Jump to content

Chime (company)

From Wikipedia, the free encyclopedia
Not to be confused with Chime Communications Limited or Chime Communications (Australia).
Chime Financial, Inc.
Company typePrivate
IndustryFinancial services
Founded2012; 12 years ago (2012)
FoundersChris Britt and Ryan King[1][2]
Headquarters101 California Street
San Francisco, California, United States
Key people
ProductsChecking accounts, savings accounts, debit cards, P2P, credit cards, fee-free overdraft
RevenueIncrease US$200 million (2019)[3]
Websitechime.com

Chime Financial, Inc. is a San Francisco–based financial technology company that provides fee-free mobile banking services through two national banks, Stride Bank and The Bancorp Bank.[2][4][5][6][7][8][9]

The company offers early access to paychecks, negative account balances without overdraft fees,[2] high-yield savings accounts,[5] peer-to-peer payments,[6] and an interest-free secured credit card.[8] Chime's mobile banking services do not rely on monthly service or overdraft fees or minimum balance requirements. Chime earns the majority of its revenue from the collection of interchange fees on debit card transactions.[10]

Chime is able to offer its services via its relationships with banks despite the company not being a bank itself. Although customer money is held in FDIC-insured accounts at Chime’s partner banks, FDIC bank insurance does not directly protect Chime's customers.[11][12] In 2021 and 2022, Chime was criticized for closing customer accounts without notice and not returning funds in a timely manner.[13][14] The company was penalized for the use of the word "bank" in its marketing, following which it agreed to include disclaimers that Chime is not a bank in its marketing materials. In 2024, Chime settled investigations for its handling of the account closures and to pay fines.[15]

History

[edit]

Chime was founded by Chris Britt (CEO) and Ryan King (CTO) in 2012[16] in San Francisco, California as an alternative to traditional banking to serve less affluent communities and people living paycheck to paycheck.[17][18] The company launched on April 15, 2014, on the Dr. Phil Show.[19] As of 2021, Chime has raised $2.3 billion in private funding. In 2022, Chime was named as one of Fortune's Best Places to Work.[18][20][21]

Chime provides mobile banking services via its bank partners without monthly or overdraft fees, and it does not require an opening deposit or minimum balance to open a free checking account.[5]

In 2018, Chime acquired Pinch, a startup focused on helping millennials and young adults build their credit scores by reporting on-time rent payments to credit bureaus. Pinch's co-founders joined Chime's team as a part of the acquisition.[22]

On October 16, 2019, Chime experienced a service outage leaving users without access to their deposits. The issue was resolved the next day.[23]

In January 2020, Chime announced a partnership with the Dallas Mavericks as their jersey sponsor as a part of a multi-year deal.[24] Chime had 8 million account holders in February 2020.[25]

In April 2020, in response to the financial strain of the COVID-19 pandemic, Chime announced a pilot program to provide users who e-filed tax returns with the IRS a $1,200 advance on the Economic Stimulus Payment via SpotMe, Chime's fee-free overdraft product.[26] Chime later announced the successful processing of over $375 million in stimulus payments one week ahead of the scheduled government disbursement date.[27]

In September 2021, Chime leased 192,000 square feet of office space across six floors in a San Francisco building owned by Hines.[28] According to a report by Forbes, Chime had planned to hold an initial public offering (IPO) in March 2022. The company delayed its IPO, however, in February 2022.[29] Chime laid off 160 positions, equalling 12% of its workforce, in November 2022.[30] As of May 2024, the company, which operates under a hybrid work model, reported having 1,300 employees and 7 million customers.[18] At the time, it was processing $8 billion worth of transactions monthly. Chime's revenue in 2023 was approximately $1.3 billion. The company's customers are largely made up of young Americans with incomes ranging from $35,000 to $65,000 annually.[18]

In August 2021, Chime Financial raised $750 million in a series G funding round, led by investor Sequoia Capital Global Equities,[31] giving the company a valuation of about $25 billion.[31] In 2024, Chime was named to the CNBC Disruptor 50 list.[32]

In September 2024, it was announced that Morgan Stanley would lead Chime's IPO in 2025.[33]

Funding

[edit]

Some of Chime’s notable early investors include seed investors Satya Patel of Homebrew and Kirsten Green of Forerunner; Series A investors Lauren Kolodny of Acrew Capital (formerly Aspect Ventures) and Crosslink Capital. Later rounds included Menlo Ventures, DST, General Atlantic and Coatue.

