Mobile Banking

Why is Chime’s Banking App so disruptive?

Griffin Anderson
3 min readApr 12, 2016

As a fan of Chime’s mobile banking app, I thought I would take a moment to discuss how Chime and other mobile banking apps are disrupting retail banking. Disruption is happening at the customer level, the business model, and at the feature level. The following are the disruptions and their implications:

Customer Relationship

The prevalence of mobile apps is altering consumer preferences. Consumers now expect all of their services to be distributed through the phone, including financial services. Technology companies that excel in creating digital experiences are partnering with traditional financial banks to create new opportunities.

Chime is a perfect example, Chime partners with The Bancorp Bank, Member FDIC to provide mobile banking services. Chime delivers the customer experience and Bancorp overseas the accounts.

The ramifications are particularly interesting. Traditionally, retail banks would manage distribution and customer acquisition. But with this new app/phone model, technology companies like Chime are controlling distribution. The change in ownership over the customer relationship will have a lasting impact on traditional retail banking.

In the future, it’s possible for fintech companies like Chime to use their competitive advantage in customer data and distribution to squeeze out traditional retail banks. This wedge will limit a bank’s opportunity to create new financial products. Next generation firms may have to choose to either focus on customer experience or the manufacturing of new financial products.

Niche Providers or Account Managers

The complexities of creating and distributing mobile apps has produced an ecosystem of financial niche providers. Each financial provider mentioned below focuses on a specific vertical:

  • Personal Finance: Robinhood, Wealthfront, FutureAdvisor, Betterment, Learnvest, SigFig, Level Money, Motif Investing, Mint, Acorns
  • Money Transfer: Venmo, Circle, Square Cash
  • Lending: Prosper, OnDeck, Funding Circle, Kabbage, Earnst, BetterFinance, Affirm

The list above is not comprehensive, but does give us an extent of the ecosystem. The objective of most of these firms is to become the “best of breed provider” of their respective verticals.

The proliferation of financial partnerships has created intense competition in the financial services marketplace. Competition has given way to customer empowerment and has reduced switching costs in the overall market.

In addition to the vertical(niche) model, another virtual financial model has emerged. A horizontal strategy focused on account management. These applications are offering a comprehensive suite of financial products, but are controlled under one app/account. Simple is an example of an account management firm.

Simple a competitor of Chime, offers a suite of retail banking services. The company uses Visa to facilitate debit payments, Bankcorp and CBW to deposit savings in FDIC-insured products, and Venmo to enable mobile payments.

As horizontal models like Chime and Simple emerge, a suite of niche providers will most likely be integrated into their products. Customers will not only be able to choose an account manager, but will be able to choose their financial services provider from a marketplace.

Value Add Services

Virtual banking, banking as platform, and the evolving mobile environment has created an opportunity for fintech companies. This shift has enabled companies to rethink how they can reengineer their services and add additional value to their most basic core offerings. The following are some of the features and trends emerging in the industry:

  • Automated Savings, Budgeting, Payments, & Investing
  • Free & Cardless ATM withdrawals
  • Transparent/No fees
  • Savings, Budgeting, Payment, & Investing Reporting
  • Transparent and Enhanced Rewards Systems
  • Real time transaction alerts and notifications
  • Real time fraud protections
  • Discovery across transactions, accounts, categories
  • Tax Optimization
  • Distribution/Transfers through social/communication channels
  • Digital Receipts

The list is not comprehensive, but does demonstrate the growing innovation in virtual banking. A new precedent will be set as consumers begin to adopt these features. The apps that can develop new financial features while ensuring consumer trust will have a competitive advantage.

Chime has focused their initial innovation on automated savings and cash back rewards. In addition to a superior user experience and real time transaction data, Chime generates revenue from their issued Visa debit cards. It’s an exciting time for mobile banking apps and Chime is well positioned for the future!

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