How Chime Makes Money

How Chime Makes Money

You may have noticed Chime’s TV advertisements. Also, you can be left wondering what this company performs. Chime is not a bank or other financial institution; rather, it is a financial technology (fintech) startup. It runs an app and collaborates with banks to offer customers financial services. Access to checking and savings accounts as well as a customized Visa debit card are some of the options offered. But how does the business actually make money? An summary of the business, its finances, and sources of revenue are given in this article.

Chime: An Overview

Chime is a fintech, as was already mentioned, not a bank. According to American financial regulations, banks must be officially designated, which is a challenging process. Instead, Chime offers an app and financial services to its consumers. As a result of its collaboration with established institutions to provide its services to customers online, it is known as a neo-bank or challenger bank. Two tiny banks, The Bancorp Bank and Stride Bank, are partners with Chime.

Chime offers the following services through these two banks:

  • No-fee checking and savings accounts
  • Chime-branded Visa debit card
  • The option to get paychecks directly deposited two days early
  • Fee-free overdraft of up to $200

Also, the business offers two automatic saving options: one allows users to round up debit-card payments to the closest dollar and sends the rounded amount to their savings account, and the other automatically transfers a certain percentage of each salary to a savings account. To have a savings account, users must first have a checking account with Chime.

One of the largest new brands in the financial sector is Chime. Despite this, it faces some fierce competition both domestically and internationally. The German neo-bank N26, funded by billionaire Peter Thiel, and Brazil’s Nubank are two of the biggest.

Fundraising and Financials

Chime is a privately held business, hence it doesn’t have a stock market listing. When clients use Chime’s debit card, Visa charges businesses a transaction fee, which is a source of revenue for the business.

According to a Forbes article published in May 2022, the company has more than 12 million users. The app and services offered by Chime are particularly well-liked by Millennials.

It’s vital to keep in mind that the real number of clients may be smaller given that many customers have both checking and savings accounts, and some accounts may even be dormant.

Chime raised $2.3 billion during nine fundraising rounds, the most recent of which was on August 13, 2021, according to Crunchbase.

The company, which had a 2018 valuation of under $1 billion, outperformed that, reaching a $25 billion valuation in 2021.

History and Leadership

In 2013, Chime was established. But, it wasn’t until the following year that it made its debut in the financial sector. Chris Britt and Ryan King are the co-founders of the San Francisco-based business.

Chime’s objective, like that of other neo-banks, was to compete with regulated banks in significant areas of consumer banking. When exchange-traded funds (ETFs) reduce money-management fees and brokers eliminate trading fees, this reflects the push to drop prices across the financial services sector.

Currently serving as Chime’s CEO is Britt (CEO). once employed by Greendot, a provider of financial services and prepaid, reloadable debit cards.

Before co-founding Chime, King worked in the financial services sector at Comcast and the now-defunct online address book company Plaxo.

Recent Developments

After its investment round in September 2020, Chime surpassed Robinhood to become the most valued fintech firm in the United States.

For trading different securities, including stocks, ETFs, and cryptocurrencies, Robinhood does not charge any commissions.

Once the European banking app N26 began to accept users from the United States in July 2019, the company started to see increased competition.

Other, more recent competitors are also making an effort to undermine Chime’s success, most notably Varo, which received U.S. license to become a legitimate bank in February 2020. The Federal Deposit Insurance Corporation (FDIC) granted Varo, the first neo-bank, permission to transform into a legitimate bank. So, it is no longer required to accept deposits through joint ventures with other banks.

According to those with knowledge of the situation, Chime has had early discussions with investment banks about a potential stock market listing that could value the business at over $30 billion. The CEO of the business declared in 2020 that Chime was getting ready for an IPO within the following 12 months. He told Reuters that the company was evaluating all options, but he declined to comment on any potential IPO ambitions.

How Chime Reports Diversity and Inclusiveness

We provide investors with a peek into Chime’s openness and its dedication to diversity, inclusivity, and social responsibility as part of our attempt to raise investor understanding of the value of diversity in businesses. We looked at the data Chime makes available. It demonstrates that Chime withholds all information regarding the diversity of its board of directors, C-Suite, general management, and workforce as a whole. Additionally, it demonstrates that Chime conceals its diversity in terms of ethnicity, gender, ability, veteran status, and LGBTQ+ identity.

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