Home / Blockchain / Blockchain: Chime’s recent earnings marks the largest single equity investment in a neobank

Blockchain: Chime’s recent earnings marks the largest single equity investment in a neobank

Blockchain:

The San Francisco-based neobank’s valuation skyrocketed to $5.8 billion after a $500 million Series E, per CNBC — marking another win in its impressive growth trajectory: Chime was last valued at $1.5 billion just nine months ago after a $200 million Series D.

Blockchain: Chime's Rising Number of Accounts


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This raise marks the largest single equity investment in a neobank — eclipsing Brazilian neobank Nubank’s $400 million Series F in July that made it the most valuable neobank globally. Chime plans to put the funding toward doubling its employee count and developing new products, which can accelerate its road to profitability.

Chime owes much of its success to its no-fee offerings and aggressive marketing strategy. Chime offers a suite of fee-free products, including a checking account with no minimum balance, an automated savings feature, and early wage access.

Chime recently introduced overdraft protection of up to $100 for users who direct deposit at least $500 per month into their account — one of its most successful features driving around 150,000 new users monthly. And to drive awareness, Chime has spent millions on marketing — $32 million on TV ads in the first eight months of 2019 alone.

But the features that have helped Chime catch on have also pushed profitability further away. Profitability is a universal problem for neobanks, as their value-added features and no-fee offerings hike up expenses: The average neobank loses $11 per user, for example. And Chime’s interchange-based revenue model through its debit card places it at the whim of customers’ swiping habits, making it imperative for Chime to prioritize a variety of revenue-generating features.

Chime claims to be on the road to profitability — expecting nearly $300 million in revenue by the end of 2019 — and adding more perks that encourage more account activity could help it get there faster. Despite being one of the largest US neobanks — with 6.5 million accounts — estimates suggest that the total number of individuals banking with Chime is 1.6 million, indicating that most of its customers aren’t using Chime as their primary account.

Chime previously stated that it plans to roll out a credit card in the first half of 2020 and personal loans and investment services in the more distant future. These new products could drive revenue, encourage account activity, and give Chime additional opportunities to get greater value out of customers it can cross-sell them to, helping the neobank’s profitability prospects in the long run. 

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