Chime Business Model | How Does Chime Make Money?

Chime is an American Neobank (internet-only bank) that offers fee-free financial services through its mobile banking app. Chime earns money from interchange fees (charged by merchants when consumers use their debit cards) and ATM fees.

In collaboration with Visa, Chime offers users a mobile application for creating checking and savings accounts, as well as a debit card.

When customers use Chime’s debit card, it earns revenue by taking a cut from Visa’s transaction fees.

The Chime app allows customers to request that their paychecks be deposited into their bank accounts two days earlier.

Additionally, it offers two automatic savings features: one that rounds up debit card payments to the nearest dollar and deposits the rounded amount into a savings account; the other automatically deposits a percentage of each paycheck into a savings account.

Customers with a direct deposit of $500 or more per month are eligible for fee-free overdrafts of up to $100.

What is Chime?

Chime is an American Neobank that offers various financial products via its mobile applications. 

Chime is a digitally enabled platform without any physical location. The app includes a downloadable Visa debit card.

Chime earns money by charging so-called interchange fees on all card transactions and interest earned on cash and ATM fees.

In the past few years, the company, founded by executives from banking and technology, has seen a steady increase in users and its products. 

Currently, Chime has more than 12 million customers who make an average of 40 transactions per month.

How Does Chime Work?

Chime is a Neobank based in the United States that offers a variety of financial products and services. Chime is a digitally enabled bank that does not have any physical branches. 

Rather than that, customers use Chime’s mobile app to manage their finances.

It’s critical to note that Chime does not charge for account maintenance.

Chime earns a majority of its revenue from fees it charges to banks and credit card companies. When a customer uses a debit card, merchants pay these fees to financial institutions.

Account authentication and registration take place within video identification. Chime claims that creating an account takes less than two minutes.

Every transaction on Chime is subject to a 1.5 percent interchange fee levied by Visa.

At first glance, this may not seem like a significant revenue stream. However, Chime customers make an average of 40 transactions a month. 

With more than 8 million customers and counting, you can get a sense of the magnitude of the eligible transactions.

Because US bank accounts are long-lasting, this lucrative business model can thrive. According to recent statistics, nearly sixteen percent of American adults have the same checking account. 

Moreover, 26% of account holders have had the same account for over twenty years.

The digital account comes with a complimentary Visa debit card so users can spend their hard-earned money.

In addition, the app includes the following features:

  • The balance and history of your account.
  • A savings account is automatically credited when funds are transferred.
  • Receiving payment via direct deposit in advance.
  • There is no overdraft fee.
  • ATM withdrawals are free at over 60,000 ATMs nationwide.
  • Instant payment to other Chime users.

… As well as numerous others. In addition to its ability to streamline the entire banking process, from opening an account to eliminating hidden charges, the company also appeals because it eliminates hidden fees.

A citizen of the United States over 18 is eligible to use the chime. Members can only open accounts with valid Social Security numbers and a permanent residence in the United States or the District of Columbia.

Users can also open a savings account or credit card account (named Credit Builder) in addition to a debit account. 

Its Credit Builder product is designed for millennials and Gen Z consumers who wish to improve their financial stewardship and credit scores.

As a result of Chime’s acquisition of Pinch in 2018, Credit Builder was launched to provide credit education to young adults. The founders of Chime contributed to the creation of the product.

In contrast to Chime’s FinTech peers in Europe (later), the company does not hold a banking license. However, its partnership with The Bancorp Bank ensures that accounts are protected from defaults.

Does Chime Offer Business Accounts?

Chime does not currently offer business accounts. Currently, the company is entirely focused on expanding its consumer product line.

Chime Business Model

There has been no comment from company management regarding future expansion. Chime may follow in the footsteps of other competitors such as Revolut and N26, who already offer business accounts.

How Does Chime Make Money?

Chime makes money through interchange fees, interest on cash, and ATM fees. Let’s examine each revenue stream in more detail below.

Interchange Fees

Chime makes money by charging merchants interchange fees (fees charged by financial institutions to merchants) each time their debit card is used.

Chime merchants pay Visa approximately 1.5 percent of their total sales. Chime receives a  share of that 1.5 percent.