Consumer and regulatory problems

[edit]

Marketing as a bank

[edit]

Chime, which is not a bank, in 2021 came to agreements with two state financial regulators, the California Department of Financial Protection and Innovation and the Illinois Department of Financial and Professional Regulation, to stop representing itself as a bank. The company agreed to stop using the URL "chimebank.com", change its use of the word "bank" in marketing, and add disclaimers to its marketing and product text. It paid $200,000 in the settlement with Illinois.[34][35][36][37]

Account closures, difficulty recovering deposits

[edit]

In July 2021, ProPublica published an article detailing Chime's record of closing customer accounts without notice or explanation, sometimes refusing to return customer deposits.[14] Chime has attributed the closures to the accidental byproduct of fraud prevention.[14]

In 2022, Chime's practice of closing customer accounts without notice or explanation was again reported. The company has no obligation to provide a reason to close an account. As of the November, 2022 report the Consumer Financial Protection Bureau had received 3,500 complaints about Chime since the beginning of 2020. Customers with closed accounts sometimes had difficulty retrieving their deposits in a timely fashion. Since Chime customers are not customers of any bank, their recourse is often limited.[13][35]

The U.S. Consumer Financial Protection Bureau in 2024 assessed a $3.25 million penalty plus at least $1.3 million in redress to customers for not returning deposits from closed accounts in a timely manner. Until 2021 Chime's customer service agreement said deposits would be issued by check, mailed within 14 days. Thousands of customers waited 90 days or longer. The settlement gives at least $150 in redress to any customer who had a $10 balance after 14 days from account closure. The $3.25 million penalty was paid to the CFPB victims relief fund. The company attributed the problem to a "configuration error" in 2020 and 2021.[38][39]

Handling customer complaints

[edit]

In 2024 Chime entered into a consent order with the California Department of Financial Protection and Innovation (DFPI) and paid a $2.5 million penalty to resolve an investigation into the company's customer service. The DFPI found that customer compliants were not being handled fairly, accurately, and in a timely manner in compliance with the California Consumer Financial Protection law.[15] The company agreed to provide 24-hour 7-days per week customer service support with sufficient training and staffing to be in compliance. Chime agreed to report on its compliance to DFPI for two years.[15]

Products

[edit]
Chime debit card

Chime offers various fee-free banking products, including checking accounts with no minimum balance, an automated savings feature, high-yield savings accounts,[5] peer-to-peer payments,[6] and an early paycheck feature.[40]

In September 2019, Chime launched SpotMe, a fee-free overdraft service where customers can overdraw their accounts up to $100 without incurring an overdraft fee; once the overdraft limit is reached, purchases will be declined but no traditional negative balance fees charged.[7]

Chime launched Credit Builder with Stride Bank, N.A in June 2020, which is a credit card designed to help consumers build their credit history.[41] Chime was the most downloaded digital banking app in the U.S. during the first half of 2021, according to data collected by Apptopia.[42]

In 2024, Chime launched MyPay, an earned wage access (EWA) product which allows users to access up to $500 of wages prior to payday. MyPay has no mandatory fees or interest, and it does not require a credit check.[43][44]

Customer service

[edit]

As of May 2024, Chime has a 'A' rating from the Better Business Bureau (BBB), with 8,000 customer complaints during the previous 3 years.[45]

