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Chime Financial, a highly regarded fintech, may have put its IPO plans on hold.
“Not only do we have the opportunity to add additional products and services, but we will continue to expand into more areas of our members’ financial lives,” said Chris Britt, Chime’s co-founder and CEO, during a Q&A keynote presentation at Fintech Nexus earlier this Week. Paul Stamas, managing director and co-head of financial services at private equity firm General Atlantic, was the moderator.
Chime, founded in 2012, has a popular smartphone app but doesn’t disclose how many users it has. However, a spokeswoman noted that the number of customers is in the millions. The San Francisco-based fintech is known for offering fee-free banking; It partners with The Bancorp Bank, a unit of The Bancorp (ticker: TBBK), and Stride Bank to provide products and services.
Speaking to an audience of fintech executives, investment bankers and venture capitalists, Britt praised the benefits of using Chime. Customers with a Chime direct deposit account can get their paycheck three days earlier, he said. Chime customers can negative their account by up to $200 without incurring overdraft fees, Britt said. Chime also has a credit builder card that launched in 2020 that is tied to the amount of cash in a user’s bank account and works similar to a prepaid debit card. Chime expects to be able to offer more credit products.
One area Chime doesn’t want to pursue is becoming a bank, Britt said. The CEO said it might make sense for Chime to hold a banking license or have a deposit base going forward, but such plans are not at the core today.
“Chime is not a bank. It’s a consumer technology company,” Britt said. (Chime reached an agreement with the California Department of Financial Protection and Innovation in March 2021, in which it agreed to stop using “chimebank.com” in its business until it received a license or authorization to conduct banking business. It agreed also agree to distance themselves from the use of the term “banking”, pursuant to the Agreement.)
Chime’s primary customers are “average income Americans,” Britt said. This group typically makes an annual income of up to $100,000. The majority of his clients are 40 years or younger. Chime currently has about 1,300 employees, up from about 200 before the pandemic, Britt said. The fintech makes money whenever a customer uses the Chime
Visas
(V) Debit Card.
merchants
pay an exchange fee that goes to Visa, which shares a portion with Chime.
One reason Chime doesn’t want to become a bank is that fintechs are currently exempt from the Durbin Amendment, which is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Durbin limits the interbank fees that major banks can charge for using debit cards.
Britt was not asked about Chime’s much-anticipated IPO. In September 2020, Britt said Chime would be “ready to go public” in 12 months. The company then raised $485 million in a Series F round that valued Chime at $14.5 billion. This rose to a $25 billion valuation in August 2021 when Chime raised another $750 million. For comparison, Stripe was valued at $95 billion in March 2021 when it raised $600 million.
According to The Wall Street Journal, Chime should start its IPO in the first half of 2022. Barron’s confirmed that Chime picked
Goldman Sachs
to work on the offer. Goldman did not respond to calls for comment.
Chime’s IPO is not expected this year, people familiar with the situation said. “We have announced plans to begin preparations for an IPO, but have never announced plans to go public, nor have we selected a banker,” the Chime spokeswoman said in an emailed response to questions . “We raised capital late last year and remain very well capitalized.”
Chime isn’t the only company not going ahead with previous IPO plans. Inflation and general market volatility have caused the IPO market to almost grind to a halt this year. As of May 27, only 43 companies have gone public with a traditional IPO, raising about $4.5 billion, Dealogic said. This compares to 157 offerings for the same period, which raised $62.1 billion.
Publicly traded fintechs are also down more than 50% over the past six months.
PayPal Stocks
‘ stock (ticker: PYPL) is down about 73% from a July 2021 high of $305.70. Block (SQ) is down 68% since hitting a yearly high of $277.65 in August. Those looking for a fintech presence could count on it
Stock now
(NU), the Warren Buffett-backed Brazilian digital lender
Berkshire Hathaway
(
BRKb
), which is also a Chime rival. Nu Holdings went public at $9 in December and is now about 58% below its asking price.
Write to Luisa Beltran at [email protected]
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