OBSERVATIONS FROM THE FINTECH SNARK TANK
Bloomberg reported that Chime, the leading fintech neobank, is planning to go public in 2025. According to the report, Chime has not engaged investment banks to date. The unnamed source is a “person familiar with the matter” and a representative for the company declined to comment.
Chime hasn’t raised funds since 2021 when it was valued around $25 billion. The neobank has not reported on the number of customers it has for the past few years.
Chime Has More Than 38 Million Customers
Consumer research conducted by Cornerstone Advisors sheds some light on Chime’s customer base and their demographics.
According to a July 2023 survey of US consumers, Cornerstone estimates that Chime has more than 38 million customers—more than the number of checking account and/or payments customers of SoFi, Dave, MoneyLion, and Current combined—more than three times greater than Cornerstone’ 2021 estimate.
Cornerstone’s numbers don’t jive, however, with what some of the other fintechs have reported publicly.
Dave claims that it “serves 10 million members with banking, financial insights, overdraft protection, building credit, and finding side hustles.” That’s similar to MoneyLion, whose Q2 2023 securities filing claimed the company had “nearly” 10 million customers.
Both claims may be true, but the Cornerstone survey asked consumers who they had a checking or payments account with. It’s possible that not all 10 million Dave or MoneyLion customers have those types of account.
How does Chime’s 38 million customer count compare to the established banks?
Because banks like Bank of America, Chase, Wells Fargo and other large regional banks have highly diverse product lines, making a direct comparison of number of customers nearly impossible.
Chime Has More Primary Customers Than Chase
It is possible, however, to make a direct comparison between Chime and incumbent banks by looking at the percentage of the providers’ customers who consider the firms to be their primary checking account provider.
Of Chime’s 38 million customers, about half consider the neobank to be their primary checking account provider. That works out to 8.1% of all American adults—12.3% of Gen Zers, 9.5% of Millennials, 7.5% of Gen Xers, and 2.9% of Baby Boomers.
In contrast, Wells Fargo has 8.5% of the market, and JPMorgan Chase—the nation’s largest bank (in terms of assets)—counts 7.6% of Americans as primary checking account customers.
At other leading fintechs like SoFi, Current, MoneyLion, and Cash App, only about a quarter of their customers consider those firms to be their primary checking account or payments provider.
Is Chime Ready For an IPO?
Chime has clearly demonstrated two important things in its path towards an IPO: 1) Sustained customer growth despite the “fintech winter,” and 2) It has maintained a high percentage of primary customers who transact more frequently.
The big question marks for Chime are: 1) Can it continue to capture emerging young consumers? 2) Will young customers “age out” of Chime as they get older? 3) Can Chime expand into credit? and 4) Can Chime capture more spending wallet share?
Chime’s Customer Demographics Differ From the Megabanks
Not surprisingly, Chime customers skew to the younger side—just one in four Chime customers is 45 years old or older. In contrast, 40% of Wells Fargo and Chase checking account customers are Gen Xers, Baby Boomers, or older.
Chime customers have lower levels of income compared to the large banks. Half of Chime customer earn $35,000 a year or less, and just 15% earn more than $75,000. Among Bank of America customers, half make more than $75,000.
These demographics make it difficult for Chime to expand into credit products.
Chime Can Diversify Revenue Streams
Asked back in 2022 by CNBC how Chime makes money, Britt responded:
“[We’re] really more of a payments business. Our members use us for their every day spending and we make a small part of that transaction when the card gets used at the point of sale.”
Well, not all members.
A growing number of banks and credit unions are bundling digitally-delivered products and services like roadside assistance, cell phone damage protection, and identity theft protection with their checking accounts as a means to grow revenue.
Across 14 different types of services, a 2022 study from Cornerstone found that a high percentage of Chime customers are very interested in getting those services bundled with a Chime checking account.
What’s Chime Worth?
Forbes notes that Chime’ 2021 raise was valued at $25 billion but that secondary-market activity in 2023 put the company’s value at around $8 billion. According to Caplight, Chime’s value has dropped to $6.5 billion as of early March 8.
Valuation at many fintechs have dropped since 2022 as many proved to not have sustainable revenue and/or business models.
Chime has bucked that trend. Although it may not yet be profitable, it has shown it can maintain strong customer growth and primary status.
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