Chime has no physical branches and does not charge monthly or overdraft fees, nor does it require an opening deposit or minimum balance to open a free checking account.[46] Bank accounts that are provided via Chime's partners are FDIC insured up to the standard maximum deposit insurance amount of $250,000, however FDIC bank insurance on Chime accounts does not directly protect Chime's customers.[11][12][5] Accounts are only available for individuals of personal accounts; all money received must be in the name of the individual account owner. Customers cannot appeal to banking regulators to retrieve their deposits, which may not be returned in a timely fashion.[13]

Chime can close user accounts with no notice, it is not required to provide a reason for the cancellation to the customer. Chime's partner banks have a duty under “know your customer” rules to guard against money-laundering or other suspicious activity, including closing down suspicious accounts.[13][14]

See also

[edit]

References

[edit]
  1. ^ Maria Deutscher,"Mobile banking startup Chime lands $485M mega-round at $14.5B valuation". siliconangle.com. 18 September 2020. Retrieved 23 April 2015.
  2. ^ a b c "25. Chime". cnbc.com. 16 June 2020. Retrieved 23 April 2015.
  3. ^ Fuscaldo, Donna (December 5, 2019). "Digital Bank Chime Now Has a Valuation of $5.8 Billion". Forbes.
  4. ^ "Everything You Need to Know About Banking With Chime". Entrepreneur. 4 November 2021. Retrieved 2023-07-23.
  5. ^ a b c d e Rowan, Lisa (2021-08-26). "Chime Review". Forbes Advisor. Retrieved 2022-06-27.
  6. ^ a b c "Digital Banking Challenger Chime Now Allows Users to Send Money to "Anyone and Everyone"". Crowdfund Insider. Retrieved 2021-04-17.
  7. ^ a b "Chime now has 5 million customers and introduces overdraft alternative". TechCrunch. 4 September 2019. Retrieved 2021-04-07.
  8. ^ a b "Best credit cards for rebuilding your credit of August 2023". USA Today. 2023-08-23.
  9. ^ Barnett, Ashley (12 September 2024). "Chime promotions and bonuses". CNN.
  10. ^ "Online bank Chime is said to near funding at $1.5 billion value". American Banker. 6 February 2019. Retrieved 2019-12-08.
  11. ^ a b Mason, Emily (June 17, 2024). "Is Your Money Really Safe In An 'FDIC-Insured' Fintech Account?". Forbes. Retrieved 2024-08-28.
  12. ^ a b "Banking with Third-Party Apps". FDIC:Consumer Resource Center. May 31, 2024. Retrieved 2024-11-26.
  13. ^ a b c d Zimmermann, Stephanie (November 25, 2022). "Closed accounts, no money: Chime app users complain they were suddenly shut out of their online accounts". Chicago Sun-Times. Retrieved 2022-11-26.
  14. ^ a b c d Kessler, Carson (July 6, 2021). "A Banking App Has Been Suddenly Closing Accounts, Sometimes Not Returning Customers' Money". ProPublica. Retrieved 8 July 2021.
  15. ^ a b c "DFPI Orders Chime Financial to Pay $2.5 Million, Improve Customer Service Standards Due to Unfair Complaint Handling" (Press release). The Department of Financial Protection and Innovation. February 27, 2024. Retrieved 2024-05-07.
  16. ^ "Chime About Us". Chime. Retrieved 2023-06-15.
  17. ^ "Meet the Team: Product at Chime". Medium.com. 12 January 2022. Retrieved 2022-02-19.
  18. ^ a b c d Kauflin, Jeff. "Exclusive: The Inside Story Of Chime, America's Biggest Digital Bank". Forbes. Retrieved 2024-05-07.
  19. ^ McGraw, Phil (April 15, 2014). "Dr. Phil Surprises a Guest Preparing for a New Baby". YouTube.
