June 3, 2023
Fintech CEO Chris Britt of Chime on reasons Americans don't trust banks
Chime CEO Chris Britt said with much of the banking system being on edge, he sees a strong market need for fintechs.

The disruption of traditional bricks-and-mortar banks by fintech companies was already occurring when the pandemic sent startups offering banking services faster, cheaper, and more digitally accessible into overdrive.

A rush of venture capital followed, with fintech companies raising more than $130 billion in 2021 alone, creating more than 100 new unicorns, or companies with at least $1 billion in valuation.

However, as the field of fintechs got more crowded and the economy has entered a more recessionary environment, funding has dried up and several fintechs have taken valuation cuts. The fintech reckoning is going well beyond private companies, as public markets have not been kind to former Disrupters Dave and SoFi, both trading well off their IPO prices. Legacy banks have seen their efforts to disruptor these disruptors fall short of expectations – for example, Goldman Sachs recently pulled back on its fintech ambitions.

Making that banking picture even fuzzier is the recent collapse of Silicon Valley Bank and the wave of concerns that followed.

But Chris Britt, CEO of Chime, which ranked No. 15 on the 2023 CNBC Disruptor 50 list, says even with much of the banking system on edge, he still sees a strong market need for fintechs.

“It’s very difficult for [the big banks] structurally to compete for the segment that we aim to serve, which is sort of mainstream middle and more lower income consumers,” Britt said on CNBC’s “Squawk on the Street” on Tuesday. “Big banks do a pretty good job with high income, high FICO score folks who have big deposits and are credit worthy, but for most Americans, the 65% that live paycheck to paycheck, the only way that big banks can make the math work on serving them is by being very punitive on fees.”

More coverage of the 2023 CNBC Disruptor 50

Addressing the part of the population that has been disillusioned by traditional banking was part of the impetus for Britt and Ryan King to found Chime in 2010. This year marks the fourth time Chime has been featured on the CNBC Disruptor 50 list.

“The trust levels that mainstream Americans have in banks is extremely low, and that was part of the opportunity that we pursued,” Britt said.

Those trust levels waned in recent weeks with the collapse of Signature Bank and Silicon Valley Bank, followed by the eventual government seizure and sale of First Republic Bank. Nearly half of the adults polled in a recent Gallup survey said they were “very worried” (19%) or “moderately worried” (29%) about the safety of the money they had in a bank or other financial institution.

Britt said that although Chime has a relationship with SVB, it “hasn’t seen much of a change as a result of the SVB situation” from members, as “99.9% of our consumer deposits are FDIC insured because they’re well below the $250,000 threshold.”

Chime’s focus on having a primary account relationship with members as opposed to other fintechs that may focus on one-off or peer-to-peer transactions has helped the company’s business be “very resilient.”

“Most of our members use Chime for non-discretionary spend; they’re going out and shopping at Target or Amazon or Subway, and they’re using it for their everyday purchases,” Britt said. The majority of Chime’s revenue comes from network partners like Visa when members use their cards at the point of sale.

Chime, which was valued at $1.5 billion in 2019, reached a valuation of $25 billion in 2021. The company became profitable on an EBITDA basis during the pandemic, Britt told CNBC in September 2020.

However, the company has not been immune from the current challenges. In November, Chime laid off 12% of its workforce, or about 160 people, in a move that Britt said would help the company thrive “regardless of market conditions.”

Still, Chime is still open to a future IPO, Britt told CNBC’s Julia Boorstin, something that the company has long been rumored for well ahead of the current frozen IPO market for new offerings from venture-backed startups.