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Hi All,
I was so sorry to hear about the flooding in Texas over the July 4th weekend. All natural disasters are tragedies, but ones that disproportionately impact children are especially so. My heart breaks for the parents and families affected.
Rent rewards startup Bilt is in talks to raise at a roughly $10 billion valuation, in a round likely to be led by existing investor General Catalyst, sources tell Axios.
The company was valued at $3.25 billion last August.
So what?
Bilt made $200 million in revenue last year, so a $10 billion valuation feels a bit steep.
But then again, everything with Bilt kinda feels that way.
Ainsley Harris published a fantastic long-form piece on Bilt a few weeks ago (that’s where I’m getting the $200 million revenue figure), and my overarching takeaway from the article is that Bilt is one of those companies that isn’t worth studying because it can’t be replicated.
The most well-known anecdote supporting this point is the company’s “partnership” with Wells Fargo on the Bilt credit card. This card was critical to the early traction that the company received from property management companies, as the Fast Company article explains:
At first, prospective partners took Jain’s pitch calls but declined to make any kind of commitment. Property managers wanted to know who his rewards partners were, and airlines and hotels wanted to know which property managers had signed on. Jain realized he needed an elaborate growth hack to get Bilt off the ground.
Enter the Bilt Rewards credit card, which Jain describes as an “accelerant to reach customers directly.” When companies launch co-branded credit cards, they typically grow the products slowly so they can monitor cardholder behavior and ensure the economics work. Get the model wrong, and the cost of paying out a reward like 3% cash back can be dear. Bilt, in contrast, went all in, with headline-grabbing rewards including one-to-one points transfers with airlines such as United and Emirates and hotels like Hyatt and Hilton. On Reddit forums and blogs, points maximizers cheered.
The reason that Bilt went all-in is that Wells Fargo allowed them to. And that decision has cost Wells Fargo a ton of money, as much as $10 million a month, according to The Wall Street Journal. That’s what happens when you offer a credit card that rewards customers for using it to pay rent while, at the same time, not charging property management companies interchange fees on those rent payments (which was critical for getting the property management companies onboard in the first place).
I have no idea what possessed Wells Fargo to sign up for that deal (which expires in 2029 and will very likely not be renewed by Wells or any other issuer at the same terms), but the fact that Wells Fargo is an investor in Bilt (as part of a $60 million funding round that the company raised in 2021) was probably a factor.
Indeed, selling equity to partners and customers has clearly been a critical part of the company’s success (emphasis mine):
Building features at the behest of property managers has helped Bilt win over some of the largest landlords in the country. Bilt Alliance customers include Douglas Elliman Real Estate, Equity Residential, GID, Greystar, Morgan Properties, and Related—all of which have also invested in Bilt. Their lease marketing budgets, which Bilt is starting to capture, can be in the hundreds of millions of dollars.
As the company has begun to expand beyond the initial credit card and property management aspects of its flywheel to develop a broader merchant loyalty ecosystem, the same relationship-first approach has been a critical ingredient.
Bilt CEO Ankur Jain, whose father, Naveen, was the founder and former CEO of InfoSpace, made this exact point in his interview with Fast Company:
Jain has built his career around being the consummate insider. He attributes the inspiration for Bilt’s rewards model to Starwood Hotels and Resorts founder Barry Sternlicht, a regular dinner companion. He is grateful to NFL commissioner Roger Goodell, who is a Kairos adviser, for introducing him to [Kenneth] Chenault [former American Express CEO and current Chairman of Bilt’s Board of Directors]. Those relationships paved the way for Bilt, Jain says. “Candidly, you’ve got to have the right platform, the right idea, the right time,” he adds. “But if you can’t call the CEOs of every major airline and hotel, how are you going to move quick enough to do this?”
Indeed. If you want to assemble an entirely new loyalty ecosystem that can compete with the likes of American Express and JPMorgan Chase, and that revolves around an activity (paying rent with a credit card) that makes no economic sense on its own, you probably should make sure you have the ability to personally call the CEOs of every major airline and hotel.
We use the term “unicorn” in tech to describe a rare breed of private company, one that has achieved a valuation of $1 billion or more. We can argue whether that term is still fit for purpose, given the growth of the venture capital ecosystem over the last decade. However, the broader point is that while unicorns are rare, there are more than one of them out there.
Bilt isn’t a unicorn. It’s more like Pegasus, sired by the Gods and the possible bane of any who dare to ride him.
(Editor’s Note — Wells Fargo is Bellerophon in this analogy.)
#2: Can You Make Agents Pay?
What happened?
