WEBVTT - Chime CEO's Inspiration for Funding Higher Education

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<v Speaker 1>This is Bloomberg Business Week with Carol Messer and Tim

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<v Speaker 1>Steneveek on Bloomberg Radio.

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<v Speaker 2>Some big news and financial services. We talked about Apple

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<v Speaker 2>and Goldman Sachs credit card partnership might be coming to

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<v Speaker 2>an end. Apple recently sending a term sheet to the

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<v Speaker 2>financial giant. That would be a first step towards severing

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<v Speaker 2>the contract. This is going to a person familiar with

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<v Speaker 2>the matter. Apple, you know this right among those. But

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<v Speaker 2>this is one of the big players looking to disrupt

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<v Speaker 2>financial services by offering its own high yield savings account product,

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<v Speaker 2>financing a credit card, Apple Cash and more. Yep, they

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<v Speaker 2>know fintech disruption. There's a lot out there.

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<v Speaker 3>Yeah.

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<v Speaker 1>Well, someone else who's looking at disrupt financial services is

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<v Speaker 1>Chris Britt, founder and CEO of the privately held fintech Chime.

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<v Speaker 1>Chime offers consumers checking accounts with no monthly fees. They've

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<v Speaker 1>got savings accounts, products such as secured credit card that

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<v Speaker 1>helps users build credit and more. Chime says it has

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<v Speaker 1>quote millions of members and back in twenty twenty one, Carol,

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<v Speaker 1>when Chime last raised money, it was valued at twenty

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<v Speaker 1>five billion dollars.

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<v Speaker 2>Well, Chris us on Zoom from San Francisco. The company

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<v Speaker 2>officially to launching the Chime scholars Foundation, which we will

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<v Speaker 2>get to in a moment. Chris, great to have you

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<v Speaker 2>here with Tim and myself. Hope you're well. Tell us

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<v Speaker 2>a little bit about the environment for your business, because

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<v Speaker 2>it sounds like you guys have a very front row seat,

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<v Speaker 2>if you will, to what's going on with the consumer

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<v Speaker 2>right now.

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<v Speaker 3>Yeah, sure, thanks for having me in the thrill to

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<v Speaker 3>announce the foundation. But in terms of the consumer trends

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<v Speaker 3>that we're seeing, yeah, we you know, we serve millions

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<v Speaker 3>of consumers and I think the the you know, the

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<v Speaker 3>relationship that we have with our members is that they

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<v Speaker 3>use Chime as their primary bank account and primary way

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<v Speaker 3>that they do their day to day spending. So we

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<v Speaker 3>actually do, you know, see a lot of we do

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<v Speaker 3>have a front row seat to transaction activity balances. You know,

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<v Speaker 3>I'd say we're starting to see a little bit of

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<v Speaker 3>a weakening among the consumer that we see. You know,

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<v Speaker 3>we've seen balances declined slightly, probably down about five percent

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<v Speaker 3>year over year, but at the same time, we're still

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<v Speaker 3>seeing spending that's been really solid. It's up you know,

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<v Speaker 3>six seven percent year over year, and again, you know,

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<v Speaker 3>our members mostly use Chime for their everyday sort of

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<v Speaker 3>non discretionary purchases, So in many ways we're insulated from

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<v Speaker 3>you know, you know ups and downs of the economy

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<v Speaker 3>because people use our cards for their every day you know,

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<v Speaker 3>grocery transactions and daily habits that you know, really help

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<v Speaker 3>you know, fuel our business.

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<v Speaker 1>Chris, are you seeing their spending patterns change, like what

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<v Speaker 1>they're actually spending money on this year versus what they

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<v Speaker 1>were spending money on in twenty twenty, twenty twenty one

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<v Speaker 1>in twenty twenty two. Has that mix changed?

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<v Speaker 3>Oh for sure. I mean we're seeing more and more

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<v Speaker 3>just a normalization of the economy and where spend is happening.

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<v Speaker 3>So you're seeing things like ride share at Uber and

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<v Speaker 3>Lyft is up pretty, you know, pretty significantly year over year.

