Thirteen-year-old digital bank Chime is expected to go public on Thursday and has already built one of the fintech industry’s largest consumer-facing businesses, with 8.6 million active customers and $1.7 billion in 2024 revenue. There are sound reasons to believe the San Francisco company can continue its history of rapid growth, including the huge size of the market it’s tackling, which consists of nearly two hundred million Americans earning up to $100,000, and its knack for getting people to make Chime their primary banking app.
Many industry insiders believe Chime’s momentum, combined with pent-up demand from Wall Street firms for new stocks to trade, will make its stock price spike in its public debut on Thursday. But as Chime aims to go public at an $11 billion valuation, down from the $25 billion it had fetched in a private 2021 fundraise, investors should also be aware of the long-term challenges it faces, ranging from attracting and retaining customers profitably to controlling lending losses and fraud.
Have a story tip? Contact Jeff Kauflin at [email protected] or on Signal at jeff.273.
Attracting and Retaining Customers Profitably
Chime brings in millions of new customers annually through hefty spending on marketing and sales–it spent $520 million on these line items in 2024. But among the new active customers it attracts, only half of them stick around for a full year, according to its initial public offering filing with the Securities and Exchange Commission. Of those who stay past a year, however, the annual attrition rate is just 10%.
Some Chime users likely leave when they want access to more credit and graduate to big banks like Capital One and Chase. At the same time, competition for entry-level banking customers is also getting broader, with fintechs like Robinhood and Block (with its Cash App) also trying to become consumers’ primary bank. So Chime will need to continue spending heavily on marketing to maintain its 30% growth, and if it wants to become much more profitable, it has to find ways to acquire customers more cheaply, keep more of them past that first year and develop new services to profit from existing users.
To its credit, the company has already done much to improve profitability–in 2022, it lost a staggering $500 million on just $1 billion in revenue, versus a $25 million net loss on $1.7 billion in revenue in 2024. But it has a lot more work to do if it wants its stock to perform well over the long term.
Lending Losses
Chime makes most of its money on interchange, the 1% to 2% fees merchants pay to accept debit and credit cards at checkout, but it began making a big bet on small-dollar lending over the past several years. It launched a $200 overdraft protection feature called SpotMe in 2019 and has since extended more than $43 billion through it. Last year, Chime released MyPay, which gives free paycheck advances of $20 to $500, charging a $2 fee only for instant transfers (otherwise, the advance arrives within 24 hours). It doled out $8.8 billion through MyPay between July 2024 and April 2025. And this past March, it announced “Instant Loans,” unsecured personal loans of up to $500 that can be paid back over three months at an annual percentage interest rate (APR) of 30%.
In its regulatory IPO filing, Chime said its credit losses have been below 0.4% for SpotMe and 1.75% for MyPay (it didn’t disclose loss rates for other lending products). Yet in the first quarter of 2025, its total “transaction and risk losses”—an unusual metric Chime reports that lumps together losses from lending, disputed charges and fraud–surged from 9% of revenue in the first quarter of 2024 to 21% in the first quarter of 2025. Chime attributed $54 million of the $109 million first-quarter transaction and risk loss to the full launch of MyPay. The result is a clear reminder that it often takes years to build a profitable, sustainable lending business, and investors should closely watch how credit losses evolve over time, especially if the economy sours and unemployment starts to rise.
Michael Gilroy, a fintech-focused venture capitalist at Marathon Management Partners, says Chime has an edge in its payroll-linked MyPay loans because it can use customers’ income into their Chime accounts to pay any outstanding MyPay balances, in the same way Block’s Square uses small businesses’ incoming sales to pay off any unpaid loans.
Fraud
Large digital banks face serious fraud challenges because they hold and move so much money–Chime processes $115 billion in transactions a year. The company saw fraud spike during the pandemic, when rental car businesses like Avis stopped accepting Chime cards. It seems to have largely gotten the problem under control: Chime said in its IPO filing that it has reduced its fraud-loss rates by 29% since 2022.
Yet fraud is a dynamic problem, and AI has made criminals much more effective. “With fraud, you can see overnight losses spiking tenfold,” says one former fintech executive. In April 2025, consumers filed 84 complaints to the Consumer Financial Protection Bureau (CFPB) about unauthorized transactions in their Chime accounts, with many consumers alleging fraud as the cause. That marked the highest number of unauthorized-transaction CFPB complaints Chime has ever received and was more than double what it saw in March 2024.
Reliance on Outside Bank Partners
Since Chime doesn’t have a banking charter, it relies on its sponsor-bank partners Bancorp and Stride to offer banking products. Over the past few years, with the growing number of regulatory infractions by sponsor banks and the collapse of Synapse, regulatory scrutiny has heightened. “The compliance hurdles are a lot more stringent, as they should be, for any fintech,” says Zuben Mathews, cofounder of cash advance app Brigit, which was acquired for $460 million earlier this year. The higher compliance hurdles lead to “lower profit margins, higher costs and some delays,” Mathews says. Bancorp and Stride haven’t had any regulatory infractions recently, but future compliance issues could slow down Chime’s pace of new product releases.
