Speaker 1: This is Bloomberg Business Week with Carol Messer and Tim
Speaker 1: Steneveek on Bloomberg Radio.
Speaker 2: Some big news and financial services. We talked about Apple
Speaker 2: and Goldman Sachs credit card partnership might be coming to
Speaker 2: an end. Apple recently sending a term sheet to the
Speaker 2: financial giant. That would be a first step towards severing
Speaker 2: the contract. This is going to a person familiar with
Speaker 2: the matter. Apple, you know this right among those. But
Speaker 2: this is one of the big players looking to disrupt
Speaker 2: financial services by offering its own high yield savings account product,
Speaker 2: financing a credit card, Apple Cash and more. Yep, they
Speaker 2: know fintech disruption. There's a lot out there.
Speaker 3: Yeah.
Speaker 1: Well, someone else who's looking at disrupt financial services is
Speaker 1: Chris Britt, founder and CEO of the privately held fintech Chime.
Speaker 1: Chime offers consumers checking accounts with no monthly fees. They've
Speaker 1: got savings accounts, products such as secured credit card that
Speaker 1: helps users build credit and more. Chime says it has
Speaker 1: quote millions of members and back in twenty twenty one, Carol,
Speaker 1: when Chime last raised money, it was valued at twenty
Speaker 1: five billion dollars.
Speaker 2: Well, Chris us on Zoom from San Francisco. The company
Speaker 2: officially to launching the Chime scholars Foundation, which we will
Speaker 2: get to in a moment. Chris, great to have you
Speaker 2: here with Tim and myself. Hope you're well. Tell us
Speaker 2: a little bit about the environment for your business, because
Speaker 2: it sounds like you guys have a very front row seat,
Speaker 2: if you will, to what's going on with the consumer
Speaker 2: right now.
Speaker 3: Yeah, sure, thanks for having me in the thrill to
Speaker 3: announce the foundation. But in terms of the consumer trends
Speaker 3: that we're seeing, yeah, we you know, we serve millions
Speaker 3: of consumers and I think the the you know, the
Speaker 3: relationship that we have with our members is that they
Speaker 3: use Chime as their primary bank account and primary way
Speaker 3: that they do their day to day spending. So we
Speaker 3: actually do, you know, see a lot of we do
Speaker 3: have a front row seat to transaction activity balances. You know,
Speaker 3: I'd say we're starting to see a little bit of
Speaker 3: a weakening among the consumer that we see. You know,
Speaker 3: we've seen balances declined slightly, probably down about five percent
Speaker 3: year over year, but at the same time, we're still
Speaker 3: seeing spending that's been really solid. It's up you know,
Speaker 3: six seven percent year over year, and again, you know,
Speaker 3: our members mostly use Chime for their everyday sort of
Speaker 3: non discretionary purchases, So in many ways we're insulated from
Speaker 3: you know, you know ups and downs of the economy
Speaker 3: because people use our cards for their every day you know,
Speaker 3: grocery transactions and daily habits that you know, really help
Speaker 3: you know, fuel our business.
Speaker 1: Chris, are you seeing their spending patterns change, like what
Speaker 1: they're actually spending money on this year versus what they
Speaker 1: were spending money on in twenty twenty, twenty twenty one
Speaker 1: in twenty twenty two. Has that mix changed?
Speaker 3: Oh for sure. I mean we're seeing more and more
Speaker 3: just a normalization of the economy and where spend is happening.
Speaker 3: So you're seeing things like ride share at Uber and
Speaker 3: Lyft is up pretty, you know, pretty significantly year over year.
