Unlike many financial institutions, Chime doesn't make money by charging fees to customers, which allows them to save more of their money and grow their savings. Instead, Chime makes money when its customers use its branded debit or credit cards. Chime earns a portion of the interchange fee that Visa (V 0.53%) charges merchants.
Chime's fee-free approach to checking and savings accounts is winning over customers who are also signing up for Chime's branded cards, increasing its revenue as customers use its cards to make purchases.
While Chime is growing rapidly, it has a long growth runway ahead as more customers open accounts and it cross-sells additional financial products and services to its customers. Chime's growth potential has made it one of the most anticipated initial public offerings (IPO) in consumer finance. It might have you interested in investing in its stock. Here's a guide to everything you need to know about how to invest in stocks like Chime and the company ahead of its eventual IPO.
IPO
Is it publicly traded?
Is Chime publicly traded?
As of mid-2023, Chime wasn't a publicly traded company. While Chime lined up investment bankers, including Goldman Sachs (GS 1.41%), to prepare for its initial public offering (IPO) in early 2022, it put those plans on hold a few months later. Challenging market conditions led the financial technology company to delay its IPO indefinitely.
Chime's IPO
When will Chime IPO?
Chime isn't currently on the IPO calendar. The IPO market was in a fairly deep freeze in 2023, especially for fintech stocks. The company will likely wait until the IPO market heats back up again before considering its public offering.
How to invest
How to buy Chime stock
Because Chime isn't yet public, you can't buy shares in your brokerage account. However, investors interested in the financial technology company do have alternative options they can consider. Here are three Chime investment alternatives:Nu Holdings
Nu Holdings (NU 2.17%) is a digital financial service company based in Brazil. Like Chime, it provides spending solutions like credit and debit cards. In addition, Nu offers savings, investing, borrowing, and insurance solutions. The company has more than 85 million customers in Brazil, Mexico, and Columbia. Nu Holdings counts Warren Buffett's Berkshire Hathaway (BRK.A 0.0%)(BRK.B -0.02%) among its shareholders.
PayPal Holdings
PayPal Holdings (NYSE:PYPL) is a digital payments company. Its technology helps people make digital payments to merchants and other PayPal users. PayPal has a massive global user base (more than 425 million in 2023). PayPal is highly profitable and generates significant free cash flow. It returns most of that money to investors by repurchasing shares.
SoFi Technologies
SoFi Technologies (SOFI 4.36%) provides customers with several financial products and services, including bank accounts, credit cards, brokerage accounts, mortgages, student loans, and insurance. The company is expanding quickly as more consumers sign up for its growing list of financial products and services. However, while SoFi is growing fast, it has yet to turn the corner on profitability.
Investors interested in one of these alternatives to Chime can buy shares in any brokerage account. Here's a step-by-step guide to investing in these financial technology companies.- Open a brokerage account: You'll have to open and fund a brokerage account before buying shares of any company. If you still need to open one, here are some of the best-rated brokers and trading platforms. Take your time to research the brokers to find the best one for you.
- Figure out your budget: Before making your first trade, you'll need to determine a budget for how much money you want to invest. You'll then want to decide how to allocate that money. The Motley Fool's investing philosophy recommends building a diversified portfolio of 25 or more stocks you plan to hold for at least five years. You don't have to get there on the first day. For example, if you have $1,000 available to start investing, you might want to begin by allocating that money equally across at least 10 stocks and then increase your holdings from there.
- Do your research: It's essential to thoroughly research a company before buying its shares. You should learn how it makes money, its competitors, its balance sheet, and other factors to make sure you have a solid grasp on whether the company can grow value for its shareholders over the long term. Continue reading to learn more about some crucial factors to consider before investing in these financial technology stocks.
- Place an order: Once you've opened and funded a brokerage account, set your investing budget, and researched the stock, it's time to buy shares. The process is relatively straightforward. Go to your brokerage account's order page and fill out all the relevant information, including:
- The number of shares you want to buy or the amount you want to invest to purchase fractional shares.
- The stock ticker (NU for Nu Holdings, PYPL for PayPal, or SOFI for SoFi Technologies).
- Whether you want to place a limit order or a market order. The Motley Fool recommends using a market order since it guarantees you buy shares immediately at the market price.
Investors would follow a similar blueprint to buy an IPO stock like Chime when it goes public. Once shares become available, select Chime's chosen stock ticker to buy shares through your brokerage account.
Profitability
Is Chime profitable?
As a privately held company, Chime doesn't have to report quarterly financial results to the Securities Exchange Commission (SEC), so there isn't much publicly available financial information on the company.According to CNBC and TechCrunch, Chime started generating positive earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2020. That made it the first of the neobanks (or nontraditional financial service companies) to reach profitability on an EBITDA basis.
According to Sacra, the company has reportedly grown its revenue at a brisk rate since then, rising from around $600 million in 2020 to almost $1.9 billion in 2022. Meanwhile, the company reportedly reduced its staff by 12% in late 2022 to cut costs and improve profitability. However, according to The Information, while the company's revenue rose 27% in the first quarter of 2023 to $305 million, Chime's adjusted EBITDA was negative $45 million in the period.If Chime does launch an IPO, investors will need to look closely at its profitability before investing in its stock.Should you invest?
Should I invest in Chime?
Chime isn't yet public. However, investors interested in the company can start researching now in anticipation of its eventual IPO. Here are some factors to consider that might lead you to believe it's a good stock to add to your portfolio:- You're a fan of Chime and its products.
- You understand how Chime makes money and how it differs from a traditional bank.
- You want to invest in a company disrupting the financial sector.
- You believe that Chime will grow its revenue and profits at a high rate after completing its IPO.
- You understand the risks of investing in IPO stocks, including the possibility that shares could lose value.
- You're seeking a potentially high-growth company.
- Adding a financial technology company like Chime would further diversify your portfolio.
- You don't use Chime and favor a competitor's products.
- You don't understand Chime's business model.
- You think Chime faces lots of competition, which could slow its growth.
- You're seeking to invest in companies that are less volatile than recent IPOs.
- You already own several financial technology stocks.
Related investing topics
ETFs
ETFs with exposure to Chime
Chime has yet to complete an IPO, so investors can't get passive exposure to the fintech company through an exchange-traded fund (ETF).
Exchange-Traded Fund (ETF)
However, investors can get some exposure to similar companies in the fintech space through an ETF. Notable ones include the Ark Fintech Innovation ETF (ARKF 1.66%) and the Global X FinTech ETF (NYSE:FINX). The Ark Fintech Innovation ETF is an actively managed fund by the well-known Cathie Wood. Meanwhile, the Global X FinTech ETF aims to track the Indxx Global FinTech Thematic Index. Either fund would provide investors with exposure to the fast-growing fintech space.
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