20 May Chime Raises $9M To Bring Banking To Millennials
Posted at 07:34h in Venture Capital
Many large banks are targeting millennials, trying to figure out how to make their services more appealing to this new generation of consumers.
Chime, a bank account startup, is servicing this demographic by focusing on making its financial services available through a mobile app and providing convenient services that are more similar to social consumer apps than banking products.
Chime has raised $9 million in an extension to its Series A round led by Aspect Ventures. Existing investors participating include Crosslink Capital, Homebrew, PivotNorth Capital, Forerunner Ventures and SurveyMonkey CEO Zander Lurie. The company, incorporated as 1debit Inc., has raised $21 million total.
Launched in 2014, Chime offers accounts designed to make it easier for millennials to manage and save money, particularly for those who don’t want to balance a checkbook or go to brick-and-mortar banks to do business. The company isn’t an actual bank but has partnered with The Bancorp Bank, which is FDIC insured. Chime provides the services on top of Bancorp.
Chime, with 120,000 users, has an optional automated savings feature that automatically rounds up from each purchase a person makes and puts that amount of change in savings. Chime then gives a bonus of 10% of all rounded-up savings at the end of each week. About 90% of Chime’s customers use the feature. “We can help you get on a healthy savings habit,” said Chief Executive Chris Britt. “We believe big banks don’t do a good job encouraging people in that way.”
The company doesn’t charge monthly fees for setting up accounts. It makes money through transactions when customers use their Visa cards.
While the company’s revenue is still in early stages, the company’s goal is to become a financial hub for a wide range of financial services, said Britt, who was previously an executive at Visa and chief product at Greendot. This could include refinancing student loans, auto loans, mortgage loans or brokerage and retirement services, he said.
Chime can compete with big banks because it doesn’t have overhead costs of retail bank locations, he said. In addition, the company has built its technology for transaction processing in such a way that it costs 75% less than traditional banks’ core deposit platform, Mr. Britt said.
The company, with 20 employees, is launching Pay Friends, a feature like Square Cash or Venmo that lets users quickly send money to friends through the Chime app.
A number of other startups have attempted to develop financial services for millennials, focusing on mobile, speed and ease of use. Simple Inc., which focused on web and mobile banking and didn’t charge for overdrafts or monthly maintenance, was acquired by Banco Bilbao Vizcaya Argentaria SA, or BBVA, for $117 million in February 2014 after raising $18.1 million from investors including Village Ventures, IA Ventures, First Round Capital, 500 Startups, Neu Venture Capital and Shasta Ventures. There also startups such as Robinhood and Metromile targeting millennials with financial services.