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<v Speaker 3>You're seeing more spending for you know, concerts and restaurants

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<v Speaker 3>and those sorts of activities, and I you know, it's

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<v Speaker 3>it's a well needed, you know sort of normalization of

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<v Speaker 3>you know, just getting back to post post COVID transaction

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<v Speaker 3>activity and that's been really healthy, you know. At the

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<v Speaker 3>same time, you know, we still see unemployment rates that

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<v Speaker 3>are really really low. So and you know, we serve

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<v Speaker 3>consumers that make up to about one hundred thousand dollars

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<v Speaker 3>is just generally the sweet spot that we serve. And

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<v Speaker 3>those consumers can generally get jobs and they sign up

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<v Speaker 3>for Chime accounts, they get direct deposit, and they use

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<v Speaker 3>us for everyday transaction. So you know, I wouldn't say

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<v Speaker 3>our business is countercyclical, but it's very resilient to you know,

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<v Speaker 3>be able to withstand you know, ups and downs in

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<v Speaker 3>the economy.

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<v Speaker 1>Chris, are you because people use this for director posit

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<v Speaker 1>for their salaries, for their paychecks, are you seeing are

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<v Speaker 1>you seeing people lose jobs? Are you seeing them jump

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<v Speaker 1>around more? Jump around less? What can what can your

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<v Speaker 1>data tell us about job hopping and the strength of

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<v Speaker 1>of the economy for for those Chime users.

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<v Speaker 3>Well, look as you as you moved down the income spectrum,

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<v Speaker 3>there certainly is more turnover and more change in in

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<v Speaker 3>how and where people work and receive direct deposits. So

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<v Speaker 3>we naturally we always see a little bit more turnover. Uh.

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<v Speaker 3>You know, then you might if if the consumers that

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<v Speaker 3>you served made hundreds of thousands of dollars a year

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<v Speaker 3>a year, But like I said, it's still very healthy

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<v Speaker 3>people can you know, there's jobs out there for people,

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<v Speaker 3>they're readily available and and a lot of people have

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<v Speaker 3>you know, multiple sources of income. That trend hasn't. That's

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<v Speaker 3>been pretty consistent. I would say, you know where people

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<v Speaker 3>might have a little bit of gig gig work for

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<v Speaker 3>a side hustle, but still you know, the primary wages

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<v Speaker 3>you know, come from a corporation or you know, h

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<v Speaker 3>office job that they have. You know, people are particularly

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<v Speaker 3>in our in our portfolio of of members that we serve,

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<v Speaker 3>they're just amazing, amazing people that are resilient and you know,

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<v Speaker 3>uh can can go out and hustle and you know,

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<v Speaker 3>get the work and get the job that they that

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<v Speaker 3>they need to help their families and move their financial

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<v Speaker 3>lives forward.

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<v Speaker 2>Hey, Chris, for those who might not be familiar though

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<v Speaker 2>with Chime, just remind us how it all kind of

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<v Speaker 2>works and how what is the business of Chime and

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<v Speaker 2>how you guys make money.

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<v Speaker 3>So Chime exists to unite everyday people to help unlock

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<v Speaker 3>their financial progress, and we do that by starting with

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<v Speaker 3>offering a core checking account, a deposit account that you know,

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<v Speaker 3>chimea is not a bank. We partner with primarily two

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<v Speaker 3>fd I C insured banks that hold the deposits. What

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<v Speaker 3>we're really good at is creating you know, really easy

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<v Speaker 3>to use, intuitive, low fee services and a tech you

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<v Speaker 3>know end end tech technology stack and and sort of

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<v Speaker 3>operate all aspects of the consumer interaction primarily through an app.

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<v Speaker 3>So we don't you know, have the cost burden of

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<v Speaker 3>a heavy, you know, sort of branch infrastructure. We're able

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<v Speaker 3>to operate at a very low cost structure. And then

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<v Speaker 3>what we do is we deliver to these to these

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<v Speaker 3>members that we serve fee free checking accounts, so there's

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<v Speaker 3>no there's no fee associated with you know, having the

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<v Speaker 3>core underlying depositive account. We give them access to their

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<v Speaker 3>paycheck a few days early. We give them free overdraft

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<v Speaker 3>services and other services to help them with liquidity, and

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<v Speaker 3>we also help them with credit building. So that combination

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<v Speaker 3>of services has really resonated with millions of people.

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<v Speaker 2>That rely on But you make money by getting a

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<v Speaker 2>fee on what every transaction that they do off that account.

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<v Speaker 2>Is that correct?

