Disruptor 50 2022

12. Chime

Founders: Chris Britt (CEO), Ryan King
Launched: 2012
Headquarters: San Francisco
$2.3 billion
Valuation: $25 billion
Key technologies:
Artificial intelligence, cloud computing
Previous appearances on Disruptor 50 List: 2 (No. 8 in 2021)

Persephone Kavallines

Consumer distrust and dissatisfaction with American banks have led many to embrace so-called challenger banks – fintech firms that exclusively offer banking services through websites and smartphone apps. 

Making a return to the annual Disruptor 50 list this year is Chime, which offers fee-free banking, early paydays for those with direct-deposit and a feature that lets users go negative in their accounts without overdraft fees. 

This has led mainstream banks, like Capital One, to challenge fintech apps by also eliminating overdraft fees.

It, along with Square's Cash App and a few other players, have become viral hits for their ease of use — especially throughout the pandemic, when many people avoided going to branch banks and pivoted to online banking services. This resulted in the San Francisco-based company more than tripling its transaction volume and revenue last year.

Chime has continued innovating by offering users a secured credit card with no annual fee or interest charges. No minimum security deposit is required, nor is a credit check in order to apply. Traditional credit cards can require a deposit of between $200 and $500.

Chime experienced torrid growth during the coronavirus pandemic, picking up millions of users and reaching a valuation of $25 billion in September 2021. In its latest round, primary investors included SoftBank, Sequoia Capital Global Equities, General Atlantic, Tiger Global, and Dragoneer Investment Group.

Forbes reported earlier this year that Chime is delaying its initial public offering until the second half of 2022. Publicly traded fintech stocks have not fared well in recent months, with firms like PayPal and Robinhood down considerably.

Chime — whose name is meant to evoke a calming sound — was valued at a mere $1.5 billion in early 2019. The company's story shows just how rapid start-ups can scale if the product fit is compelling.

Part of Chime's growth is understanding the large swath of U.S. customers who aren't well served by traditional bricks-and-mortar banks. Chime focuses primarily on millennials who make between $35,000 to $70,000 a year. These people are more likely to be frustrated by fees than those who can afford to maintain higher balances.

This segment of the population tends to lean heavily on debit cards to pay for everyday expenses while staying within budget, and Chime makes money from the swipe fees paid for by merchants.

Chime became profitable on an EBITDA basis during the pandemic, co-founder and CEO Chris Britt told CNBC in September of 2020. The company is adding hundreds of thousands of accounts a month, he said at the time, but declined to say how many users it has overall.

"We're more like a consumer software company than a bank," Britt told CNBC. "It's more a transaction-based, processing-based business model that is highly predictable, highly recurring and highly profitable."

It hasn't been a cakewalk, though. Last May, the company was reprimanded by a California regulator after referring to itself as a bank in some cases. To be clear, Chime leans on FDIC-backed partners to hold customer deposits.

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