14 Mar The View from Silicon Valley
Mobile-only bank Chime isn’t your parents’ or grandparents’ bank.
The San Francisco-based start-up is gaining 100,000 accounts a month – it’s at roughly 900,000 – at a time when most large banks are struggling to attract millennials. Like other tech companies such as Amazon.com (AMZN), rumored to be considering a foray into checking accounts, Chime sees an opportunity in financial services amid a shifting customer base and widespread dissatisfaction with big bank services.
(Read on Barron’s)
“The days of getting all your financial services from one bank brand are ending,” says Chime Chief Executive Officer Chris Britt. “Our customers tend to be younger, rely on their smartphones and hate big banks.”
Indeed, 57% of millennials said they would change their bank relationship for a better technology platform solution, according to Deloitte. One reason why: Americans pay $15 billion annually in overdraft fees alone.
Chime is targeting those in their late 20s and early 30s with a low-fee checking and savings account, a mobile app that allows for automated savings and real-time notifications, and a policy of no monthly fees, hidden fees or overdraft charges. It makes money through a 1.5% fee of Visa-related transactions by its customers.
“Wells Fargo (WFC) reported $1.246 billion of service charges on deposit accounts in its last quarter,” Britt says. “That’s great advertising for us.”
Chime has benefitted from word-of-mouth referrals from customers, often on social media platforms such as Instagram, says Britt. Many are defecting from monolithic banks who crave lower costs and a simplified experience, he says.
The trend toward tech-centric, mobile banks has already started in Europe, where relaxed regulations have led to so-called “challenger” banks such as N26 in Germany, Monzo in Italy and Revolut in the UK, says Britt. —Jon Swartz