- San Francisco-based digital bank company Chime is likely going to quadruple its revenue this year to $200 million, according to Forbes’ sources
San Francisco-based Chime — a digital bank company that offers a debit card without monthly or overdraft fees — is expected to quadruple its revenues this year according to Forbes staff writer Jeff Kauflin. This year, Chime is expected to hit $200 million, according to Forbes’ sources. And the company is planning to expand into other products like credit cards and investment services. As of right now, Chime has 5 million accounts (about 3.3 million customers).
Chime offers products that banks general charge for like basic checking accounts with no minimum balances — which is offered through an app.
How does Chime attract users? The company has been spending a lot on marketing. It is estimated that Chime spent $32 million on TV ads during the first 8 months of this year, according to Kantar. And over 1 million people have signed up for direct deposit through Chime.
Chime primarily makes money through the interchange, which are 1% to 2% fees that banks charge retailers for swiping debit and credit cards. This is why Chime is pushing for its users to utilize their card as much as possible. And if users are directly depositing their checks to Chime, then it will drive more swipes.
Users who set up direct deposit on Chime gives the benefit of accessing wages two days earlier than a traditional bank. And the same benefit is applied if you want to overdraw your Chime account up to $100 without having to pay any interest or fees.
So far, Chime has processed over $30 billion in transactions — which is up from $10 billion in 2018. Maximilian Friedrich, an analyst at ARK Investment Management, told Forbes that it would be challenging for digital banks to expand into lending though.
Chime CEO Chris Britt said that the company is planning to launch a new feature to help users increase their credit scores. And the company is planning to launch its credit card in the first half of 2020. The goal is to move into personal loans and low-fee exchange-traded funds and retirement services by 2021. Britt also told Forbes that the company is considering installment loans where users can finance purchases in periodic payments.
Chime could be profitable today if it scaled back marketing efforts. However, the company is seeing a “very high” gross profit margin.
Oliver Wyman partner Dan Rosenbaum estimates that traditional banks pay $750 to acquire new customers who have a lifetime value of about $4,500. But Chime is able to acquire a new customer for $100. And those customers are worth thousands of dollars if they stay with the company for about 10 years.