Chime is a huge success as a neobank because of its sheer imagination about the needs of the customers:
Chime is a fintech and the No 1 neobank in the US, but it says it is not a bank. Responding to complaints by the California Department of Financial Protection and Innovation it agreed to stop using the term ‘bank’ in marketing. The regulator acted against the neobank because it does not have a state banking license. In terms of the ruling of the regulator, Chime describes itself on its website as a fintech and that it is partnering with its parent The Bancorp Bank and Stride Bank to offer
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Chime has more than 8 million users, accounting for a 2.4% share of the US banking market. It offers various fee-free banking products, which comes with features like get paid early, online banking, fee-free overdraft, no hidden fees, mobile banking, automatic savings, mobile payments and security and control. It also has accounts such as a spending account, credit builder and savings account.
Its SpotMe is a fee-free overdraft service where customers can overdraw their accounts up to $100 without incurring an overdraft fee; once the overdraft limit is reached, purchases will be declined but no traditional negative balance fees charged. Its Credit Builder is a credit card designed to help consumers build their credit history. All account holders are given Visa debit cards and have access to an online banking system accessible through chime.com or via the mobile app for Android or iOS.
Chime’s revenue is primarily from the collection of interchange. It has no physical branches and does not charge monthly or overdraft fees. Bank accounts are insured up to the standard maximum deposit insurance amount of $250,000.
Founded by Chris Britt and Ryan King in 2013 in San Francisco as an alternative to traditional banking, Chime has raised as of 2020, $1.5 billion in private funding. It has also received funding from investment firms like Dragoneer, Menlo Ventures and Cathay Innovation.
Last valued at $5.8 billion, its valuation may have touched anything between $12 billion and $15 billion as of now. It has a 35% share of all digital bank checking accounts in the US. Its immediate competitors are Ally Bank with 9% of the digital banking market, and Varo Money with a 6% share.
In April 2020, in response to the financial strain resulting from the pandemic, Chime announced a pilot program to provide users who e-filed tax returns with the IRS a $1200 advance on the Economic Stimulus Payment via SpotMe. Subsequently, it said it had successfully processed over $375,000,000 in stimulus payments 1 week ahead of the scheduled government disbursement date.
How Chime got into the hearts of Americans is by evolving strategy experts describe as ‘featurization’. Customers no doubt can be attracted by providing a good user experience or by providing no-fee services. However, Chime appears to have used non-traditional methods like early access to customers’ money – 2-day early access to their direct-deposited paycheques; early access to government stimulus and tax refund checks; its Spot Me product allowing customers to make debt card purchases that overdraw on their accounts with no overdraft fees; and the credit-builder credit card, which is held by all the primary banking customers of the bank.
Two-thirds of Chime’s customers are under the age of 40.
While it is predicted that neobanks in the US will have 20.2 million account holders by end of 2021, more than double the number just two years ago, Chime for all purposes is well ahead of its competitors. Many industry watchers say it will hold steady as the industry leader. It will have 13.1 million US account holders this year, up 30.7% over last year. By 2025, it is expected to reach 22.7 million account holders, increasing its lead over competitors through the end of the forecast period.
Chime’s Co-founder and CEO Christ Britt had said once: “You can either have product structures that are aligned with the consumer’s best interests, which is what we strive to do, or you can have products that are adversarial and profit from people’s misfortune. That’s what big banks do and that’s being exposed.”
Chime obviously derives its strength from its technology backbone. But sometimes, this can falter. In October 2019, it faced an outage that left its 5 million customers without access to funds or the ability to make purchases. Customers did not have the option to physically go into a branch and talk to a banker. This had been some sort of reputational damage and loss of trust for the bank, but it quickly recovered and regained the lost space.
Chime is confident it will continue to deliver banking as simple and low-cost as possible, along with new complimentary services. To retain its position as the leader, it will look to lead the way with game-changing products that cater to multiple customer segments at different stages of life, from students to retirees.