FTT+ April 12th: A Closer Look: Chime's CEO Talks About Strategy During Covid-19
Hi all, Julie here.
Last week, we talked about the ways fintechs could help small businesses seeking to get access to the recent government stimulus. This week, since stimulus checks are supposed to be available any day (and in some cases are already being sent out), we’re focusing on what fintechs have been trying to do to help consumers.
Probably the most prominent fintech that comes to mind in regards to the $1,200 government stimulus checks going out to those with incomes of $75,000 or less is Chime. Why? In case you missed it in Ian’s Fintech Today last week, the largest challenger bank in the U.S. did something interesting just under 2 weeks ago. The week before last, the firm offered 1,000 of its customers a higher “Spot Me” limit, or basically an interest free, no fee, loan. Anyone with a direct deposit with Chime gets access to $100 in Spot Me credits, meant to help customers if they accidentally overdraft. Then last week, the company increased the Spot Me limit to $200 for 100,000 of its customers. I’ve known Chris Britt, the CEO and Co-Founder, for several years, so I was able to hop on the phone with him this week. Here are some excerpts from the interview:
Editor’s Note: This chart starts from 2017, Chime started in 2014 and it took approximately 3 years to get the first 1m customers.
Julie: Why did you do this?
Chris: Some of our features that are most loved are getting paid early and Spot Me. We’re all about helping members with their peace of mind. What we found talking to them recently was that they had a lot of anxiety around the current situation. We thought that based on the feedback, a lot of our members were planning on getting access to the government stimulus, but it wasn’t not gonna happen right away (like before rent was due). We thought we were in the position to help with that.
Julie: Explain to me exactly what you did and what risk it involves for you and your banking partners?
Chris: We had 1,000 people that we piloted a new $1,200 limit with. They got a pop-up in the app and an email notifying them of the change, and these were customers that we believed were very likely going to be getting the government checks. We are taking real risk here though. There is no recourse, since these aren’t legally considered loans. If you take it negative and don’t pay it back, we are taking that risk. We are mitigating it by, in addition to being someone that has been on direct deposit and used Spot Me in the past, we picked people that had already gotten tax refunds into Chime accounts. So if they did get a payment, it was likely to go to Chime. You also have to remember that every financial banking product we do, we have to do in coordination with our bank partners (Stride and Bancorp). We sat down with them and explained how we wanted to do the program. They are the FDIC insured institution, so at the end of the day, they had the ultimate risk, but we made it so the way the contract works, we are taking the risk.
Julie: What did most of those people do with the new limit?
Chris: We saw about half the people offered this to go in and increase their Spot Me limits to higher levels. The average was between $150-300. So people weren’t on average going in and using all of it, but needed a bit extra to get by. We got a lot of feedback, and there were many people that said ‘man that sucks we didn’t get it but it’s cool our bank is doing this.’ A lot of people also said having a few hundred to get them by until the stimulus payment would be a big help. That is when we increased Spot Me limits to $200 for 100,000 people.
Julie: What has customer growth and engagement looked like recently?
Chris: January is always our best month. New year, new you. The first quarter of this year has been the best quarter in terms of new signups, enrollments, transaction volumes, and revenue. In terms of card transactions, we benefit from getting your direct deposit and target people that tend to pay with everyday transactions with debit cards. The drop off in transaction spend has been very small, and it’s been more of a transition in what people are using the cards for (such as groceries rather than eating out). We are not insulated from this, however. People are sadly going to lose jobs, and that means deposits are going to decline for us.
The day after our interview, Chime put out a tweet that said some checks were already hitting member accounts.
Chime might have done the best in terms of marking around this, but it’s not the only challenger bank getting payments to their customers as quickly as possible. Challenger bank Current did some marketing around customers being able to get checks quickly, and CEO Stuart Sopp also tweeted on Friday that customers were starting to see checks hit accounts.
Square CEO Jack Dorsey also used the opportunity to remind customers that their Square Cash accounts had routing numbers and could accept government payments as well.
There was one thing that struck me when digging into this though. Why haven’t any of the big banks promoted themselves as getting the government stimulus checks? I mean, I know you’re the big guys, but it feels like you should have done a bit more, even if it was just to let your qualifying customers that you’re looking out for their best interest? Even though I (barely) missed the cutoff to get the payment, the lack of reactions from those like Chase and Bank of America leaves a bit of a bad taste in my mouth versus the Neobanks that are looking out for me (even though it’s sometimes coming with some personal benefits to them as well).
I’d love your feedback on this. Maybe I'm just another millennial that has simply grown up loving notifications in apps that alert me to things that may need my attention. But a big part of me thinks that, when it comes to their financial lives, it's not just millennials that value a little guidance and support right now. If I'm right, this is a really big opportunity for fintechs to not only help current customers, but to convince even more consumers to leave their incumbent banks and become loyal fintech users. One word of caution to fintechs, however: with that comes a lot of added responsibility, and consumers can very easily switch back if you disappoint.