DIGITAL NEO BANKS + INTERCHANGE FEE FEEDING FRENZIES: FinTech Start-Ups Growing Fast with Inflated Market Valuations

Get a load of this: "Chime provides banking services but doesn’t have a banking license—it partners with Bancorp and Oklahoma-based Stride Bank to offer FDIC-insured checking and savings accounts. It extends small loans of $200 to customers but has yet to roll out a large-scale lending product. Nearly all of Chime’s revenue comes from interchange, the small fees merchants pay every time consumers buy something with a credit or debit card."

Chime In Talks To Go Public At $35 To $45 Billion Valuation

 

Jeff Kauflin Forbes Staff Fintech He covers fintech, blockchain and investing.

Forbes | 2021-10-

 

Jeff Kauflin: "San Francisco digital bank Chime is in talks to go public at a valuation of $35 to $45 billion, according to a person familiar with the matter, and it’s targeting March of 2022 for the IPO. The company’s revenue will likely reach $900 million to $1 billion this year, the person said. A spokesperson for Chime declined to comment. 

Founded in 2013, Chime offers checking accounts with no monthly or overdraft fees and has gained a particularly strong following among lower and middle-income Americans.

> As hordes of people shifted their spending online during the pandemic, Chime and many large fintechs grew faster than at any point in their history.

That has led to an investor frenzy for fintech startups. U.S. fintechs have raised roughly $43 billion in funding in 2021 so far, more than double last year’s total, according to CB Insights. (Chime raised $1.1 billion at a $25 billion valuation just two months ago.) In the third quarter of 2021, one in every three newly minted unicorn startups was a fintech company. And forty-six fintechs have gone public in 2021, compared with 31 for all of 2020.

At a valuation of $35 billion-plus, Chime would be more valuable than regional banks like Fifth Third, M&T and Regions, each of which has hundreds of branches and brought in more than $1 billion in net profit in 2020.

Chime has not been consistently profitable, although CEO Chris Britt has said the company turned a net profit in the second quarter of 2020. “But we are not optimizing for that, because there's great growth opportunity ahead of us,” he told Forbes in March 2021"

About Jeff Kauflin

Jeff Kauflin 

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I lead our fintech coverage at Forbes, and I also write about blockchain technology and investing. In October 2020, three of my colleagues and I won the Excellence in

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History[edit]

Chime was founded by Chris Britt (CEO) and Ryan King (CTO) in 2013 in San Francisco, California as an alternative to traditional banking.

The company launched publicly on April 15, 2014 on the Dr. Phil Show.^[9]

As of 2020, Chime has raised $1.5 billion in private funding.^[10]

In 2018, Chime acquired Pinch, a startup focused on helping millennials and young adults build their credit scores by reporting on-time rent payments to credit bureaus. Pinch's co-founders joined Chime's team as a part of the acquisition.^[11]

On October 16, 2019, Chime experienced a service outage leaving users without access to their deposits. The issue was resolved the next day.^[12]

In January 2020, Chime announced a partnership with the Dallas Mavericks as their jersey sponsor as a part of a multi-year deal.^[13]

In April 2020, in response to the financial strain of the COVID-19 pandemic, Chime announced a pilot program to provide users who e-filed tax returns with the IRS a $1,200 advance on the Economic Stimulus Payment via SpotMe, Chime's fee-free overdraft product. ^[14]

Chime later announced the successful processing of over $375,000,000 in stimulus payments 1 week ahead of the scheduled government disbursement date.^[15]

> In May 2021, the company agreed to stop using the term "bank" in marketing per complaints by the California Department of Financial Protection and Innovation.^[16]

Account closures[edit]

In July 2021, ProPublica published an article detailing Chime's record of closing customer accounts without notice or explanation, sometimes refusing to return customer deposits.^[17] Chime has attributed the closures to the accidental byproduct of fraud prevention.^[17]

Funding[edit]

In August 2021, Chime Financial raised $750 million in a series G funding round, led by investor Sequoia Capital Global Equities.^[18]

This values the company at about $25 billion.^[18]