Chime’s New Membership Service: Chime Prime
Chime, one of the leaders in the neobank industry, is introducing a new membership service known as Chime Prime. The goal of this new service is to motivate customers to make Chime their primary bank. The introduction of Chime Prime showcases how fintechs like Chime, SoFi, Robinhood, Block, and others are working to develop new features in order to generate more deposits.
Chime Prime’s Offerings
Chime Prime offers a variety of benefits for customers who make at least $3,000 in monthly direct deposits, which equates to earners making at least $36,000 per year after taxes. The benefits include 5% cash back on Chime Card, a secured credit card; a 3.75% annual percentage yield on savings; overdraft protection; free access to Instant Loans, a small dollar lending product; and MyPay, an earned wage access product. Additional travel and lifestyle perks are included as well.
“Chime was built to challenge the status quo and deliver a better banking experience for mainstream America,” Mark Troughton, the president at Chime, stated in an email conversation with American Banker. He further explained that Chime aims to tie premium rewards and perks to everyday banking activities. By doing so, customers who make Chime their primary account can receive more rewards, savings, and benefits without the need for fees or minimum balances.
The Impact on the Banking Industry
The introduction of Chime Prime is a significant move in the banking industry as it adds a new level of competition. Traditional retail banks stand to lose the most, as Chime aims to gain a larger market share. However, it’s worth noting that higher-income customers who are the target of Chime Prime also have more options for banking services from other neobanks. These customers tend to be better served than Chime’s existing core member base.
Keybanc analysts note that the launch of Chime Prime is a “differentiated offering” compared to traditional retail banks. However, they also pointed out that the move up-market could potentially force Chime to consider more lending options. The analysts also suggested that the move could lead to more product innovation at the neobank, possibly in the form of a revolving credit product.
As Tony DeSanctis, a senior director at Cornerstone Advisors, observes, Chime’s move up market isn’t aimed at high earners, but rather “the same population that Cash App is going after.” He explains that Chime is focusing on the sub-$75,000 annual income population to become their primary banking relationship.
Conclusion
Chime’s introduction of Chime Prime is a strategic move to attract higher income members and consequently increase average revenue per account. It is a well-calculated risk in a market that is increasingly competitive, with both traditional banks and other fintechs vying for consumer deposits. The effectiveness of this strategy will largely depend on Chime’s ability to continue innovating and providing value to its customers.
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