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<v Speaker 3>You know, we have a few sources of income, but

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<v Speaker 3>that is a very large part of our of our

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<v Speaker 3>revenue is the interchange that is earned when consumers use

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<v Speaker 3>their Chime cards for their everyday purchases. And what we

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<v Speaker 3>like about that model is that it's very aligned with

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<v Speaker 3>the consumer. Right, we only monetize when they're engaged with

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<v Speaker 3>us and using the card for everyday transactions. We've been

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<v Speaker 3>very careful, careful to design the business to not from

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<v Speaker 3>their misfortune, which is often times the way. You know,

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<v Speaker 3>larger institutions make money off of this segment. So yes,

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<v Speaker 3>we earn money off interchange, and it's really allowed us

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<v Speaker 3>to unlock free banking for millions of people who otherwise

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<v Speaker 3>we'll be paying huge amounts of monthly freeze, search, draft fees,

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<v Speaker 3>you name it.

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<v Speaker 1>Let's talk about interchange fees. The FED is proposing lower

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<v Speaker 1>caps on those interchange fees. This is your business. How

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<v Speaker 1>concerned are you about this? Does that mean that you'll

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<v Speaker 1>make less money if the Fed does indeed go through

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<v Speaker 1>with that proposal.

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<v Speaker 3>Well, we're of course well aware of the conversations happening

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<v Speaker 3>in Washington around interchange. You know, none of the proposals

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<v Speaker 3>being contemplated would have any direct impact on Chime or

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<v Speaker 3>the banks that we that we partner with, so you know,

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<v Speaker 3>we're monitoring it. It's sort of an age old discussion

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<v Speaker 3>and debate, But at the end of the day, you know,

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<v Speaker 3>interchange has been a huge positive for millions of people

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<v Speaker 3>that suffer from, you know, paying outrageous levels of overdraft

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<v Speaker 3>fees and monthly fees. And you know, like I said that,

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<v Speaker 3>this interchange based business model has really been tremendously helpful

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<v Speaker 3>for us to be able to disrupt this category. Look

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<v Speaker 3>at the changes that have happened in overdraft.

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<v Speaker 1>That's exactly where That's exactly where I wanted to go, Chris,

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<v Speaker 1>because you guys were early to do to do this.

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<v Speaker 1>You know, so many banks now though offer free online banking,

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<v Speaker 1>no ATM fees, early direct deposits, no overdraft fees, something

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<v Speaker 1>that you guys have been doing for years. How do

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<v Speaker 1>you differentiate from those traditional banks that are now offering

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<v Speaker 1>those services that you offer.

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<v Speaker 3>Well, I think it's great that all those changes have happened.

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<v Speaker 3>It's awesome for our country. It's awesome for people, you know,

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<v Speaker 3>people in every state across across the country. What do

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<v Speaker 3>we do. We have to keep innovating and push the

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<v Speaker 3>envelope on the next service that's actually consumer friendly and

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<v Speaker 3>actually help our members, you know, move their financial lives ahead.

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<v Speaker 3>For themselves and for their families. So we certainly have

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<v Speaker 3>more copy chat you know companies, you know, startup types.

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<v Speaker 3>But also it's in many ways it's flattering that these

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<v Speaker 3>big institutions now do advertising on getting paid early and

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<v Speaker 3>free overdraft all on note, like I would say, the

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<v Speaker 3>overdrafts are the structure are friendlier, but you know there's

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<v Speaker 3>still you know, some gotcha's. You know, they may give

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<v Speaker 3>you a little bit of extra grace period, but a

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<v Speaker 3>lot of these institutions still aren't shy about being pretty

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<v Speaker 3>aggressive on the fee schedule.

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<v Speaker 2>We are talking with the founder and CEO of chime

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<v Speaker 2>on Zoom from San Francisco, Chris Britt is still with us.

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<v Speaker 2>Hey Chris, just a few rapid business questions to wrap

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<v Speaker 2>up the business part of our interview in three and

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<v Speaker 2>sixty seconds. I want to ask you because we want

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<v Speaker 2>to get to your foundation. We want to talk a

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<v Speaker 2>little bit about your backstory. First of all, are you

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<v Speaker 2>guys profitable?

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<v Speaker 3>We have very attractive, highly profitable unit economics. We are

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<v Speaker 3>not yet profitable, but that's a decision we've made a

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<v Speaker 3>as a private company.

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<v Speaker 2>Okay, will you be soon or that's not a goal?

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<v Speaker 2>That's a part of it.

