[CNBC] Chime recognized as #8 on CNBC Disruptor 50

Originally posted on CNBC

by Hugh Son

Founders: Chris Britt (CEO), Ryan King
Launched: 2013
Headquarters: San Francisco
 $1.5 billion (PitchBook)
Valuation: $14.5 billion (PitchBook)
Key technologies:
 Artificial intelligence, cloud computing, machine learning
Previous appearances on Disruptor 50 List: 1 (No. 25 in 2020)

For years, American banks have been among the least popular of industries with customers, thanks in large part to penalties like overdraft fees. Enter the so-called challenger banks, fintech firms that offer banking services exclusively through smartphone apps and websites.

Atop this new breed of upstarts is Chime, which offers fee-free banking, early paydays for those who direct-deposit their earnings, and a feature that lets users go negative in their accounts without overdraft fees. It, along with Square’s Cash App and a few other players, have become viral hits for their ease of use.

Chime has experienced torrid growth during the coronavirus pandemic, picking up millions of users and reaching a $14.5 billion valuation in September. That figure has undoubtedly climbed since then as it nears a potential IPO — CEO Chris Britt told CNBC last year that he would have the firm “IPO-ready” within 12 months.

Amazingly, Chime — whose name is meant to evoke a calming sound — was valued at a mere $1.5 billion in early 2019, just two years ago. The company’s story shows just how rapid start-ups can scale if the product fit is compelling.

Part of its growth story is understanding the large swath of U.S. customers who aren’t well served by traditional bricks-and-mortar banks. Chime focuses mostly on millennials who make between $35,000 to $70,000 a year. That’s because these people are more likely to be frustrated by fees than those who can afford to maintain higher balances.

Also, this segment tends to lean heavily on debit cards to pay for everyday expenses while staying within budget, and Chime makes money from the swipe fees paid for by merchants.

“We’re more like a consumer software company than a bank,” Britt told CNBC. “It’s more a transaction-based, processing-based business model that is highly predictable, highly recurring and highly profitable.”

New products include a credit card designed to help users build credit without fees or a credit check.

Still, it hasn’t been all smooth sailing for the fintech darling. The company was recently reprimanded by a California regulator after referring to itself as a bank in some cases. To be clear, Chime leans on FDIC-backed partners to hold customer deposits.

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