SCOTTSDALE, Ariz.–One analyst is challenging reports that the fintech Chime has surpassed five-million FDIC-insured accounts in just five years, with nearly all of them coming from its mobile app.
Chime is often mentioned by speakers at credit union conferences as the kind of startup that is a threat to their business model, and it is a frequent advertiser on national TV broadcasts. But Ron Shevlin, director of research at Cornerstone Advisors, said some of the claims around the numbers deserve a closer look.
‘Deserves Some Scrutiny’
Writing on Forbes.com, Shevlin responded to a report by the same publication that while there’s “no question that Chime offers interesting and attractive features like early wage access, round-up savings, and no account maintenance or overdraft fees,” the “news of crossing the five million account mark--along with some statements from Chime's CEO and other points in the article--deserves some scrutiny.”
The first question, said Shevlin: Is it five-million people or five-million accounts? Shevlin noted a recent survey of U.S. consumers by Cornerstone Advisors produced an estimate of about 1.6 million people banking with Chime.
“Why the discrepancy between number of customers and number of accounts?” asked Shevlin. “Chime tells customers, ‘When you open your Chime Spending Account, you are presented with an option to open your Savings Account.’ It's likely that most Chime customers are opening that account since there's no risk to them to do so. But it's also likely that not all of Chime's accounts are funded, active accounts (Chime wouldn't be the first neobank to not report those numbers). It's possible that survey respondents with inactive accounts don't think of themselves as doing business with the startup.”
Potential ‘Warning Sign’
Shevlin also examined whether San Francisco-based chime is really an “alternative” to banks,” and suggested there is a potential “warning sign” ahead for the company.
Shevlin pointed to a statement by Chime’s CEO, Chis Britt, that the company’s best channel for customer acquisitions is not paid TV ads or Internet ads, it’s referrals. “Customers are bragging about us,” he said, even as he added the company will be spending more on customer acquisition via TV and social media.
Looking forward, Shevlin also explored whether Chime will be able to successfully penetrate the lending market.
For the full piece by Shevlin, go here.