Digital Bank Chime Financial Plans Massive IPO

Matthew Broersma,
Silicon UK: FinTech Part 1: A New Payments and Banking Landscape

Chime Financial plans New York IPO worth up to $40bn after Covid-19 pandemic leads to surge in users and spiralling market valuation

Digital banking company Chime Financial may stage an initial public offering in New York as early as this spring after reportedly approaching Goldman Sachs as lead underwriter.

The firm, which offers all-digital banking services in the US in partnership with traditional banks, was valued at $25 billion (£18bn) with a funding round in August led by Sequoia Capital.

Its IPO is likely to aim for a substantial premium over that, up to a valuation of nearly $40bn, Reuters reported, citing sources familiar with the plans.

Chime reportedly plans to add other banks as underwriters before the planned IPO, the timing and size of which are subject to market conditions.

FinTech Part 2: Building the FinTech EcosystemDigital banking

Chime, valued at $1.5bn only three years ago, is one of a range of tech companies that has benefited from the Covid-19 pandemic, as US consumers have flocked to all-digital banking services.

The company offers current accounts with payday advances and no overdraft fees, but does charge fees for depositing funds or replenishing debit cards.

Most of its revenues come from a portion of the interchange fees charged when a user swipes a debit or credit card.

Founded in 2012 by former Visa executive Chris Britt and Ryan King, formerly of Comcast, Chime faces unpredictable market conditions that have caused some IPOs to be pulled in recent weeks.

Market volatility

Companies who launched onto the market last year, such as Robinhood Markets and Nu Holdings, have seen their valuations drop since then.

Robinhood is more than 50 percent down since its July 2021 IPO, while Brazilian digital bank Nu Holdings is down about 15 percent from its December listing.

Chime doesn’t disclose user numbers, but research firm eMarketer estimated in June of  last year that Chime would have 13.1 million US account holders by the end of 2021, making it the country’s leading digital bank.

It competes with Revolut, Current, Varo and others.