As reported by CEO Britt, Chime users conduct 40 transactions per month on average. When you consider that the average adult in the United States keeps the same primary checking account for 16 years, this can result in an enormous amount of transactions and fees over time.

Chume’s appeal is partly because legacy banks frequently charge fees for various services, including ATM withdrawals, overdrafts, account maintenance, international transfer fees, and non-sufficient funds (NSF) fees. Chime users are not subject to any of these “penalty” charges.

So far, the strategy seems to work. Chime recently announced that it had surpassed 8 million customers. As compared with a million users in 2018, it has increased by 800 percent.

Britt further stated that most newly added customers are from large banks like Wells Fargo and JPMorgan Chase.

Interest On Cash

You can open a Chime high yield savings account if you wish to save money.

The FinTech company offers both an automatic savings account and an account for online services. Moreover, there is no fee associated with the account.

At this time, Chime is offering a 1% Annual Percentage Yield (APY) on balances in the account. The national average, according to the company, is 0.06 percent.

Now, Chime does not distribute money to its users solely for charitable purposes. In the same manner, like any other bank, it lends money from client accounts to other institutions, such as other banks.

These institutions then pay them interest (also called net interest margin). Statista reports that the net interest margin for all US banks in 2019 was 3.35 percent.

ATM Fees

Chime earns money whenever a user withdraws money from an ATM not connected to MoneyPass or VPA.

The withdrawal fee charges by Chime in this circumstance is $2.50. There may be additional fees associated with a specific ATM provider.

In January 2021, Axios reported that ATM fees accounted for 21% of Chime’s revenue.

Success Story of Chime

Even though Chime was founded in 2013, none of its consumer-facing apps were available until 2014. The company was created by Chris Britt, the current CEO, and Ryan King, the current CTO. 

Britt has worked for Visa and Greendot, a company that makes prepaid, reloadable debit cards. 

Formerly, King worked at Plaxo, a defunct online address book company, and Comcast.

To become a bank, one must go through a long and complex process governed by US  financial regulations. 

Moreover, Chime, like many similar apps, does not operate as a bank.

Rather than that, Chime’s customers receive services from two small banks, Bancorp Bank and Stride Bank, neither publicly traded.

The Fintech startup that offers exclusive online banking services is called a “neo-bank” or  “challenger bank.”

This new breed of service providers is increasingly taking on regulated banks in critical areas of customer banking.

According to Chime, the average US customer now pays $329 in annual banking fees, and neo-banks would like to provide an alternative source of checking and savings accounts with few or no customs fees.

Likewise, brokerage firms have eliminated trading fees, and ETFs have cut money-management fees to reflect the industry-wide rush to reduce prices.

Despite being one of the fastest-growing companies in its field, Chime faces competition both domestically and internationally. 

A few of its biggest competitors include Germany’s N26 neo-bank, billionaire Peter Thiel backs, and Brazil’s Nubank.

In February 2020, Chime had 8 million accounts, up from 6.5 million a few months earlier in  December 2019. “Chime, a technology startup, pays early. It, too, desires users’ savings.”  Accessed 28 November 2020.

However, the bank’s customer base is smaller as many customers have checking and savings accounts, and some accounts may be inactive.

According to Crunchbase, Chime has raised $1.5 billion in funding through eight funding rounds, the latest of which occurred on September 18, 2020.

According to the latest round of fundraising for Chime, the company is valued at $14.5 billion.

According to people familiar with the matter, Chime has begun discussions with investment banks about a potential listing on the stock market that would value the company at over $30 billion.

Chris Britt, Chime’s CEO, stated that the company planned to complete an initial public offering (IPO) within 12 months.

However, he declined to discuss any potential IPO plans with Reuters, citing that the company is weighing all its options.

Chime Business Model

During its most recent funding round, Chime Markets Inc. became the most valuable fintech startup in the United States, surpassing Robinhood Markets Inc.

The company offers commission-free trading on a variety of securities, including stocks, ETFs, and cryptocurrencies.

Since July 2019, when European banking app N26 began accepting US customers, Chime faced increased competition.

The threat to Chime may also be greater. Varo, a rival neo-bank, received US approval to become an actual bank in February 2020. 