  20. ^ "Chime is now worth $14.5 billion, surging past Robinhood as the most valuable US consumer fintechs". CNBC. 18 September 2020. Retrieved 2020-11-01.
  21. ^ 75 Best Small and Medium Workplaces in the Bay AreaFortune (magazine)
  22. ^ "Mobile bank Chime picks up credit score improvement service Pinch in all-stock deal". 14 September 2018.
  23. ^ Son, Hugh; Rooney, Kate (October 17, 2019). "Mobile bank Chime goes dark for millions of customers as it seeks $5 billion valuation". CNBC.
  24. ^ Rader, Doyle. "Dallas Mavericks Announce Multi-Year Partnership With Chime As Jersey Sponsor". Forbes.
  25. ^ "Chime has hit 8 million accounts and is now offering a 1.6% interest rate on savings products". Business Insider.
  26. ^ Son, Hugh (April 2, 2020). "Chime pilots way to get $1,200 stimulus checks to users instantly after talks with Mark Cuban". CNBC.
  27. ^ "#ChimeCARES Update: Initial stimulus payments have been received. More on the way. | Chime". Banking Made Awesome. April 10, 2020.
  28. ^ Done deal: Chime signs the largest new San Francisco lease of the year at downtown skyscraperSan Francisco Business Times
  29. ^ "With Fintech Stocks Down 40%, Chime Delays Its IPO". Forbes. Retrieved 2022-02-19.
  30. ^ León, Riley de (3 November 2022). "Chime cuts 12% of its workforce, adding to recent wave of tech layoffs". CNBC. Retrieved 3 November 2022.
  31. ^ a b Corrie Driebusch & Peter Rudegeair,"Chime Financial Raises $750 Million in Latest Funding Round". wsj.com. 2021-08-13. Retrieved 2021-08-23.
  32. ^ "22. Chime". CNBC. May 14, 2024. Retrieved October 11, 2024.
  33. ^ Roof, Katie (26 September 2024). "Morgan Stanley to lead fintech company Chime's IPO". Fortune.
  34. ^ "California Prohibits Fintech Chime From Calling Itself a Bank". Bloomberg Law. May 5, 2021. Retrieved 2022-11-26.
  35. ^ a b Zimmermann, Stephanie (September 30, 2022). "Chime refunds $977 amid Sun-Times questions, as neo-bank apps face thousands of consumer complaints". Chicago Sun-Times. Retrieved 2022-11-26.
  36. ^ Rosenberg, Eli A. (May 27, 2021). "Whose "Bank" is it Anyway? State Enforcement Actions Against Chime Underscore the Pitfalls of Using "Bank" Terminology". Baird Holm Attorneys at Law. Retrieved 2022-11-26.
  37. ^ "Chime has agreed to stop using the word "bank," after a California regulator pushed back". TechCrunch. 5 May 2021. Retrieved 2021-05-05.
  38. ^ "CFPB Takes Action Against Chime Financial for Illegally Delaying Consumer Refunds" (Press release). Consumer Financial Protection Bureau. May 7, 2024. Retrieved 2024-05-29.
  39. ^ Wile, Rob (May 7, 2024). "Biden administration orders online banker Chime to pay $4.55 million over delayed refunds to customers". NBC News. Retrieved 2024-05-29.
  40. ^ Green, Rachel. "Chime's recent earnings marks the largest single equity investment in a neobank". Business Insider.
  41. ^ "US challenger bank Chime launches Credit Builder, a credit card that works more like debit". Techcrunch. 30 June 2020.
  42. ^ Chime, Current lead US banking app downloads in first half of 2021: reportBanking Dive
  43. ^ Lang, Hannah (15 May 2024). "Digital bank Chime debuts advance wage product ahead of anticipated IPO". Reuters.
  44. ^ Walden, Stephanie (27 August 2024). "Chime takes aim at outdated 2-week pay cycle with national tour". USA Today.
  45. ^ "Chime Financial, Inc.: Business Profile". Better Business Bureau. Retrieved 2024-05-06.
  46. ^ "Online Banking". Chime. Retrieved 2022-06-27.
Retrieved from "http://en.wiki.x.io/w/index.php?title=Chime_(company)&oldid=1263856462"