Chime Banking App
Chime, the digital bank, now boasts a valuation of $5.8 billion, after raising $500 million in a fresh round of fundraising.
Among the leaders in this new crop of mobile and digital-only banks, Chime had a valuation of $1.5 billion back in March when it raised $200 million in funding.
The jump in its valuation since then underscores interest investors have in fintechs challenging the status quo. Robinhood, a mobile trading app with more than 10 million customers had a valuation of $7.6 billion as of July.
“Its a combination of things,” said Chris Britt, CEO of Chime Bank of the fundraising round. “The opportunity to improve the way banking works in America is huge. Combine that with the fact that we created a suite of products that is really resonating with a large segment of America.”
The venture funding raise also shows investors are still interested in backing startups even if they’ve been burned by the likes of Uber, WeWork, and Lyft. According to CB Insights, the $500 million Chime raised is the largest investment in a digital bank since NuBank raised $400 million. The Series E financing round was led by DST Global and included participation by General Atlantic, ICONIQ, Coatue, Dragoneer and Menlo Ventures.
Proceeds from the round of funding will be used to hire more employees and to build out new financial products. Its opening a office in Chicago as part of its expansion. Chime could also make fintech acquisitions with some of the funding. Britt said any targets would be focused on building its team and purchasing complementary products and services.
“Its about continuing to do more of the same which is investing to build out an amazingly talented team so we can continue to build products that help our members achieve financial peace of mind,” he said. Chime also wants to build awareness about the digital bank, recently launching a TV advertising campaign.
Chime has emerged as one of the leaders in this new digital banking space. At last count, it had 6.5 million accounts and is estimated to reach close to $200 million in revenue by the end of the year. It’s been experiencing red-hot growth since last year when it had one million accounts.
In order to protect its leadership position and pursue more growth Chime is expanding into other products including credit cards and investment services. The idea is to eventually offer all the services of a traditional bank but at a fraction of the cost. Chime offers fee-free banking and is part of the wave of fintechs that have rid the world of those pesky fees that eat away at savings and investment returns.
Unlike some of the other digital banks who are amassing customers but aren’t getting them to treat it as their main banking partner, Chime is different. It has adopted a unique approach that appears to be resonating. In order to access perks, customers have to sign up for direct deposits.
Still, the San Francisco startup does face increased competition and not only from other fintechs. The likes of Google and Uber are eyeing the banking market. Britt isn’t too concerned. Chime views traditional banks as the real competitors not the tech companies.
“The fact that big tech companies as well as other startups are talking about entering our market is a testament to the attractiveness of the category,” said Britt. “At the end of the day the market is controlled by the top five banks. That’s where most of our members are coming from.”