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<v Speaker 3>We're not optimizing for profitabily right now. We may actually

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<v Speaker 3>be profitable in Q one, but it's not it's not

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<v Speaker 3>a stated goal. You know, we raise a large round

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<v Speaker 3>of financing in twenty one, so you know, we don't

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<v Speaker 3>need to raise money again. But you know, we're feeling

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<v Speaker 3>like there's an opportunity right now to continue to pursue

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<v Speaker 3>our vision, which is to you know, be the number

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<v Speaker 3>one market share company in terms of primary account relationships

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<v Speaker 3>among consumers that make up to one hundred thousand dollars

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<v Speaker 3>a year. And I think that's within reach for us

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<v Speaker 3>over the next few years.

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<v Speaker 2>Which tells you a lot about the folks that you

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<v Speaker 2>are reaching out to and helping growth in users and

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<v Speaker 2>how sticky if somebody's on the platform, do they stay

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<v Speaker 2>with you?

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<v Speaker 3>Oh yeah, I think that's if you were to, you know,

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<v Speaker 3>in a nutshell describe what different differentiates Chime relative to

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<v Speaker 3>other consumer fintech companies. Is just that it's the engagement.

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<v Speaker 3>It's the primary account relationship that we enjoy with with

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<v Speaker 3>millions of consumers. So the majority of people that that

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<v Speaker 3>bank through the Chime app are using us as their

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<v Speaker 3>primary every day, you know, transaction relationship and sort of

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<v Speaker 3>way to manage their money. So yeah, it results in

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<v Speaker 3>very high engagement, lots of transaction volume and you know

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<v Speaker 3>for the business, extremely high our poo relationships with with

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<v Speaker 3>our members, but in a way that's very aligned.

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<v Speaker 2>With that all right, and growth end users. Can you

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<v Speaker 2>give us any kind of like year to year overgrowth?

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<v Speaker 3>Oh yeah, I mean, you know, we're growing at a

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<v Speaker 3>rate of you know, next year will grow well above

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<v Speaker 3>thirty percent. So I think in an environment where a

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<v Speaker 3>lot of companies are you know, mus or declining, are

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<v Speaker 3>flatlining a bit, you know, we are a real bright

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<v Speaker 3>spot in that we're you know, growing at a at

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<v Speaker 3>a nice clip right now.

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<v Speaker 2>And just quickly, since you just did another funding round,

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<v Speaker 2>any plans to go public anytime soon? I know this

0:12:10.600 --> 0:12:12.080
<v Speaker 2>has been as certainly in the past.

0:12:14.840 --> 0:12:17.480
<v Speaker 3>Well we did a funding around in twenty twenty one.

0:12:17.520 --> 0:12:21.040
<v Speaker 3>That's been it's been a few years. But yeah, yeah,

0:12:21.120 --> 0:12:26.280
<v Speaker 3>but look, we intend to be an independent, large public company.

0:12:26.360 --> 0:12:27.960
<v Speaker 3>We've certainly you know, we've raised a lot of money

0:12:28.040 --> 0:12:30.080
<v Speaker 3>and so we uh, you know, we want to make

0:12:30.160 --> 0:12:32.480
<v Speaker 3>sure that we can do that for for our amazing

0:12:32.480 --> 0:12:36.000
<v Speaker 3>investors and also for all of all the chimers that

0:12:36.040 --> 0:12:38.840
<v Speaker 3>work here to support our members every day. So it's

0:12:38.880 --> 0:12:41.600
<v Speaker 3>not something that we have planned on in the short term,

0:12:41.640 --> 0:12:44.679
<v Speaker 3>but we're certainly about as I P R I P

0:12:44.800 --> 0:12:47.439
<v Speaker 3>already as as you know a company could be, and

0:12:47.440 --> 0:12:49.840
<v Speaker 3>were certainly of the scale to be able to to

0:12:49.880 --> 0:12:52.600
<v Speaker 3>be a you know, a nice public company. I think,

0:12:52.640 --> 0:12:54.920
<v Speaker 3>you know, we're gonna wait and see how the the

0:12:54.960 --> 0:12:57.560
<v Speaker 3>economy plays out and the stock market plays out over

0:12:57.559 --> 0:12:59.880
<v Speaker 3>the course of you know, the first half of next year,

0:13:00.200 --> 0:13:01.520
<v Speaker 3>and figure out planes from there.