Vario is the nation’s first neo-bank to be approved by the FDIC to operate as a full-service bank, so it no longer needs to partner with other banks to accept deposits.

Who are the Competitors of Chime?

Facts and Factors Market Research estimates that the global digital bank market will be worth $578 billion by 2027. It represents a 31-fold increase from the market’s 2018 valuation of $18.6.

Neo banks still only represent a small portion of people’s primary banks, but you cannot overlook the growth of such banks.

Chime Business Model

In this section, we examine Chime’s main competitors in the neo banking space. However, their prominent rivals will remain traditional banks such as Wells Fargo and Bank of  America.


N26 (formerly Number 26) was founded in 2013 by Valentin Stalf (CEO) and Maximilian  Tayenthal (CFO) in Berlin.

It offers a variety of banking services to both private consumers and businesses.

N26 monetizes its customers and businesses by offering subscription-based premium services. 

Other revenue streams include withdrawal fees, overdraft and loan fees, and cashback partnerships.

Currently, N26 is valued at $3.5 billion and has raised more than $682 million in venture capital. The company has over 5 million customers and operates in close to 30  countries.


Nikolay Storonsky (CEO) and Vladyslav Yatsenko (CTO) founded Revolut in 2015 in London. In addition to a digital bank account, the company offers peer-to-peer payments, trading options,  and budgeting tools.

Revolut monetizes consumers (and businesses) through monthly subscription plans – one is free, and two are premium. 

Besides overdraft fees and insurance commissions, they also earn revenue when loan interest is paid and from their cashback program.

The company has raised a total of $836 million to date. It is currently valued at 5.5 billion dollars. It operates in more than 30 countries, making it the leader in the Neo banking space.


Monzo is a fintech company based in London founded in 2015 by Tom Blomfield (CEO), Tom  Foster-Carter (COO), and others. It offers various banking services, including bank accounts, savings, borrowing options, and energy plans.

The charges for premium or business accounts, interest on loans, and commissions help generate revenue (for example, when customers buy energy plans).

Monzo’s account includes a Mastercard linked directly to the mobile app, like N26 (and all other mobile banks).

In its most recent Series F funding round, the company was valued at $2.5 billion. The number of people who opened a bank account was over 3.5 million by December of this year. The company is currently active in both the United Kingdom and the United States.

Starling Bank

A second London-based challenger bank, Starling Bank, was founded in 2014 by banking industry veteran Anne Boden (CEO). 

It offers both personal and business banking services. Furthermore, users can apply for loans and transfer money inside and outside of the country.

The company places a high value on social responsibility and sustainable growth. The founder and employees retain a 14% stake in the company.

According to Crunchbase, the company has raised more than $323 million. There was no disclosure of valuation during any of the funding rounds.

What is the Funding, Revenue, and Valuation of Chime?

Crunchbase reports that Chime raised a total of $1.5 billion from eight rounds of venture capital funding.

In its most recent Series F round, Chime raised $485 million and was valued at $14.5 billion. It represents a nearly tenfold increase from the company’s early 2019 valuation of $1.5 billion.

Several companies, including DST Global, Menlo Ventures, and General Atlantic, have invested in the company.

The company does not reveal its revenue or profit figures publicly, as is typical with fast-growing startups. 

However, a Forbes report stated that the company expects to reach $200 million in revenue this year. The increase over the previous year is fourfold.

Also read, The Affirm Business Model.

Final Word about the Chime Business Model

Chime is an app for opening a checking and savings account with direct deposits and debit cards. 

Chime is a North American Neobank that focuses on financial literacy and simple banking. There are no physical branches of this company, nor does it operate them.

Chime focuses on merchant interchange fees rather than charging consumers for account maintenance. More than 8 million Chime customers perform more than 40 transactions per month, making this a sizable revenue stream. 

Chime makes money by charging transaction fees that merchants charge when customers use their debit cards.

Chime is a “neo-bank” or “challenger bank,” a new breed of fintech startup that offers fee-free consumer banking without traditional branch locations. 

Moreover, Chime earns revenue by lending customer funds to other banks and collecting interest. Although fee-free ATMs are available, revenue from Dishonor Fees has increased despite the increased accessibility of ATMs.

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