Chime aims to increase growth with higher interest rates ahead of IPO
Chime is making significant strides in enhancing its offerings as it prepares to go public, aiming to attract more customers with enticing features.
In an exclusive to TechCrunch, the digital bank disclosed that customers who opt to have their paychecks directly deposited into a Chime savings or checking account will receive an Annual Percentage Yield (APY) of 3.75%. Even for those who choose not to utilize direct deposit, the interest rate of 2% for standard users remains highly competitive.
For context, the national average savings account yield stands at 0.61% APY, based on Bankrate’s recent survey of financial institutions.
Madhu Muthukumar, Chime’s Chief Product Officer, didn’t explicitly mention it, but the decision likely aims to increase customer loyalty. Last year, Chime boasted 7 million customers and $1.5 billion in annualized revenue. However, the company has not disclosed updated figures.
Chime initiated confidential filing for an Initial Public Offering (IPO) with the U.S. Securities and Exchange Commission in December. It was last valued at $25 billion after a $1 billion funding round in 2021 amidst a valuation craze. To date, Chime has secured a total of $2.65 billion in funding from prominent investors like Forerunner Ventures, Sequoia, SoftBank, Menlo Ventures, and others.
Chime has refrained from commenting on the IPO’s timeline, keeping details under wraps.
To qualify for the 3.75% APY rate, users must enroll in Chime+, a premium membership level requiring the agreement to have paychecks direct deposited. There are no fees associated with joining as a premium member.
Established in 2012, Chime positions itself as a bank alternative catering to ordinary Americans. It prides itself on zero overdraft, maintenance, or low balance fees, and no minimum account requirements. Muthukumar emphasized that Chime serves individuals from diverse backgrounds, including those working in local stores, educational institutions, delivery services, and retail.
Notably, Chime shifted its focus in 2020 by introducing a credit card designed to help users enhance their credit score by setting purchase limits based on their account balance. Membership in Chime+ is no longer a prerequisite for applying for and utilizing Chime’s Credit Builder Visa credit card.
Furthermore, Chime unveiled several new features, such as a revamped app, an extended range of exclusive discounts for Chime users, cashback opportunities, and dedicated customer support. Additionally, the company recently introduced an “instant loans” product on March 21.
In conclusion, Chime is strategically leveraging these innovative offerings and customer-centric approaches as it gears up for its upcoming IPO, setting the stage for continued growth and expansion in the competitive fintech landscape.