Revolut & Chime: Two Digital Bank Founders Talk About Building the Bank of the Future
Last week, FT Partners, a Fintech focused investment bank, held a Zoom presentation where more than 5,000 individuals registered to attend. The interest in the presentation was, of course, driven by the speakers: Nik Storonsky, founder and CEO of Revolut and Chris Britt, founder and CEO of Chime – two fast-growing digital banks.
While Chime, with its 8+ million accounts, is solely focused on North America, Revolut with its 12+ million customers in 55 different countries wants to conquer the world – including the challenging US market.
Both companies are seeking to emerge as the consumer’s bank of choice – not funded by the excessive fees charged by traditional banks and minus the costly brick and mortar locations that are clearly no longer needed.
Britt, asked what problem he is trying to solve, explained that many people are underbanked in the US. They may not be poor but they still live paycheck to paycheck. Chime removes the intrinsic friction to better manage their money while removing the fees like overdraft gouging.
Storonsky explained that, in the beginning, he was trying to solve his own problems as he was traveling a lot. Spending $100 in a different country could mean you would instantly lose $6. Why? He first wanted to find a way to spend in any currency for free. A simple concept but challenging in execution.
Without any payments background, Storonsky took 6 months to figure it out. He said the payments industry was a mess and, in fact, it still is.
From payments, Revolut now has a broad portfolio of banking services including crypto, savings, cards, loans, Forex – pretty much everything you want.
For business accounts, Revolut connects invoicing, payroll, expenses while simplifying the process of connecting with other services like Slack.
“We build products that are 10x cheaper than banks,” said Storonsky.
Asked about the impact of COVID-19 on this business, Storonsky said their experience in Italy was telling as in the middle of March payments dropped by 55% to 65% in the country. They have seen the same take place in other European countries. But beyond payments, the other services are said to be booming like trading and cryptocurrency.
Storonsky said that payments were really hurt but everything else is in line with previous forecasts.
Regarding staff for the digital native operation, Storonsky said the Revolt employees have been even more productive during the lockdown.
Britt, like the rest of the world, said he was feeling caged, but said it was an inspiring time for his team and the “company is rallying” and they are walking the walk.
Typically, their users have Chime as their primary bank account. They leave their traditional bank to bank with Chime. According to Britt, on a per-member basis, transaction volumes are up at Chime.
Britt said there is an understandable shift in transactions taking place as people are making fewer purchases at restaurants and more at grocery stores, for example.
As their business model is based on transactions, this could be good for the company. Britt said they are seeing pretty robust spending across various categories like games and Apps.
Offer the Bank Product People Need, Not What You Want to Give Them
Asked about their vision for the future, Storonsky said they are creating a “financial super App” that will be highly personalized to your needs – driven by individual actions and circumstances. All “beautifully interconnected.”
The long time vision may be succinct but it is very hard to do – especially across many different countries and regulatory regimes. But it is possible said Storonsky.
Regarding Chime, they expect to serve 1os of millions of Americans with better services within the next few years.
“We are not building products for ourselves nor our former selves,” Britt explained.
Chime’s customers do not live in SF. They live across American and tend to be younger and value a mobile-first experience. AND they are not going to pay fees.
“They do not want to go into a bank branch.”
Chime is a daily product and the addressable market huge.
Asked about Big Tech and the potential for the likes of Google and Apple to disrupt Fintech, Storonsky was not at all concerned.
Storonsky believes that Big Tech will not like the confinement of financial regulations and the ongoing challenges of compliance.
Asked why traditional big banks will not be successful, Britt was somewhat diplomatic in his response saying big banks are not going away as a lot of the services they offer are “awesome.”
“They dod a good job of serving the top 20% of customers,” said Britt. But these same products are not designed for regular people. “You are just punishing people with fees.”
Old banks are struggling to wean themselves from the fee-based structure that drives billions to their balance sheets while Chime is changing the way the core pricing is designed.
“… it is hard for these really big companies, including these banks to be nimble,” said Britt.
For both Revolut and Chime culture is key. They both expect people who consistently strive for more. Revolut focuses on accountability and getting things done fast. Chime is more a carrot than a stick operation while setting a high bar, driven by data and leadership by example.
Chime and Revolut are two great examples of the future of banking – building products that people need at a reasonable price while being asset-light. Old finance, mired in the past, is finding it hard to create a product that will disrupt their traditional business – the epitome of an innovator’s dilemma. Some things never change.