Bilt, BaaS, & New York Steps on the Gas
Happy Wednesday, Fintech Listeners!
Well, it’s been a fun (and exhausting) couple of days at Fintech Meetup. I’ve got more coming on the event in Friday’s newsletter, but today, I have a new podcast for you.
- Alex
P. S. — For those of you in the Big Apple, NY Fintech Week is coming up, and I'm hosting a party.
It’s a small party, but it’s a party, specifically for senior bank execs who are thinking seriously about AI. Open bar. Great food. A short (but incisive) panel discussing the opportunities and very real challenges of bringing AI into financial services.
The room is intentionally small and heavily curated. Also, the venue is much cooler than any of us are prepared for.
Applications are open. See you there?
3 BIG IDEAS FROM THE PODCAST
This week on Fintech Recap, Jason Mikula joined me just before decamping to Oaxaca for a month to learn Spanish (buena suerte, Jason).
We covered a lot of ground: Bilt's troubled product transition, the structural problem facing BaaS, New York's aggressive push to fill in for the CFPB, and, in a development that won’t surprise regular listeners, a few things we just couldn’t let go of…
Tune in for the full conversation here
And read below for my three big ideas...
#1: Wells Fargo Was the ProductCopy anchor linkCopied
When the Bilt-Wells Fargo breakup was covered in the press, everyone (including me) focused on the economics of the deal. Wells Fargo was reportedly losing $10 million a month on a partnership built on assumptions about cardholder spending, revolver rates, and mortgage conversion that, well, turned out to be wrong. But the story underneath the story is that Wells Fargo wasn't just Bilt's bank partner. Wells Fargo was, in many underappreciated ways, the product.
When you have a large bank partner with a full-stack infrastructure, you’re getting access to debt capital, customer service, fraud operations, dispute resolution, and an enormous institutional balance sheet that can absorb problems before they become customer-facing disasters. Bilt was a loyalty brand layered on top of that infrastructure. That's a perfectly reasonable business to build, as long as you understand that you are building on someone else's foundation.
Wells Fargo was an investor in Bilt, which makes for a complicated dynamic. When your bank partner is also on your cap table, the incentive structure grows murky in both directions. The bank partner has reasons to be accommodating that have nothing to do with whether the program makes sense. And the fintech company has reasons to keep the partner happy that have nothing to do with building an enduring product.
When Wells Fargo exited, Bilt had to replace a huge portion of its operational infrastructure with a combination of different service providers, including Column (the bank), Cardless (the issuer processor), and Fidem Financial (the capital provider).
The result, as Jason documented, was a transition that failed cardholders in serious ways: missed rent payments, an AI customer service bot that looped without resolution, and email response times stretching to 10 or 14 days.
The lesson isn’t that Bilt chose the wrong vendors in its transition to Bilt 2.0, but rather that it likely underestimated just how much value Wells Fargo and its vertically-integrated infrastructure had been providing for Bilt 1.0.
#2: A Bypass on the BaaS Toll Road Copy anchor linkCopied
BaaS looked like a brilliant business model because it resembled infrastructure. You owned the road. Everyone else had to pay to use it. But it only worked because there were no alternatives.
For years, if you were a fintech company, you realistically couldn’t get a bank charter. The cost, the timeline, and the regulatory uncertainty made it a non-option.
If you were a fintech company without a bank charter, you needed a bank partner, and that bank partner could collect fees for providing access to the banking system. Regulators were not handing out de novo charters. The entire BaaS ecosystem was built on scarcity.
That calculus has changed quickly once the Trump Administration took over in January of 2025. Mercury is now pursuing a bank charter. Affirm is pursuing one. Upstart, which explicitly built its brand around not being a bank, just filed for one. Coinbase, Stripe, and PayPal are also moving in that general direction.
Now, all of a sudden, there’s a new vector of competition in BaaS. And the thing that’s especially challenging about it is that it’s aimed squarely at the most profitable programs in BaaS banks’ portfolios. Early-stage fintech startups aren’t getting bank charters. It’s the scaled-up, successful late-stage fintech companies that are. The ones that drive most of the revenue for successful BaaS banks.
This graduation risk has always been present in BaaS, but it’s been significantly magnified by how easy the Trump Administration has made it for non-banks to acquire bank charters.
#3: “Excuse me. This isn’t the deregulation I ordered.”Copy anchor linkCopied
The financial industry assumed that weakening the CFPB would lead to less regulation. That assumption is holding at the federal level, but it’s failing at the state level.
When the CFPB first started getting gutted, we knew that the states would step in and try to fill the gap. However, I assumed that this would mostly be in the form of increased enforcement, both through state banking regulators and attorneys general.
That’s definitely happened. However, we’ve also seen quite a bit of legislating and rulemaking.
New York provides the clearest example.
New York's proposed financial data rights bill is, I think, the most ambitious piece of open banking legislation ever filed in the U.S. It explicitly defines what an authorized third party can do with consumer data. It explicitly prohibits charging fees for data access. It covers small businesses as well as consumers. And it applies broadly to banks and non-banks that provide financial services to New York residents.
The fintech trade associations are happy about it. Bank trade associations are, I assume, not.
The legal question Jason and I focused on in our discussion is federal preemption. The doctrine holds that federal law supersedes conflicting state law in certain domains, but it’s not a blanket principle. It applies in specific instances due to a combination of laws and judicial precedents.
And the current situation could produce a bizarro dynamic. Traditionally, federal regulators will take the lead in arguing in court for federal preemption. However, I have a hard time, in this case, seeing the current CFPB taking that stand. Russ Vought doesn’t strike me as an ardent defender of the rights and privileges of federal bureaucrats.
The industry thought that gutting the CFPB would produce a more permissive regulatory environment. That’s why you didn’t see many banks or fintech companies publicly defending the CFPB in early 2025. However, as we’ve seen, deregulation at a federal level often produces increased regulation at a state level, particularly when it comes to consumer protection.
WHAT I'M LISTENING TO
#1: What Drives Bank Branch Closures? (Bank Nerd Corner) 🎧Copy anchor linkCopied
I’m becoming more and more fascinated by bank branches and banks’ branching strategies.
I know, I know. Tell me you’re approaching your 40s without telling me.
#2: Building the First Agentic Brokerage (Fintech One-on-One) 🎧Copy anchor linkCopied
Public has, by far, the best view on how to incorporate novel wealth management and risk hedging products (including prediction markets!) into the brokerage apps that retail investors use.
Leif’s conversation with Peter covers these topics, agentic investing, and a whole bunch of other topics. Highly recommend giving it a listen!
*Bonus: Credit Without Constraints (by me, with Spinwheel) 🎧Copy anchor linkCopied
Our final episode explores why the best credit decisions start with understanding what a borrower is trying to accomplish. Tomás Campos (Co-founder and CEO of Spinwheel) and I sit down with fintech advisor Rich Franks to discuss how folks shop for credit, the data that shapes those decisions, and where AI may take the process next. Listen here!
*this rec is brought to you by one of our fantastic brand partners
Thanks for the read! Let me know what you thought by replying back to this email.
— Alex
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