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As much as the traditional banks try to change their ways and move into the 21st Century, millennials still want nothing to do with them. That has opened the door for fintech upstarts like Chime to move in and carve out a niche which appears to be growing among the more tech-savvy, mobile generation.
Chime’s timely entry into mobile-first banking has also caught the attention of investors who see it as the next big disruptor of the traditional banking industry. In its latest round of financing, Chime managed to pull in $18 million in Series B financing led by Northwestern Mutual Future Ventures, Cathay Innovation, Crosslink Capital, and Forerunner Ventures among others. That brings the total funding amount for the three-year old startup to more than $42 million.
What is Chime All About?
Launched in 2014, San Francisco-based Chime came to market with the right technology and the right value proposition. Its technology, a primarily mobile-first banking platform, has captured the imagination of the younger generations who have grown up in the digital age running their lives through their smartphones. Chime is one of the first new digital banks to be created in the smartphone era almost exclusively for smartphone users. Users can do any type of banking using its feature-rich app, which makes it an ideal banking solution for the mobile generation.
Among the cool features found on the app are daily balance updates, instant transaction alerts, and real-time deposit notifications to keep customers on top of their finances. Customers can easily transfer money between accounts and pay bills or send money to friends. If a check needs to be mailed, the Chime app will create the check and mail it at no additional charge. The free debit card can be temporarily blocked with the flip of a switch if needed. An instant chat feature puts customers in touch with a bank rep. Best of all, there are no charges of any kind – no bank fees, no overdraft fees, nothing, nada.
Why Chime is Likely to Stick With Millennials
That might be enough to build loyalty among its more than 500,000 customers, but it is Chime’s unique value proposition that seems likely to create lifetime relationships. At the core of Chime’s appeal is its totally free banking, which supports its mission to help its customers create healthier personal finances. To that end, Chime has introduced some optional automatic savings tools that allow customers to set aside a certain amount of money or round up their transactions to the next dollar, setting the spare change aside in savings. Its latest feature is “Save When I Get Paid,” which enables customers to automatically transfer 10 percent of their paycheck to savings.
Chime has even made it incredibly simple for new customers to switch their bank accounts. One of the reasons why people hesitate to change banks is the hassle of changing all their online and subscription payments to a new account. Chime recently introduced a bill switch feature called CardSwap that will take care of that for you right from your smartphone.
What Investors See in Chime
Although Chime’s digital footprint is currently dwarfed by the big banks, such as Bank of America with 17 million mobile banking users and Chase with more than 20 million, it’s lapping them with its technology. That is its appeal to investors who see Chime as the best positioned to disrupt the traditional banking relationships of millions of customers. Unlike many of its competitors in the digital banking space, which are struggling to gain a foothold, Chime has built a solid growth foundation supported with strong economic units, leading investors to believe it is building the bank of the future.
Chime projects that it will reach more than $1 billion in transaction volume by the end of 2017, which has been an amazing growth trajectory based almost exclusively on word of mouth. They plan to use the additional funding for their first ever marketing efforts. Then watch out.
Author: Jeff Gitlen