It has been a whirlwind 18 months for CEO Chris Britt and the team at mobile bank account and debit card company Chime.
Since debuting on stage at Money20/20 2014, Chime has grown to more than 100,000 members, launched a new automated savings product, and attracted more than $11 million from a group of early-stage venture capital firms.
Mr. Britt has spent the last 16 years in the Silicon Valley region, including a five-year stint at reloadable prepaid credit card company Green Dot, which he helped take public in 2010. He was also Head of General Purpose Prepaid Products for Visa.
Late in 2012 Mr. Britt and his business partner Ryan King saw an opportunity to create a different type of bank account for younger consumers yearning for an option not involving big banks, people early in their earnings careers with straightforward financials. That option would have to come with an optimal mobile experience.
Like most financial services companies created after 2008, Chime was indelibly influenced by the recession, Mr. Britt said. Its effects on a generation of parents produced several changes in millennials.
One is they simply do not trust banks. The biggest names in the industry consistently rank among the least trusted brands in America.
They are also open to being educated on financial literacy and to receiving help on how to develop better spending and saving habits.
“There has also been a secular shift toward debit cards as the primary way to pay,” Mr. Britt said. “And the primary reason is control. Credit cards make them feel like they are burning a hole in their pocket.”
In this environment Chime saw a great opportunity, Mr. Britt said.
“We want to create a relationship that helps consumers build a healthy financial life.”
“Most banks do not operate in your best interests. They market on credit cards and make money from your misfortune.”
Chime began by offering an FDIC-insured deposit account which included a Chime Visa Debit Card and optional savings account. There is no minimum balance required, no monthly fees, and withdrawals are free if made at more than 24,000 MoneyPass locations, which are located in all 50 states and whose nearest locations to the customer are shown on a GPS-enabled map.
There are also no overdraft fees, because Chime does not allow them to occur, Mr. Britt explained. When an account is running low, the customer receives a text message informing them of their balance. They cannot make a purchase costing more than their balance.
As of January 12, Chime members also get paid every time they use their Chime card, Mr. Britt said. Under the Automatic Savings Program, each purchase is rounded up to the next dollar, with that roundup deposited into their account. Each Friday members are paid a 10 percent bonus on those extra funds.
Those pennies quickly add up. The average Chime member using their card twice each day makes $400 per year.
“When you consider 60 percent of Americans have less than $1,000 in savings, an extra $400 looks pretty good,” Mr. Britt said.
Chime is able to offer these unique features because of their business plan, Mr. Britt explained. Instead of charging user fees, Chime generates revenue through its interchange with Visa.
“By encouraging people to put more money into their accounts, it helps them develop healthy savings habits,” Mr. Britt said.
“It creates aligned incentives. The consumer is motivated to swipe more and use it more regularly.”
The continued development of mobile technology has made it possible for Chime to provide several additional value-added features, Mr. Britt said. Customers can be instantly notified of every transaction. That enables fraud to be much more quickly detected than before.
“Compare that to the old school bank statement which reflects the old intelligence of the bank,” Mr. Britt said.
With one click a customer can report a lost or stolen card and block its use.
Chime also provides a full dashboard where all transactions are displayed by category.
“People say they want to use budgeting tools and closely manage their finances,” Mr. Britt said. “The best way for people to develop healthy financial habits is to use technology in an automated way.”
“A mobile-first bank account is like control on steroids.”