Cloudflare, a cloud infrastructure provider that serves 20% of the web, has announced an interesting new solution:
For the last year, Cloudflare has launched tools for publishers to address the rampant rise of AI crawlers, including a one-click solution to block all AI bots, as well as a dashboard to view how AI crawlers are visiting their site. In a 2024 interview, Cloudflare CEO Matthew Prince told TechCrunch these products were laying a foundation for a new type of marketplace in which publishers could distribute their content to AI companies and be compensated for it.
Now, Cloudflare is bringing that marketplace to life.
It’s called Pay per Crawl, and Cloudflare is launching the “experiment” in private beta on Tuesday. Website owners in the experiment can choose to let AI crawlers, on an individual basis, scrape their site at a set rate — a micropayment for every single “crawl.” Alternatively, website owners can choose to let AI crawlers scrape their site for free, or block them altogether. Cloudflare claims its tools will let website owners see whether crawlers are scraping their site for AI training data, to appear in AI search responses, or for other purposes.
So what?
The context here is that the developers of large language models (LLMs) like Google, OpenAI, and Anthropic have been mercilessly scraping every written word from the internet and have been winning lawsuits brought against them for copyright infringement.
And while AI companies have argued that their interactions with users will drive traffic back to source websites, Cloudflare’s data suggests that this benefit isn’t proportional to the costs for content publishers:
This June, Cloudflare says it found that Google’s crawler scraped its websites 14 times for every referral it gave them. Meanwhile, OpenAI’s crawler scraped websites 1,700 times for every one referral, while Anthropic scraped websites 73,000 times for every referral.
Thus, Cloudflare’s Pay per Crawl marketplace:
To participate in Cloudflare’s experimental marketplace, AI companies and publishers must both be set up with Cloudflare accounts. In their accounts, both parties can set rates at which they’d like to buy and sell a “crawl” of the publisher’s content. Cloudflare acts as the intermediary in these transactions, charging the AI company and distributing the earnings to the publisher.
There are two fintech angles to this story.
The first, unsurprisingly, is stablecoins:
Cloudflare spokesperson Ripley Park tells TechCrunch there are no stablecoins or cryptocurrency involved in Pay per Crawl at this time, even though many have suggested digital currency would be perfect for something like this.
However, during a Tuesday appearance on the TBPN show, Prince said that Cloudflare was looking into “potentially creating our own stablecoin that would be part of how these transactions take place,” as well as working with other stablecoin providers.
Ugh. Truthfully, I am tired of stablecoins being a default part of every AI/payments story. Just because both technologies are new doesn’t mean they are well-suited for each other. If you want to argue about the economics of micropayments or the unsung virtues of programmability, please be specific and ensure you are making apples-to-apples comparisons!
The more interesting fintech angle (to me) is consumer permission.
Cloudflare doesn’t just envision its solution being used to stop AI companies from stealing content from publishers. It envisions it as a transaction layer for consumer-permissioned information retrieval:
OpenAI and Google are building AI agents that are designed to visit websites on behalf of users, collect information, and deliver it back to users directly. A future in which these tools are mainstream has huge implications for publishers that rely on readers visiting their sites.
Cloudflare notes that the “true potential” of Pay per Crawl may emerge in an “agentic” future.
“What if an agentic paywall could operate at the network edge, entirely programmatically? Imagine asking your favorite deep research program to help you synthesize the latest cancer research or a legal brief, or just help you find the best restaurant in Soho — and then giving that agent a budget to spend to acquire the best and most relevant content,” Cloudflare said in a blog post.
This is the same problem that banks and fintech companies will have to solve for in open banking, especially if the CFPB’s Personal Financial Data Rights Rule is vacated.
Thanks to LLMs, any company that wants to can now cost-effectively build agentic agents to scrape consumers’ financial data with their permission. That data can be used to power experiences and transactions that generate revenue for those companies without any compensation for the data providers (i.e., the banks and fintech companies). And as we have seen in the content publishing space, while the largest data providers can use their leverage to directly negotiate favorable arrangements with the scrapers, the smaller providers end up getting screwed.
Cloudflare is developing an infrastructure-level solution for smaller content publishers. Someone should do the same for smaller banks and fintech companies.
UK-based money transfer giant Wise has applied to be directly regulated by the US Office of the Comptroller of the Currency and create a national trust bank.
Wise National Trust would be based in Austin, where the firm already has around 450 employees
Circle Internet Group … has formally submitted an application to the Office of the Comptroller of the Currency (OCC) to establish a national trust bank, First National Digital Currency Bank, N.A.
If approved, First National Digital Currency Bank, N.A. would be authorized to operate as a federally regulated trust institution, subject to OCC oversight, and would oversee the management of the USDC Reserve on behalf of Circle's U.S. issuer.
