Chime: Leading the Pack of Neobanks in the US
| Case Code: BSTR623 Case Length: 12 Pages Period: 2013- 2020 Pub Date: 2021 Teaching Note: Available |
Price: Rs.300 Organization: Chime Industry: Financial Services Countries: United States Themes: Banks and Banking, Banks and Banking, Business Level Strategies |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Innovations Drive Customer Experience at Chime
Keeping the needs of young millennials in mind, Chime launched an account called Checking Account/ Spending Account in 2014. Chime did not charge any monthly fee for this account nor were the customers required to maintain a minimum balance. It sent its customers balance notifications and instant transaction alerts anytime their debit card was used. The Chime website displayed a chart of all potential fees associated with the account. This account also allowed the customers to get access to their salary as soon as it was deposited by their employer (Refer to Figure II for updates available on Chime Spending Account). To open this Spending account, users had to visit chime.com, enter their personal details, and complete the enrollment. After completing their enrollment, they received a Chime Visa Debit Card in the mail. And their new debit card reached their registered address in 7-10 business days..
Competition
Chime faced stiff competition from several fast-growing digital banks such as Venmo, Varo, Simple Bank, and N26 (Refer to Table IV for Details of Chime’s Competitors). Of these, Venmo was the biggest competitor for Chime in terms of number of customers. Looking at the requirements of people, Venmo observed that apart from gifting or splitting a restaurant or rent bill, there were some other payment related problems like repayment of loans, which needed to be solved. So, Venmo planned to create an agreement online that would enable the borrower to pay the lender through Venmo – for a fee. The company had plans to tie up with more merchants in the US and launch its services in the UK in the coming years. Along with that, Venmo aimed to launch additional innovative features through its app in future..
Challenges
One of the major challenges for Chime in sustaining its competitive position was the low income of its target group. From the beginning of its operations, Chime had focused more on young millennials (between 25 and 35 years old). Around two-thirds of Chime’s customers were under the age of 40. Out of these, only 15% had a college degree and just 12% earned more than US$75,000 per year. As Chime’s target customer group was millennials, the addition of customers from other segments could be a challenge for the bank...
Road Ahead
Chime planned to increase the valuation of the bank to US$ 30 billion by the end of 2021. Accordingly, it held preliminary talks with investment banks about a possible stock market listing. The bank also wanted to be ready for an IPO by the end of 2021. Talking about the bank’s future plans, Britt said, “When we get closer to make the decision to actually go public, we will evaluate all of the potential paths to do so, including direct listings, traditional IPOs, and SPACs” Chime also had plans to expand into other areas of financial services like lending and credit. To sustain its position, Chime had plans to launch a variety of products that would cater to multiple customer segments at different stages of life, from students to retirees....
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