0:13:01.880 --> 0:13:04.240
<v Speaker 1>Hey, Chris, I want to talk about the big news

0:13:04.240 --> 0:13:07.200
<v Speaker 1>this week coming from Chime, the company announcing the Chime

0:13:07.320 --> 0:13:10.080
<v Speaker 1>Scholars Foundation. I actually, you know, we've talked many times

0:13:10.080 --> 0:13:12.960
<v Speaker 1>in the past. I didn't know your backstory. Give us just,

0:13:13.080 --> 0:13:16.520
<v Speaker 1>you know, quick thirty seconds on your backstory and how

0:13:16.559 --> 0:13:19.200
<v Speaker 1>that got you to launch a company like Chime, and

0:13:19.200 --> 0:13:20.199
<v Speaker 1>then we'll get into the foundation.

0:13:21.800 --> 0:13:24.000
<v Speaker 3>Yeah, you asked about public offerings. Well, this today is

0:13:24.000 --> 0:13:27.520
<v Speaker 3>the public offering of Chimes Scholars Foundation. I'm so thrilled

0:13:28.480 --> 0:13:32.559
<v Speaker 3>to announce it, and I appreciate you asking about my backstory.

0:13:32.600 --> 0:13:34.800
<v Speaker 3>I actually wrote a little blog post about it too

0:13:34.880 --> 0:13:39.040
<v Speaker 3>on the Chime website. But man, I was so lucky.

0:13:39.679 --> 0:13:42.120
<v Speaker 3>Growing up, I grew up in Mount Vernon, New York,

0:13:42.120 --> 0:13:45.839
<v Speaker 3>which is a sort of working class you know town,

0:13:47.080 --> 0:13:49.679
<v Speaker 3>lived in an apartment building, and when my parents got divorced,

0:13:49.720 --> 0:13:51.200
<v Speaker 3>my mom had to go to work and my dad

0:13:51.240 --> 0:13:54.400
<v Speaker 3>wasn't around all the time. And by the grace of God,

0:13:54.440 --> 0:13:57.320
<v Speaker 3>I had a neighbor downstairs. His name was Joe, and

0:13:57.440 --> 0:13:59.200
<v Speaker 3>Joe used to look out for me. He made sure

0:13:59.240 --> 0:14:02.520
<v Speaker 3>that I got to practice, did my homework, had some dinner,

0:14:03.960 --> 0:14:05.920
<v Speaker 3>and we had so much fun. It became like a

0:14:05.960 --> 0:14:09.040
<v Speaker 3>father figure, a grandfather, and really my best friend. And

0:14:09.440 --> 0:14:13.360
<v Speaker 3>and why that's relevant to today's news is that, you know,

0:14:13.640 --> 0:14:16.360
<v Speaker 3>my mom, when the schools got pretty tough in my town,

0:14:16.440 --> 0:14:18.559
<v Speaker 3>my mom decided to try to apply to a private school.

0:14:18.559 --> 0:14:20.360
<v Speaker 3>When I got in, but it was really difficult to

0:14:20.360 --> 0:14:24.760
<v Speaker 3>pay for it, and Joe agreed to I mean, I

0:14:24.800 --> 0:14:27.120
<v Speaker 3>had a scholarship, but still it was tough, and Joe

0:14:27.120 --> 0:14:29.240
<v Speaker 3>agreed to pay for it. And then later in life,

0:14:29.280 --> 0:14:31.720
<v Speaker 3>when I got into college, you know, neither of my

0:14:31.760 --> 0:14:36.480
<v Speaker 3>parents had graduated from college, and I got into a

0:14:36.480 --> 0:14:40.240
<v Speaker 3>great college, Tulane University. I got a scholarship there too,

0:14:40.280 --> 0:14:43.200
<v Speaker 3>but again it was tough to make it all work,

0:14:43.280 --> 0:14:47.480
<v Speaker 3>and Joe agreed to pay for you know, the remaining

0:14:47.480 --> 0:14:51.280
<v Speaker 3>balance for me and I just you know that story,

0:14:51.760 --> 0:14:57.040
<v Speaker 3>which probably sounds incredibly weird or lucky, it really was.