Speaker 3: You're seeing more spending for you know, concerts and restaurants
Speaker 3: and those sorts of activities, and I you know, it's
Speaker 3: it's a well needed, you know sort of normalization of
Speaker 3: you know, just getting back to post post COVID transaction
Speaker 3: activity and that's been really healthy, you know. At the
Speaker 3: same time, you know, we still see unemployment rates that
Speaker 3: are really really low. So and you know, we serve
Speaker 3: consumers that make up to about one hundred thousand dollars
Speaker 3: is just generally the sweet spot that we serve. And
Speaker 3: those consumers can generally get jobs and they sign up
Speaker 3: for Chime accounts, they get direct deposit, and they use
Speaker 3: us for everyday transaction. So you know, I wouldn't say
Speaker 3: our business is countercyclical, but it's very resilient to you know,
Speaker 3: be able to withstand you know, ups and downs in
Speaker 3: the economy.
Speaker 1: Chris, are you because people use this for director posit
Speaker 1: for their salaries, for their paychecks, are you seeing are
Speaker 1: you seeing people lose jobs? Are you seeing them jump
Speaker 1: around more? Jump around less? What can what can your
Speaker 1: data tell us about job hopping and the strength of
Speaker 1: of the economy for for those Chime users.
Speaker 3: Well, look as you as you moved down the income spectrum,
Speaker 3: there certainly is more turnover and more change in in
Speaker 3: how and where people work and receive direct deposits. So
Speaker 3: we naturally we always see a little bit more turnover. Uh.
Speaker 3: You know, then you might if if the consumers that
Speaker 3: you served made hundreds of thousands of dollars a year
Speaker 3: a year, But like I said, it's still very healthy
Speaker 3: people can you know, there's jobs out there for people,
Speaker 3: they're readily available and and a lot of people have
Speaker 3: you know, multiple sources of income. That trend hasn't. That's
Speaker 3: been pretty consistent. I would say, you know where people
Speaker 3: might have a little bit of gig gig work for
Speaker 3: a side hustle, but still you know, the primary wages
Speaker 3: you know, come from a corporation or you know, h
Speaker 3: office job that they have. You know, people are particularly
Speaker 3: in our in our portfolio of of members that we serve,
Speaker 3: they're just amazing, amazing people that are resilient and you know,
Speaker 3: uh can can go out and hustle and you know,
Speaker 3: get the work and get the job that they that
Speaker 3: they need to help their families and move their financial
Speaker 3: lives forward.
Speaker 2: Hey, Chris, for those who might not be familiar though
Speaker 2: with Chime, just remind us how it all kind of
Speaker 2: works and how what is the business of Chime and
Speaker 2: how you guys make money.
Speaker 3: So Chime exists to unite everyday people to help unlock
Speaker 3: their financial progress, and we do that by starting with
Speaker 3: offering a core checking account, a deposit account that you know,
Speaker 3: chimea is not a bank. We partner with primarily two
Speaker 3: fd I C insured banks that hold the deposits. What
Speaker 3: we're really good at is creating you know, really easy
Speaker 3: to use, intuitive, low fee services and a tech you
Speaker 3: know end end tech technology stack and and sort of
Speaker 3: operate all aspects of the consumer interaction primarily through an app.
Speaker 3: So we don't you know, have the cost burden of
Speaker 3: a heavy, you know, sort of branch infrastructure. We're able
Speaker 3: to operate at a very low cost structure. And then
Speaker 3: what we do is we deliver to these to these
Speaker 3: members that we serve fee free checking accounts, so there's
Speaker 3: no there's no fee associated with you know, having the
Speaker 3: core underlying depositive account. We give them access to their
Speaker 3: paycheck a few days early. We give them free overdraft
Speaker 3: services and other services to help them with liquidity, and
Speaker 3: we also help them with credit building. So that combination
Speaker 3: of services has really resonated with millions of people.
Speaker 2: That rely on But you make money by getting a
Speaker 2: fee on what every transaction that they do off that account.
Speaker 2: Is that correct?
