Chime is an online-only bank that offers services on the go with no fees and the intention to make a change in the fintech and banking industry. The U.S.-based digital bank is among the 50 companies of the CNBC Disruptor List. These companies want to change the world — and Chime’s case, it specifically want to change our habits about how we make payments online. Chime is a company that offers no-fee banking and wants to make a change to the fintech and financial industries. And you can now invest in Chime stock.
The key technologies at the core of Chime are cloud computing, machine learning, fintech and online banking applications. It is an online bank only, after all — it has no physical branches.
And this may not be a problem, as Covid-19 has hastened several major shifts in our lives, and online banking may be one of them. An article in Business Insider about the digital trends disrupting the banking industry in 2020 supports the idea that among banking industry trends mobile banking is the dominant trend:
“The most prevalent trend in the banking industry today is the shift to digital, specifically mobile and online banking … In today’s era of unprecedented convenience and speed, consumers don’t want to have to trek to a physical bank branch to handle their transactions. This is especially true of Millennials and the older members of Gen Z, who have started to become the dominant players in the workforce (and the biggest earners).”
As more of our business moves online, major banks such as Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC) and JPMorgan Chase (NYSE:JPM) will face intense competition from startups and other banks with disruptive technologies, focusing on niche markets.
And Chime is one of these companies, as it’s focused on offering mobile and online banking solutions.
The company was founded in 2013 with headquarters in San Francisco. The founders are Chris Britt (CEO and cofounder) and Ryan King (CTO and cofounder).
A recent fintech industry report from Research and Markets about “Trends, Developments, and Growth Deviations Arising from the COVID-19 Pandemic” is upbeat about the future of the fintech on a global basis.
“The Global Fintech Market is anticipated to grow at a CAGR of around 20% during the forecast period. The market is expected to witness progressive growth and reach a market value of around $ 305 billion by 2025.
“The key reason for the growth of the fintech market includes high investment in technology-based solutions by banks and firms. Moreover, the infrastructure-based technology and APIs are reshaping the future of the financial services industry, thus aiding the growth of the Global Fintech Market. Furthermore, financial technology companies are delivering low-cost personalized products on account of emerging developments in the technology sector, leading to rising customer expectations, thereby, boosting the market growth globally.”
And what if we focus on North America, the primary market for Chime operating in the fintech industry?
According to the press release, “North America was the leading contributor until 2019 and is expected to maintain its dominance in the forthcoming years as well which can be attributed to high adoption and development of major technologies involved in the fintech sector in the region.”
The prospects look quite promising for Chime based on this data.
The Business Model
If the online bank offers no-fee banking, how does Chime make money? The most explicit answer is the one answer Pitchbook gives about the business model of Chime.
“The company’s platform automatically saves users money by setting aside a pre-determined amount of money in savings after a transaction and the company earns revenue from transaction fees paid by the merchant aligning company incentives with the users, enabling members to avoid fees, save money automatically and lead healthier financial lives,” according to its description.
Chime offers some interesting online banking features to consider. Some noteworthy to mention are:
• You can get paid from your employer paid up to two days early, with direct deposit and grow your savings.
• There are no hidden fees, a fee-free overdraft service with no minimum balance.
• Daily alerts can help you organize and track your finances.
• The deposits are FDIC insured up to $250,000 through The Bancorp Bank or Stride Bank N.A.
• Emphasis is placed on security to prevent unauthorized use.
• A built-in automatic saving feature makes saving money easy, which helps you reach your goals faster and facilitates financial planning.
• Chime users can locate fee-free ATMS and use their Chime debit card to withdraw money.
How to Invest in Chime Stock
Chime stock has gained traction in raising funds, with the latest data reporting funding of $805 million and a valuation of $5.8 billion. Equity crowdfunding has a lot of risks, but if you want to invest in Chime stock you can do it on SharesPost and on EquityZen.
As of this writing, Stavros Georgiadis did not hold a position in any of the securities.
Investing through equity and real estate crowdfunding or asset tokenization requires a high degree of risk tolerance. Despite what individual companies may promise, there’s always the chance of losing a portion, or the entirety, of your investment. These risks include:
1) Greater chance of failure
2) Risk of fraudulent activity
3) Lack of liquidity
4) Economic downturns
5) Dearth of investor education
Read more: Private Investing Risks