Chime, the San Francisco challenger bank, raised $200 million in venture funding, propelling the company’s valuation to $1.5 billion.
The Series D round of financing was led by DST Global and new investors Coatue, General Atlantic, ICONIQ Capital, and Dragoneer Investment Group. Existing investors Menlo Ventures, Forerunner Ventures, Cathay Innovation and other unnamed investors participated in the fundraising round.
In a press release, Chime, which made Forbes Fintech 50 List for the first time this year, said the money will go to boost growth and launch more financial products. March marks a significant milestone for the company. It was able to surpass 3 million FDIC bank accounts and claims to be the fastest growing U.S. challenger bank.
Chime is among a growing number of startups that are aiming to disrupt the traditional banking industry that has long been plagued by high fees and bad reputations. With Americans, particularly millennials, looking for another way to bank, Chime has been benefiting. Take the recent outage at Wells Fargo as one example. In one day Chime was able to open close to 10,000 new bank accounts. And while the company didn’t link it directly to the Wells Fargo outage it did say new customers are expressing frustration with their existing banking relationships.
Since launching in 2013 Chime has amassed millions of customers by offering debit cards, saving accounts and checking accounts without any fees. The company makes money from the revenue it gets from a portion of the interchange fee on its debit card. Its rivals include other challenger banks such as N26, Revolut, Simple, Varo and Moven as well as financial technology companies that are entering the fray such as Social Finance, Wealthfront, PayPal and Amazon.
A big challenge to Chime is expected to come from the likes of PayPal and Amazon.com, who have the war chests to go after the traditional banks’ customers and those being ignored by the big banks. This past spring the Wall Street Journal reported PayPal began offering banking features to groups of customers that includes FDIC insurance, a debit card that can be used at ATMs, photo check deposit and direct deposit services. Amazon.com has reportedly been in talks with the major banks about creating a bank account product for its customers.
Speculation has been swirling since early February that Chime would raise more funding, giving it a valuation of $1.5 billion. At the time Bloomberg reported it was expected to raise $300 million at a $1.5 billion valuation. In May it raised $70 million at a $500 million valuation with Menlo Ventures leading that round.
Rivals Revolut and N26 have also recently raised hundreds of millions of dollars in venture funding but at higher valuations. In late April Revolut raised $250 million giving it a valuation of $1.7 billion while N26 raised $300 million in January at a $2.7 billion valuation. Both companies are based in Europe and are leaders in the bank challenger market outside of the U.S. According to Chime excluding its European rivals, the fundraising announced Tuesday (March 5) marks the largest financing round and highest valuation in the U.S. challenger banking industry.
Chime plans to use the funds to invest in lending and credit products, boost growth and broaden its offering to consumers. The company also plans to double its size to more than 200 employees and add to its leadership team. “We’re excited to welcome some of the world’s leading growth investors to Chime,” said Chris Britt, Chime Founder, and CEO said in a press release announcing the capital raise. “Banking should be free, helpful and easy to use but traditional banks are reluctant to embrace this reality. We aim to set a new standard in the industry by using technology to create services that are truly aligned with the best interests of consumers.”
