Journal reported. A Wells Fargo spokesperson called co-branded cards a “modest piece” of the bank’s credit card strategy in a statement to Bisnow.

“As with all new card launches, it takes multiple years for the initial launch to pay off,” the spokesperson said.

Credit card purchases typically require the merchant to pay a fee between 2% and 3%, but Wells Fargo pays that cost for Bilt cardholders. The bank also pays Bilt $200 each time a customer signs up and around 0.8% of each rent transaction, despite not collecting any fees from the charges.

Bilt’s valuation jumped to $3.1B in January from a $1.5B valuation when the card partnership began in late 2022. Ken Chenault, the former CEO of American Express, joined the company’s board, and Wells Fargo invested at least $20M in the firm.

Bilt was founded in 2019 and has high-profile backers, including Blackstone and Mastercard, but it struggled to find a bank to partner with. Tennessee-based Evolve Bank & Trust was its first issuer, but as the company grew, it met with U.S. Bancorp, Synchrony Financial and JPMorgan Chase about potential partnerships that never came to fruition.

Bilt disputed the Wall Street Journal’s characterization of the partnership with Wells Fargo and said it had been successful in its goal of bringing a younger cohort of cardholders to the bank.

“Following our co-brand card's successful launch in 2022, we have been impressed by the early traction and growth and we are committed to a long term partnership with Wells Fargo that benefits all parties, most importantly — our customers,” Bilt said in a statement to Bisnow.

The partnership contract is scheduled to expire in 2029, and sources told the WSJ the bank doesn’t plan to renew the program. Bilt CEO Ankur Jain, who became a billionaire through the company, said in a post on the social media platform X that 70% of Bilt cardholders were new Wells Fargo customers and that the average cardholder was 31 years old with a 760 credit score.

That demographic is highly desirable for credit card companies, Jain said. And Wells Fargo said it plans to continue working with the proptech firm.

“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,” the Wells Fargo spokesperson told Bisnow.

Jain said on X that Wells Fargo has never had a conversation with Bilt about exiting the partnership.