Speaker 3: You know, we have a few sources of income, but
Speaker 3: that is a very large part of our of our
Speaker 3: revenue is the interchange that is earned when consumers use
Speaker 3: their Chime cards for their everyday purchases. And what we
Speaker 3: like about that model is that it's very aligned with
Speaker 3: the consumer. Right, we only monetize when they're engaged with
Speaker 3: us and using the card for everyday transactions. We've been
Speaker 3: very careful, careful to design the business to not from
Speaker 3: their misfortune, which is often times the way. You know,
Speaker 3: larger institutions make money off of this segment. So yes,
Speaker 3: we earn money off interchange, and it's really allowed us
Speaker 3: to unlock free banking for millions of people who otherwise
Speaker 3: we'll be paying huge amounts of monthly freeze, search, draft fees,
Speaker 3: you name it.
Speaker 1: Let's talk about interchange fees. The FED is proposing lower
Speaker 1: caps on those interchange fees. This is your business. How
Speaker 1: concerned are you about this? Does that mean that you'll
Speaker 1: make less money if the Fed does indeed go through
Speaker 1: with that proposal.
Speaker 3: Well, we're of course well aware of the conversations happening
Speaker 3: in Washington around interchange. You know, none of the proposals
Speaker 3: being contemplated would have any direct impact on Chime or
Speaker 3: the banks that we that we partner with, so you know,
Speaker 3: we're monitoring it. It's sort of an age old discussion
Speaker 3: and debate, But at the end of the day, you know,
Speaker 3: interchange has been a huge positive for millions of people
Speaker 3: that suffer from, you know, paying outrageous levels of overdraft
Speaker 3: fees and monthly fees. And you know, like I said that,
Speaker 3: this interchange based business model has really been tremendously helpful
Speaker 3: for us to be able to disrupt this category. Look
Speaker 3: at the changes that have happened in overdraft.
Speaker 1: That's exactly where That's exactly where I wanted to go, Chris,
Speaker 1: because you guys were early to do to do this.
Speaker 1: You know, so many banks now though offer free online banking,
Speaker 1: no ATM fees, early direct deposits, no overdraft fees, something
Speaker 1: that you guys have been doing for years. How do
Speaker 1: you differentiate from those traditional banks that are now offering
Speaker 1: those services that you offer.
Speaker 3: Well, I think it's great that all those changes have happened.
Speaker 3: It's awesome for our country. It's awesome for people, you know,
Speaker 3: people in every state across across the country. What do
Speaker 3: we do. We have to keep innovating and push the
Speaker 3: envelope on the next service that's actually consumer friendly and
Speaker 3: actually help our members, you know, move their financial lives ahead.
Speaker 3: For themselves and for their families. So we certainly have
Speaker 3: more copy chat you know companies, you know, startup types.
Speaker 3: But also it's in many ways it's flattering that these
Speaker 3: big institutions now do advertising on getting paid early and
Speaker 3: free overdraft all on note, like I would say, the
Speaker 3: overdrafts are the structure are friendlier, but you know there's
Speaker 3: still you know, some gotcha's. You know, they may give
Speaker 3: you a little bit of extra grace period, but a
Speaker 3: lot of these institutions still aren't shy about being pretty
Speaker 3: aggressive on the fee schedule.
Speaker 2: We are talking with the founder and CEO of chime
Speaker 2: on Zoom from San Francisco, Chris Britt is still with us.
Speaker 2: Hey Chris, just a few rapid business questions to wrap
Speaker 2: up the business part of our interview in three and
Speaker 2: sixty seconds. I want to ask you because we want
Speaker 2: to get to your foundation. We want to talk a
Speaker 2: little bit about your backstory. First of all, are you
Speaker 2: guys profitable?
Speaker 3: We have very attractive, highly profitable unit economics. We are
Speaker 3: not yet profitable, but that's a decision we've made a
Speaker 3: as a private company.
Speaker 2: Okay, will you be soon or that's not a goal?
Speaker 2: That's a part of it.
