Neo, or ‘app-only’ bank Chime is a new breed of ‘zero-fees’ fintechs that are giving traditional banks a run for their money.

Branchless, fintech startup Chime is enjoying startling growth in the number of customer accounts. It’s no surprise that it’s also well-funded. Its latest funding round that commenced in November 2019 has secured $700 million from 25 investors. (CROWDFUND INSIDER)

Growth snowballs at Chime

According to a Bloomberg report, which cited CB Insights, San Francisco-based Chime had about 8 million accounts as of mid-February. That’s a sharp uptick from the figure of 5 million accounts reported last fall according to CROWDFUNDING INSIDER. In 2018, Chime had only 1 million customers, according to Bloomberg.

Chime does not have a banking license but its bouquet of bank-like services is poaching millions of customers away from traditional banks such as Wells Fargo & Co. (NYSE: WFC) and JPMorgan Chase & Co. (NYSE: JPM).

“The majority of our members are coming from the big banks,” said Chief Executive Chris Britt.

Britt attributes the influx to Chime’s zero-fees policy. He cites customers’ disillusionment with traditional banks that “love to sneak charges into their customer accounts every time you look the other way.” The upstart bank claims such clandestine fees could total upwards of $329 annually for an average US household.

“We are now the largest and fastest-growing [challenger bank] in terms of accounts and rate we’re adding them,” said Britt to Forbes in September. “We offer a great alternative to traditional banks.”

Innovative products

A top product at Chime is its direct deposit scheme which pays out salaries two days earlier.

The fintech startup also offers fee-free overdrafts up to $100 through its SpotMe product. Chime claims to have saved customers more than $200 million in overdraft fees.

Last month, it declared a new 1.6% interest rate on savings accounts, which is far superior to most large banks’ rates of well under 1%.

However, Chime provides traditional banking services through a tie-up with Bankcorp Bank and Stride Bank, and credit cards in collaboration with other financial service firms.

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