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Challenger Banking recovers steam

Free Mobile Banking
Chime recently announced a $ 70 million Series C round of financing led by Menlo Ventures. Existing investors Forerunner Ventures, Aspect Ventures, Cathay Innovation, Northwestern Mutual, Crosslink Capital and Omidyar Network also participated.

Chime valued his business at $ 500 million. Through Series C funding, the company has raised more than $ 100 million in total funding.

Investors seem to have confidence in Chime's business model because "it's very clean with extremely low overhead," said Rob Enderle, senior analyst at Enderle Group.

"The carillon also seems to be the place where other banks have to go, and investors tend to invest in the future," he told the E-Commerce Times.

The rise of NeoBanking

Chime is one of the many digital banks that have emerged in recent years. They are usually known as "challenger banks" or sometimes

These new banking organizations do not have inherited technology or cumbersome organizational structures, like the big agencies, KPMG noted.

Opening a mobile account is now the norm for large banks, especially in the United States, where
According to Avoka, it accounts for nearly 40% of new accounts.

Mobile is the fastest growing digital banking channel, said Don Bergal, director of marketing at Avoka.

"We have seen tangible evidence in recent months of a tipping point with more mobile openings than digital desktops," he told the E-Commerce Times.

The threat to traditional banks

Neobank and Challenger banks do not offer a full range of services, so they are less affected by regulatory requirements than traditional banks and can move faster.

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"Challenger banks pose a great threat for the future, but they do not immediately take a significant share of retail banks today," Bergal said. "The danger becomes blinded by the challengers once they take the momentum and it is too late to react."

That said, a neobanque – Tandem, in the UK – announced an agreement
to acquire the two centuries old Harrods bank to obtain a full banking license.

The big banks, which have major investments in infrastructure, find it easier to go digital, Bergal said. Avoka offers a turnkey solution for opening and integrating digital accounts to small banks and credit unions.

How the chime works

Chime does not have monthly fees, minimum balance, overdraft or international transactions. Customers can make unlimited withdrawals at more than 30,000 MoneyPass ATMs at no charge and at more than 30,000 points of withdrawal.

Customers must open an expense account – a sight deposit account available from The Bancorp Bank. They can then open a paid savings account, subject to restrictions.

The interest rate on savings accounts is 0.01% APY – but some online banks offer close to 2%.

Accounts are for personal use only and may be closed if Chime determines that they are used for business purposes.

Deposits are insured by the FDIC up to a maximum of $ 250,000 through Bancorp Bank.

Chime also offers the following:

  • A Visa debit card with daily balance notifications and instant transaction alerts. Lost or compromised cards can be blocked in one go;
  • An Automatic Savings Function
  • A salary advance free of charge;
  • Deposit of Checks and Mobile Payments
  • Money transfers between Chime accounts and external bank accounts; and
  • Mobile money transmissions to other users of Chime or non-users by Venmo.
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Chime supports mobile payments via Apple Pay Google Pay and Samsung Pay.

Pre-authorized pre-authorized debits or pre-authorized debits on savings accounts are not available.

"The attraction of the challenger banks is a more friendly experience, a faster response, and the convenience of anywhere access instead of being still attached to a branch. at some point, "said Bergal.

"The challengers tend to look and feel like retailers, not like banks," said Bergal, "and that's the attraction for consumers, especially millennia."

Richard Adhikari has been a reporter at ECT News Network since 2008. His fields of intervention are cybersecurity, mobile technologies, CRM, databases, the software development, the central and midrange computer. and the development of applications. He has written and edited for many publications, including Information Week and Computerworld . He is the author of two books on client / server technology.
Email Richard.