Q&A: How Chime is helping its members achieve financial peace of mind
Patrick Leonard, Managing Director and Co-Head of Emerging FinTech for Barclays International, recently spoke with Chris Britt, Co-Founder and CEO of Chime, about the key role of challenger bank models in financial inclusion.
Chime is changing the way people feel about banking. Founded in 2012 by financial and tech industry veterans Chris Britt and Ryan King, Chime has quickly established itself as the leader in the US challenger banking segment.
The business was built on the principle of protecting its clients, who are referred to as ‘m2embers’, and helping them get ahead.
Chime has pursued that mission by building a new kind of bank account. For example, Chime accounts don't have account fees and have free overdraft protection. It offers a wealth of tools and services, including two-day advances on direct deposit payroll and automatic savings, to help members lead healthier financial lives.
Patrick Leonard: Thank you for participating, Chris. To begin, can you give us a quick update on Chime? You recently announced a $500 million equity financing at nearly $6 billion valuation.
Chris Britt: Thanks Patrick. We’ve had a lot going on since our financing in December. We’ve continued to grow our member base rapidly, announced a major brand sponsorship of the Dallas Mavericks and of course had to manage a transition to work from home due to COVID-19. I’m really proud of the work we done recently - especially providing Chime members with early access to over $1.5 billion in stimulus payments and the recent launch our Credit Builder credit card. It’s been a busy time!
PL: You have commented that the American banking system is broken. How has the traditional banking system fallen short for everyday Americans and how has Chime addressed these shortfalls?
CB: Banks do a reasonably good job of serving the top 25-30% of Americans in terms of wage earners. That segment of the population is generally well served. The vision for Chime has always been to provide a suite of services for the rest of America. If you look across the country, there is a huge segment of Americans that has a lot of anxiety around their money and day-to-day finances. We have been very deliberate in thinking about ways to deliver services that help individuals achieve financial peace of mind. We think that starts first and foremost with a checking account relationship that doesn’t rely on fees.
PL: How did that backdrop influence your vision for Chime, and how has that vision evolved over time?
CB: The problem that so many Americans have with their core banking partner is that incentives are not aligned. So much of the economics in traditional consumer banking are built on fee income that it creates an adversarial relationship. The level of fee income that banks earn is mind blowing and, in our opinion, not sustainable for the long-term. That is the foundation for how we see ourselves as being different. We believe we’re in a time and era where the brands that are helpful, authentic and have a customer’s best interest in mind are the ones that are going to thrive – and that is definitely what we are driving toward at Chime. Given the backdrop of what is going on in the country right now, it is more important than ever to feel like you have a banking partner that has your best interests at heart and that is how we build our business every day.
Given the backdrop of what is going on in the country right now, it is more important than ever to feel like you have a banking partner that has your best interests at heart and that is how we build our business every day.
Co-Founder and CEO, Chime
PL: What steps has Chime taken to educate members on financial products and financial wellness to enhance their financial literacy
CB: We’re really proud of the community that we’ve build at Chime. We have more Instagram followers than any major bank and I think we are the leading FinTech not just in terms of followers, but importantly, the level of engagement that we have on social media (for example, the number of comments per post). We’ve built a community of highly engaged people who really love our product every day. As we think about communicating tips and best practices as it relates to people’s money and financial literacy, our style is not to write long-winded lectures and textbook materials, but rather more bite sized content that connects culturally with what’s going in the country and the world. We strive to give people helpful tips on how to get their finances right, leverage automation and get into healthy habits which we believe are core to financial success – particularly getting into the rhythm of starting to save at an early age.
PL: Chime has amassed an amazing number of members, so the platform is clearly resonating in the target segment – what is driving the growth, adoption and engagement you are seeing?
CB: The biggest driver of growth for us has been our own member base. We get almost half of our new accounts each month through referrals, word of mouth or organic means. We very consciously add to that with acquisition initiatives through online and other common channels. I think the product features that we designed have been very relevant to the mainstream consumers that we serve. If you boil down the features that have really resonated, it all comes back to short-term liquidity. Depending on what research you read, as many as 70% of Americans live paycheck to paycheck – we offer free services such as early access to paychecks (up to two days early) and overdraft protection. Those offerings are very helpful for our members, who in turn mention it to their friends – and this starts the flywheel effect.
We are very focused on the segment we serve. We take the time to really understand what their needs are, and we design products and services to meet those needs. It sounds simple, but really understanding your customer needs is so incredibly important. For example, if you serve consumers with really high credit scores and solid six-figure incomes, they probably don’t pay with a debit card, they pay with a credit card. So no matter how great a debit card you build, they’re still going to pay with a credit card. It comes down to understanding what segment you want to serve and focusing on products and services that will resonate with them.
PL: The COVID-19 pandemic has placed financial strain and uncertainty on many people. How has Chime adapted and created new solutions to meet members’ financial needs during this time?
CB: I was really proud of how quickly our team moved to take action as a result of COVID-19. We launched an initiative called ChimeCARES, which did a couple of things. First, in anticipation of the $1,200 stimulus payments from the government we tested out a programme where we increased the SpotMe limits (that is, our overdraft limit) up to $1,200 for thousands of people, and we got really good feedback. We spoke to our members and asked them about their situations – people were starting to lose jobs or felt like they could lose their job and become eligible for this payment. The bigger thing we did though was when people were going to get those payments on 15 April, we started releasing the funds as early as 10 April. We actually provided members with early access to over $1.5 billion of stimulus payments before they arrived. While it was nice to get some buzz around the programme, we just thought about the right thing to do for our members – it was a natural thing for us to do.
PL: Many industry participants concur that the pandemic has accelerated the pace of digital adoption. What is your outlook on the long-term effects this will have on the industry?
CB: The pandemic has accelerated trends that were already in motion including the movement to mobile and more digital experiences that don’t require in-person interactions. Although we don’t have physical locations, I’m sure there is far less activity in branches now and I suspect that will be permanent. Consumers are going to place more emphasis on brands that they trust and experiences that are easy, helpful and increasingly free. I think that bodes well for us and probably a number of similar companies.
Consumers are going to place more emphasis on brands that they trust and experiences that are easy, helpful and increasingly free.
Co-Founder and CEO, Chime
PL: You forged a multi-year strategic partnership with the Dallas Mavericks earlier this year. How do you think about partnership/sponsorship opportunities and what organisational attributes are important when selecting a partner?
CB: We are doing great things with the Mavs organisation every week – it’s a very close, active partnership rather than just PR or passive sponsorship. They [the Mavs] are continuously doing so much to support their communities. We had opportunities to partner with other teams but we felt that without question the Mavericks organization was the most like-minded in terms of working to have a positive impact and being active in the community. It’s a great partnership. Hopefully there is a season and the Mavs make a good run! They are a good young team and in some ways mirror where we are as an organisation.
PL: If you had to identify a key lesson or two from your journey as an entrepreneur in the sector, what would they be?
CB: You have to have a good sense for the problem you are trying to solve for the segment you want to serve. Any successful entrepreneur will tell you that it all starts with understanding your customers’ needs and designing products and services for them. But the team you build is equally, if no more, important. If I look back and reflect on it, the most important thing I ever did was find our co-founder Ryan, who is our CTO and has been my right hand forever. But it didn’t stop with him – there’s the rest of the team we hired from the early employees, and the culture we built in the early years, to the hiring we are doing today. We are building a team with leaders who see the world similarly and are passionate about our mission, the consumer segment we serve and the problem we’re trying to solve.