Speaker 3: We're not optimizing for profitabily right now. We may actually
Speaker 3: be profitable in Q one, but it's not it's not
Speaker 3: a stated goal. You know, we raise a large round
Speaker 3: of financing in twenty one, so you know, we don't
Speaker 3: need to raise money again. But you know, we're feeling
Speaker 3: like there's an opportunity right now to continue to pursue
Speaker 3: our vision, which is to you know, be the number
Speaker 3: one market share company in terms of primary account relationships
Speaker 3: among consumers that make up to one hundred thousand dollars
Speaker 3: a year. And I think that's within reach for us
Speaker 3: over the next few years.
Speaker 2: Which tells you a lot about the folks that you
Speaker 2: are reaching out to and helping growth in users and
Speaker 2: how sticky if somebody's on the platform, do they stay
Speaker 2: with you?
Speaker 3: Oh yeah, I think that's if you were to, you know,
Speaker 3: in a nutshell describe what different differentiates Chime relative to
Speaker 3: other consumer fintech companies. Is just that it's the engagement.
Speaker 3: It's the primary account relationship that we enjoy with with
Speaker 3: millions of consumers. So the majority of people that that
Speaker 3: bank through the Chime app are using us as their
Speaker 3: primary every day, you know, transaction relationship and sort of
Speaker 3: way to manage their money. So yeah, it results in
Speaker 3: very high engagement, lots of transaction volume and you know
Speaker 3: for the business, extremely high our poo relationships with with
Speaker 3: our members, but in a way that's very aligned.
Speaker 2: With that all right, and growth end users. Can you
Speaker 2: give us any kind of like year to year overgrowth?
Speaker 3: Oh yeah, I mean, you know, we're growing at a
Speaker 3: rate of you know, next year will grow well above
Speaker 3: thirty percent. So I think in an environment where a
Speaker 3: lot of companies are you know, mus or declining, are
Speaker 3: flatlining a bit, you know, we are a real bright
Speaker 3: spot in that we're you know, growing at a at
Speaker 3: a nice clip right now.
Speaker 2: And just quickly, since you just did another funding round,
Speaker 2: any plans to go public anytime soon? I know this
Speaker 2: has been as certainly in the past.
Speaker 3: Well we did a funding around in twenty twenty one.
Speaker 3: That's been it's been a few years. But yeah, yeah,
Speaker 3: but look, we intend to be an independent, large public company.
Speaker 3: We've certainly you know, we've raised a lot of money
Speaker 3: and so we uh, you know, we want to make
Speaker 3: sure that we can do that for for our amazing
Speaker 3: investors and also for all of all the chimers that
Speaker 3: work here to support our members every day. So it's
Speaker 3: not something that we have planned on in the short term,
Speaker 3: but we're certainly about as I P R I P
Speaker 3: already as as you know a company could be, and
Speaker 3: were certainly of the scale to be able to to
Speaker 3: be a you know, a nice public company. I think,
Speaker 3: you know, we're gonna wait and see how the the
Speaker 3: economy plays out and the stock market plays out over
Speaker 3: the course of you know, the first half of next year,
Speaker 3: and figure out planes from there.
Speaker 1: Hey, Chris, I want to talk about the big news
Speaker 1: this week coming from Chime, the company announcing the Chime
Speaker 1: Scholars Foundation. I actually, you know, we've talked many times
Speaker 1: in the past. I didn't know your backstory. Give us just,
Speaker 1: you know, quick thirty seconds on your backstory and how
Speaker 1: that got you to launch a company like Chime, and
Speaker 1: then we'll get into the foundation.
Speaker 3: Yeah, you asked about public offerings. Well, this today is
Speaker 3: the public offering of Chimes Scholars Foundation. I'm so thrilled
Speaker 3: to announce it, and I appreciate you asking about my backstory.
Speaker 3: I actually wrote a little blog post about it too
Speaker 3: on the Chime website. But man, I was so lucky.
