How Chime Makes Money
Chime is an online and mobile banking solution that offers its users to open an account, make purchases, and withdraw money from their accounts without having a bank account. Chime offers its services free of cost. It does not levy monthly charges and does not require a minimum account balance. Chime also provides its users with a Visa debit card, using which they can make purchases or withdraw money from any VPA or MoneyPass network ATMs.
So how does Chime make money?
Chime makes money by taking a portion of the transaction fees that Visa charges to merchants when customers use Chime's debit card.
Chime offers its customers an option to access their directly deposited paychecks two days earlier. It also offers an automatic saving feature that rounds up the debit card payment to the nearest dollar and sends the remaining amount to the user's account. Users who have a direct deposit of $500 or more a month can get up to $100 in cost-free over drafting.
Technically, Chime is not a bank. The services Chime offers to its customers are handled by two small banks, The Bancorp Bank and Stride Bank.
As a fintech startup, the kind of banking services Chime offers would categorize the company as "neo bank" or "challenger bank." These new services aim to compete with traditional banking services. According to Chime, an average person in the U.S spends $329 a year in banking fees. Chime, as a neo bank, provides an alternate source of checking and savings account that is devoid of any hidden fees.
Chime is one of the biggest fintech, neo banks in the United States. However, it has its competitors, one of them being German neo bank N26, backed by German billionaire Peter Thiel and Brazil-based Nubank. Chime entered into a joint venture with 21 Savage to promote financial literacy among children.
Fundraising and Financials
By 2019, Chime had 6.5 million accounts registered with its app, from 1 million in the previous year. However, since many users have both checking and savings accounts, many of these accounts will be inactive.
As per Crunchbase, Chime has raised $808 million over 7 funding rounds. According to the latest fundraising round, Chime was valued at $5.8 billion with an estimated $300 million in revenue.
History and Leadership
Chime was launched in 2013, however, it was not until 2014 that the app was offered to consumers. It was found by Chris Britt, who is serving as the current CEO, and Ryan King, who is the current CTO of the company.