0:14:57.360 --> 0:15:02.720
<v Speaker 3>And I think when I think about very yeah, I mean, look,

0:15:02.920 --> 0:15:05.360
<v Speaker 3>I think when in ways that Chime could give back

0:15:05.360 --> 0:15:07.360
<v Speaker 3>in some way. You know, I talked about our mission

0:15:07.360 --> 0:15:13.040
<v Speaker 3>around unlocking financial progress. Higher education is the most powerful

0:15:13.160 --> 0:15:19.560
<v Speaker 3>engine to allow for economic mobility. So it's very much

0:15:19.600 --> 0:15:21.480
<v Speaker 3>brand aligned for us, is what can we do to

0:15:21.520 --> 0:15:25.760
<v Speaker 3>help people gain more access to education. Obviously there's you know,

0:15:25.840 --> 0:15:28.200
<v Speaker 3>lots of colleges and community colleges and different ways to

0:15:28.240 --> 0:15:31.440
<v Speaker 3>get you know, post secondary education. But too often people

0:15:31.480 --> 0:15:34.360
<v Speaker 3>are you know, saddled with tremendous amounts of debt and

0:15:34.400 --> 0:15:39.280
<v Speaker 3>they start out life like really difficult starting place because

0:15:39.440 --> 0:15:41.200
<v Speaker 3>you know, they may be sort of feel forced to

0:15:41.200 --> 0:15:43.320
<v Speaker 3>go to a four year college, they've got a ton

0:15:43.360 --> 0:15:45.440
<v Speaker 3>of debt, and the first you know, part of their

0:15:45.480 --> 0:15:48.320
<v Speaker 3>professional lives are very difficult. So that's what we've tried

0:15:48.360 --> 0:15:51.720
<v Speaker 3>to solve for with this nonprofit that we've started, a

0:15:51.920 --> 0:15:54.840
<v Speaker 3>Chime scholars Foundation. I think, you know, we're thrilled to

0:15:54.960 --> 0:15:59.440
<v Speaker 3>announce it today, you know, we've already been in pilot

0:15:59.560 --> 0:16:02.520
<v Speaker 3>for at a year. We've offered scholarships to over three

0:16:02.640 --> 0:16:05.640
<v Speaker 3>hundred students. And one of the things that's really unique

0:16:05.680 --> 0:16:07.720
<v Speaker 3>is that it's not just for four year university. It's

0:16:07.720 --> 0:16:12.280
<v Speaker 3>also for community colleges, it's for vocational training. And you know,

0:16:12.280 --> 0:16:15.000
<v Speaker 3>we're really optimizing for people that have the grit and

0:16:15.040 --> 0:16:17.680
<v Speaker 3>the grind and people that we feel a high degree

0:16:17.720 --> 0:16:19.800
<v Speaker 3>of confidence are going to see it through and get

0:16:19.840 --> 0:16:23.440
<v Speaker 3>their degrees and move their financial lives for themselves and

0:16:23.480 --> 0:16:26.480
<v Speaker 3>their family forward. And I think maybe you know, in

0:16:26.480 --> 0:16:29.360
<v Speaker 3>addition to announcing the three hundred students, you know, the

0:16:29.400 --> 0:16:31.840
<v Speaker 3>other announcement that I just wanted to highlight is Chime

0:16:31.880 --> 0:16:35.200
<v Speaker 3>and our board of directors and investors have committed to

0:16:35.240 --> 0:16:38.160
<v Speaker 3>allocate one percent of the equity of our company into

0:16:38.200 --> 0:16:41.000
<v Speaker 3>this foundation to ensure that we can fund it for

0:16:41.040 --> 0:16:41.720
<v Speaker 3>many years to come.

0:16:41.880 --> 0:16:43.880
<v Speaker 2>Well, and I love it as you write, as we

0:16:43.880 --> 0:16:46.840
<v Speaker 2>look at this release, you know, it's like everyday kids

0:16:46.880 --> 0:16:49.840
<v Speaker 2>like you who have responsibilities at home, work hard, hustle,

0:16:49.920 --> 0:16:52.280
<v Speaker 2>yearn for something more. It's not necessarily everybody who at

0:16:52.280 --> 0:16:54.640
<v Speaker 2>a four point zero in terms of who you are

0:16:55.480 --> 0:16:59.680
<v Speaker 2>providing this for, are possibly offering up Thank you so much.

0:16:59.760 --> 0:17:03.200
<v Speaker 2>Chris Britt, Happy holidays, have a good holiday season, Founder

0:17:03.240 --> 0:17:06.320
<v Speaker 2>and chief executive officer of Chime, right here on Bloomberg