Speaker 3: Growing up, I grew up in Mount Vernon, New York,
Speaker 3: which is a sort of working class you know town,
Speaker 3: lived in an apartment building, and when my parents got divorced,
Speaker 3: my mom had to go to work and my dad
Speaker 3: wasn't around all the time. And by the grace of God,
Speaker 3: I had a neighbor downstairs. His name was Joe, and
Speaker 3: Joe used to look out for me. He made sure
Speaker 3: that I got to practice, did my homework, had some dinner,
Speaker 3: and we had so much fun. It became like a
Speaker 3: father figure, a grandfather, and really my best friend. And
Speaker 3: and why that's relevant to today's news is that, you know,
Speaker 3: my mom, when the schools got pretty tough in my town,
Speaker 3: my mom decided to try to apply to a private school.
Speaker 3: When I got in, but it was really difficult to
Speaker 3: pay for it, and Joe agreed to I mean, I
Speaker 3: had a scholarship, but still it was tough, and Joe
Speaker 3: agreed to pay for it. And then later in life,
Speaker 3: when I got into college, you know, neither of my
Speaker 3: parents had graduated from college, and I got into a
Speaker 3: great college, Tulane University. I got a scholarship there too,
Speaker 3: but again it was tough to make it all work,
Speaker 3: and Joe agreed to pay for you know, the remaining
Speaker 3: balance for me and I just you know that story,
Speaker 3: which probably sounds incredibly weird or lucky, it really was.
Speaker 3: And I think when I think about very yeah, I mean, look,
Speaker 3: I think when in ways that Chime could give back
Speaker 3: in some way. You know, I talked about our mission
Speaker 3: around unlocking financial progress. Higher education is the most powerful
Speaker 3: engine to allow for economic mobility. So it's very much
Speaker 3: brand aligned for us, is what can we do to
Speaker 3: help people gain more access to education. Obviously there's you know,
Speaker 3: lots of colleges and community colleges and different ways to
Speaker 3: get you know, post secondary education. But too often people
Speaker 3: are you know, saddled with tremendous amounts of debt and
Speaker 3: they start out life like really difficult starting place because
Speaker 3: you know, they may be sort of feel forced to
Speaker 3: go to a four year college, they've got a ton
Speaker 3: of debt, and the first you know, part of their
Speaker 3: professional lives are very difficult. So that's what we've tried
Speaker 3: to solve for with this nonprofit that we've started, a
Speaker 3: Chime scholars Foundation. I think, you know, we're thrilled to
Speaker 3: announce it today, you know, we've already been in pilot
Speaker 3: for at a year. We've offered scholarships to over three
Speaker 3: hundred students. And one of the things that's really unique
Speaker 3: is that it's not just for four year university. It's
Speaker 3: also for community colleges, it's for vocational training. And you know,
Speaker 3: we're really optimizing for people that have the grit and
Speaker 3: the grind and people that we feel a high degree
Speaker 3: of confidence are going to see it through and get
Speaker 3: their degrees and move their financial lives for themselves and
Speaker 3: their family forward. And I think maybe you know, in
Speaker 3: addition to announcing the three hundred students, you know, the
Speaker 3: other announcement that I just wanted to highlight is Chime
Speaker 3: and our board of directors and investors have committed to
Speaker 3: allocate one percent of the equity of our company into
Speaker 3: this foundation to ensure that we can fund it for
Speaker 3: many years to come.
Speaker 2: Well, and I love it as you write, as we
Speaker 2: look at this release, you know, it's like everyday kids
Speaker 2: like you who have responsibilities at home, work hard, hustle,
Speaker 2: yearn for something more. It's not necessarily everybody who at
Speaker 2: a four point zero in terms of who you are
Speaker 2: providing this for, are possibly offering up Thank you so much.
Speaker 2: Chris Britt, Happy holidays, have a good holiday season, Founder
Speaker 2: and chief executive officer of Chime, right here on Bloomberg