True to our long-standing compliance roots, @Ripple is applying for a national bank charter from the OCC. If approved, we would have both state (via NYDFS) and federal oversight, a new (and unique!) benchmark for trust in the stablecoin market.
So what?
Jason Mikula published a great overview on this news yesterday, which I would strongly encourage you to read if you haven’t already.
One point that Jason makes, which I want to emphasize because it hasn’t always been accurately reported in other publications, is that these aren’t your typical full-service commercial bank charters. These are national trust bank charters.
I’m going to quote from Jason directly here because he does a better job of describing what a national trust bank is than I could:
OCC-chartered national trust banks specialize in acting as a trustee, fiduciary, or custodian for assets. Because they generally do not hold deposits, trust banks typically are not FDIC insured.
Because they are relatively less complicated and risky compared to full-service commercial banks, the chartering process for national trust banks is less complex and time consuming.
Holding a national trust charter potentially enables firms to custody their own assets, rather than relying on a third-party custodian, something that is likely appealing to current or potential stablecoin issuers.
A national trust bank charter also would obviate the need for state-issued money transmission licenses (MTLs), which could significantly simplify a stablecoin issuer’s or payments firm’s regulatory overhead.
And perhaps the biggest prize: holding an OCC national trust charter makes firms eligible for direct access to Federal Reserve payment systems via a Fed master account — though it is worth emphasizing that, as uninsured institutions, national trusts are subject to a higher “Tier 2” or “Tier 3” review process and that the Fed retains broad discretion in approving or denying applications for master accounts.
As Jason also notes, becoming a national trust bank would also align with the expected compliance requirements under the GENIUS Act for Circle and Ripple.
Setting Wise aside for a moment, the bigger story here (from my perspective) is that stablecoin issuers are repurposing national trust bank charters in a manner that differs significantly from what Congress originally intended when it authorized this form of banking a century ago.
The keyword here is trust.
It used to refer to an organization that acted as a trustee for activities such as wealth and estate administration, pension custody, and corporate bond issuance. Retail banking (taking deposits and making loans) is expressly disallowed under this charter, but that restriction only makes sense in a world in which licensed banks are the only ones that can facilitate the storage, movement, and lending of money.
Today, these activities can be performed in a permissionless, peer-to-peer manner over the internet. The only things missing are safety (how can you reassure the end customer that their money is secure?) and on-ramps and off-ramps (how do you get your funds in and out?)
The answer to these questions used to be banks. You’d partner with banks to custody your stablecoin reserves in a safe and well-regulated place. You’d partner with banks to facilitate money transfers. You’d partner with banks to issue debit cards tied to customers’ stablecoin balances.
However, if these national trust bank charter applications are approved (feels likely) and the resulting banks are given Fed Master Accounts (more difficult, but also feels likely given the scrutiny the Fed has been under in this area) and Principal Member status with Visa and Mastercard (this is purely speculative on my part), these stablecoin issuers won’t need full-service commercial bank partners at all.
This is not a popular position to take, so credit to Andrew for making this argument.
For what it’s worth, I tend to agree with him. I believe that the process of furnishing medical debt information to the credit bureaus should be more closely supervised to minimize errors and abuses, but I also think the practice should continue. Lenders need to know the financial situation of their prospective borrowers, and if the credit files cannot provide those insights, lenders will look elsewhere (such as open banking) or they will simply lend less (and at higher rates).
Using the credit bureaus to address other policy priorities is always a mistake, as I have previously written about.
There are a TON of interesting questions being asked in the Fintech Takes Network. I’ll share one question, sourced from the Network, each week. However, if you’d like to join the conversation, please apply to join the Fintech Takes Network.
It’s aimed at filling the void created by the failure of SVB and First Republic, so the obvious answers would be First Citizens, JPMorgan Chase, and Mercury. However, it wouldn’t surprise me if Erebor also got into BaaS, so this list should also include Column and Lead Bank?
I don’t know. I’m curious to hear what you think!
If you have any thoughts on this question, reply to this email or DM me in the Fintech Takes Network!
EXPERT RESOURCES
Through the Fintech Takes Network, I meet a lot of smart and experienced fintech operators. Some of them have the time and interest to do in-depth research and writing, which I gratefully publish as Fintech Takes Research Reports.
We just dropped a new research report — How Cash Flow Data Can Defuse the Credit Score Time Bomb — and it’s excellent. Truly, if you are curious about why cash flow data is such an essential innovation in consumer lending, you need to read it.
If you’d like to speak with Martin Kleinbard, the author of the report, let me know. I’d be happy to introduce you!
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— Alex
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