Chime IPO: Everything to know about Chime

Chime IPO: What do we know about the Chime IPO?

The date for the Chime IPO has not yet been announced, and the company has said it has no 'immediate' plans so the date will likely be subject to market conditions. But rumours suggest the company has now asked Goldman Sachs Group to aid in its preparations for a New York listing - although a spokesperson has denied the plans. The valuation of the company could be around $40 billion or more post listing, based on its most recent funding round of $25 billion in August 2021. 

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How much is Chime worth?

Chime is worth some $25 billion as of its latest fundraising round in August 2021, in which it raised $750 million. Prior to this mark, September 2020 saw the company achieve a valuation of around $14.5 billion following a $200 million round Series F round that month. Just three years ago the company was valued at $1.5 billion, which indicates the substantial growth the company has seen in the last few years. 

What is Chime?

Chime is a San Francisco-based fintech that offers fee-free mobile banking services.

The company was started in 2013 by former Visa executive Chris Britt and Ryan King, former VP of engineering at early social networking pioneer Plaxo. The mission statement for Chime was, and is, to help Americans manage money, remove costly fees, and cater for an audience that increasingly does not want to visit a physical branch.

After raising an initial seed round of finance in 2013, the company secured a Series A of $8 million in 2014 to develop its mobile debit card and location-based rewards app.

A Series B of $18 million followed in 2017, by which point the company had launched a suite of features that enabled its 500,000 customers to use Chime as a primary bank account.

By the company’s $70 million Series C in May 2018, Chime had passed 1 million accounts, with the proceeds earmarked for key hires and additional features. A Series D of $200 million in 2019 established the company as the leader in US challenger banks in terms of funding volume, and made for a valuation of $1.5 billion. An extra $500 million followed that year, by which time the company had signed up 6.5 million accounts. 

Most recently, a 2020 Series F of some $533 million and the latest 2021 Series G of $750 million helped the company move towards 12 million total customers, revenues in excess of $200 million and more than 400 employees.

Who are Chime’s competitors?

Chime’s competitors include neobank and challenger bank operators such as the UK-based Revolut, Germany’s N26, and Brazil’s Nubank, as well as digital wallets such as Venmo and bill-splitting service GoDutch.

Many of these operators have nuanced and varying offerings, but Revolut is currently one of the main global players if we’re focusing on pure digital banks, with more than 14.5 million global customers as of August 2021. Revolut is also one of the few in the sector to have seen at least some profitability, with figures reportedly moving into the black in the latter part of 2020.

In regard to the domestic US market, Varo won approval in 2020 from the Federal Deposit Insurance Corporation to offer banking services and may be a serious rival to Chime in future.

Online banking start-ups operate in a relatively young sector with the industry yet to mature. Research by Exton Consulting in December 2020 found 256 operations classed as ‘neobanks’ worldwide. In time, however, we may expect to see various acquisitions and consolidations. Inevitably, certain operators will emerge from the pack as the demands of the market develop, and more consumers move away from ‘traditional’ banking services.

How does Chime make money?

Chime makes money primarily through taking a percentage of the transaction fees that merchants are charged by Visa when people use the Chime debit card. It seems likely that Chime will seek diversification potential in terms of its revenue model, as rivals such as Revolut have done.

What is Chime's business strategy?

Chime’s business strategy from the beginning was to provide banking services that offer ‘financial peace of mind’ to those Americans outside of the top 25-30% of wage earners. This involved exploring a move away from traditional fee income models pursued by traditional banks, and building a community of engaged users who are hopefully more financially literate than those served by incumbents. 

Many services offered by the company have been designed to address short-term liquidity issues, such as early access to paychecks and overdraft protection – the sort of features that inspire referrals, Britt has claimed.

Indeed, customer acquisition for the company has been driven mostly by referrals, but also through organic means and word of mouth. In terms of revenues, the company’s aforementioned interchange fees could soon be bolstered by potential plans for a product marketplace as well as credit and loans.

Moving forward, traders and investors interested in a potential Chime IPO will be keen to see how such product development takes hold. As with any young industry, competitors are still experimenting and finding their feet in regard to the right features to resonate with their userbase. So far, paths to profitability for challenger and neobanks have been all but straightforward. But if a particular company can get there, Chime has the backing and in-house expertise to overcome difficulties and be a potential leader in the sector.

Is Chime profitable?

Chime became profitable in terms of EBITDA during the global coronavirus pandemic in 2020, Britt told CNBC in September that year.

Who owns Chime?

The ownership of Chime is split between a range of individuals, such as the founders Britt and King, along with a series of investment institutions that have acquired stakes along the way, such as Sequoia Capital, Tiger Global Management and Japan’s Softbank.

Key personnel of Chime

Chris Britt – Co-founder, Chief Executive Officer

Ryan King – Co-founder, Chief Technology Officer

Mark Troughton – Chief Operations Officer

Matthew Newcomb – Chief Financial Officer

Melissa Alvarado – Chief Marketing Officer