If Chime goes public next year, the neobank could get even larger — but it would have to be transparent about its finances and would likely have to rein in its operating costs, including spending less on marketing.
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If this does happen, the deal would give a large neobank the chance to become even bigger. Chime now has more than 38 million customers, according to
"I think a Chime IPO would be significant, because it would dramatically increase the capital available to Chime to grow and invest," said Aaron McPherson, principal at AFM Consulting. "It would also be a form of validation for the digital banking model."
Going public would also open the company's books to all and likely force the company to cut expenses.
Chime's journey
Chime was founded in San Francisco in 2012, shortly after the financial crisis. It officially launched its account and debit card in 2014 during a segment on the "Dr. Phil" show, with a message of offering low-cost products and helping people avoid bank fees.
The company's consumer-friendly features have proven to be popular among millennials and Gen Z as well as those who live paycheck to paycheck, as 66.2% of Americans said they were doing in a MarketWatch survey conducted in August (48.6% of Americans consider themselves "broke"). Customers who directly deposit their paychecks in a Chime account can get access to them up to two days early. Chime's SpotMe lets members overdraft up to $200 without overdraft fees. In May, Chime launched an earned wage access product called MyPay that lets consumers get as much as $500 of their paychecks before payday. Chime also offers Credit Builder, a secured credit card without an up-front fee.
"They've demonstrated a level of customer centricity that has earned them high praise from consumers," said Jim Perry, senior strategist at Market Insights. "And their digital-only product offerings, like no-fee banking, early access to direct deposits and early wage access, have already disrupted the industry and made them a significant competitor, especially for younger low-to-moderate income consumers. The new capital could support further innovation or improvements that would intensify competition among both digital-first and traditional banks."
Chime's leaders pride themselves on the fact that the company's business model is based on interchange fees, not so-called "nuisance fees" like overdraft penalties. It also charges fees for its small, short-term loans.
The company has had its struggles. A 2021
But it's also been showered with venture capital. Chime has raised a total of $2.3 billion in funding over 11 rounds.
The increased transparency forced by going public would make Chime's business model more transparent, which will make it easier to see how the company generates profits, McPherson said.
Going public will also bring scrutiny of Chime's expenses, including its marketing budget.
"However, it would also increase trust, which would lead to greater growth," McPherson said. "Being publicly traded increases perceived legitimacy."
Impact on fintech market
It's become unusual for unicorns to go public these days, with many choosing to remain private for longer because of better access to private capital and the ability for the founders to remain in control, McPherson said.
"Depending on how the IPO goes, it may encourage other fintechs to follow suit," he said.
Peter Renton, the founder of Lend Academy and Fintech Nexus, who now has an independent advisory firm, said this IPO would affect the entire fintech industry.
"The public markets have not been kind to many fintech companies, and to sustain their private market valuations they will need to execute perfectly," he said. "One thing I know for sure is that the entire fintech space will be following this IPO very closely and wishing them well. A successful IPO from Chime could open up a new fintech IPO wave."
