The $11.6 Billion FinTech Tollbooth

What you're really buying with Chime

Payments are so hot right now. Every day there’s another headline about “the future of money movement” or how some company is about to “disrupt the way value changes hands.” It’s become the favorite cocktail-party conversation of fintech founders, crypto diehards, and banking execs who want to sound like visionaries without changing a line of code. And if you zoom out, the whole narrative starts to sound less like infrastructure strategy and more like urban planning, who gets to build the roads, who collects the tolls, and what happens when someone invents flying cars that don’t need roads at all.

That’s where we are today. Circle fresh off it’s scorching IPO and others are trying to build the skyways. Chime still operates a tollbooth. A beautifully designed tollbooth with great customer reviews and slick interface, but a tollbooth none the less.

Last week I wrote up Circle, the most grown-up company in the stablecoin universe not named Tether, who is riding the momentum of a system that moves money 24/7, digitally, globally, with no card rails and no cutoff windows. The believers say it’s not hype anymore, that the future is now. Stablecoins already account for trillions in volume, mostly crypto-to-crypto, mostly bots, mostly outside the mainstream, but the rails are real and the use cases are creeping closer to everyday payments. Shopify even jumped on the bandwagon a day ago. I remain skeptical they’ll take enough of “the system’s” deposits to truly leave a mark.

Elswhere and right on cue, the capital markets window stay wide open. Invest for longer than a cycle and you know that IPO windows go from droughts to downpours, and when the sun comes out, they come fast. Last week it was Circle. This week, it’s Chime. The company IPO’d at $27, popped to $43, and briefly touched an eye-watering $18 billion market cap, all for giving people a cleaner interface to swipe their debit card.

But Chime and Circle aren’t just different. They’re structurally inverted. One earns on stillness. One earns on motion. One is building a financial internet. The other is renting space on roads that might not matter in ten years.

And here’s the irony: if Circle works, if you really believe stablecoins work and that programmable dollars actually become the settlement layer of the internet, then Chime’s model doesn’t just struggle. It becomes obsolete. Two companies. Two IPOs. One week apart. One future, and for me the irony for me is beautiful.

The lingering question for you all as investors is, should you buy Chime (CHYM) or let the hype traders have their food fight over limited shares and hype driven euphoria?

Read on to find out.

There has been a lot written on Chime. And none of us need another one of those articles: who they are, puff pieces on their founders and VCs written by Patagonia vest wearing left coasters, pictures of their interface … you know what I mean.

What we all really need is to understand how Chime operates, the value they add, the risks they face, and if the valuation is lunacy or cheap.

And one more time. I have a high degree of respect for the entire team, just like I did with Circle, but that doesn’t mean I need to turn a blind eye to the risks of the investment. If you’re a Chime fan or exec you’re always welcome to disagree with me.

Chime Owns the Experience, Not the Payment Rails

There’s a quiet precision to how Chime rebuilt the consumer experience around money, not by challenging the system at its core, but by reworking the edges that users actually touch. It didn’t revolutionize the underlying mechanics of banking, but it made them feel different, cleaner, easier.

For those of you that know Rory Sutherland, he would be proud. Rory is a top tier marketing mind who wrote a book called Alchemy on how improving someone’s experience using your product can be more valuable than actually improving the product. Chime did this in spades, they improved the experience more than the actual product, a masterclass in marketing that is subjective but adds tremendous value to the human experience.

It stripped out the predatory fees, the delays that always arrived on payday, the interfaces that looked like they hadn’t been updated since the dial-up era, and in their place delivered something intuitive, fast, beauriful, and human. For millions of Americans who had spent years feeling like second-class citizens in the financial system, that was more than an app, it was a shift in posture, a signal that banking didn’t have to be punishing to be profitable. Chime’s focus is the “underserved” people that make less than $100,000 and their focus is a great banking experience.

And it worked, I mean just look at the app; it’s clean, crisp, and stunning against a world of banking that feels like a root canal and looks like a building from the 1920’s.

But while the surface changed, the deep underlying foundation remained tied to a narrower kind of economics, one that didn’t involve lending, didn’t involve float, and didn’t depend on margin or proprietary rails. Chime isn’t a bank. It didn’t collect interest on deposits or build spread into the system. Instead, it earned when customers moved, when debit cards were swiped, when dollars flowed through Visa and Mastercard, when Durbin-exempt partner banks clipped fees that Chime split or shared or leaned on to power its entire model. The infrastructure was borrowed. The economics were event-driven. It wasn’t built on value creation at rest, but on activity that kept the engine turning. They need you spending friends, use those cards.

And that’s the core fragility. Because the second that motion becomes unnecessary, if programmable money like stablecoins and Circle route around the tollbooths, if “free” real-time settlement becomes table stakes, if card-present spend becomes just one of many ways value moves, then the business doesn’t just become less efficient. It becomes misaligned with the direction the financial system is actually heading. Chime doesn’t earn when dollars park. It doesn’t benefit from liquidity. It doesn’t clip on stillness. It gets paid when movement produces friction, and if that friction disappears, the model doesn’t compress slowly.

That’s why it’s perfectly ironic that Chime is IPO’ing a few days after Circle. A drone company subjverting the main roads and a toll booth operator raising mega bucks back to back.

A Legit Growth Machine That Operates By Spending a Lot of Money (But Says It Is Driven by Referrals).

I’m skeptical yes, but also kudos to the Chime team for making it where they are. What they’ve done at scale is impressive even if I think the business model is not very durable.

According to the S-1, by the close of 2024, Chime had opened more than 38 million total accounts, facilitated over $135 billion in direct deposits, and processed a staggering $378 billion in total payment volume, all without ever holding a bank charter. That kind of scale, delivered through a front-end interface sitting atop regulated partner banks, is a remarkable feat in brand-led consumer finance, proof of just how hungry the market was for a banking experience that felt less extractive and more intuitive. But underneath that reach sits a cost structure few talk about and fewer understand.

Revenue reached $1.7 billion last year, up from $1 billion in 2022 for a 30% CAGR which again is top tier status, but the growth didn’t come from operating leverage or recurring margin. It came from throughput, from user acquisition, and from a marketing engine that has to stay revving to keep volume alive.

As of Q1, on $518 million of revenue sales and marketing is $132 million. This is a big number. I’m not even touching on the $109 million of transaction and risk losses which come from reimbursements to their partners for unauthorizd chages, ACH returns, disputes, etc. There’s $60 million in cost of revenue is paid to Visa and Mastercard as well as their Bank partners for using their rails.

Customer acquisition costs are estimated between $75 and $150 per user, depending on the channel, and while Chime references “referrals” more than a dozen times in the S-1, those referrals are incentivized, offered with cash bonuses, not fueled by product evangelism. My skeptical thinking on Chime is this. They tout referrals and the power of their network for growing clients, because that’s what Uber did and that’s what every “network effect” company ever has done. But in reality they’re paying a lot for these referrals. And so despite their words, their actions are that they have to pay for their members.

Should you really have to tout your referral network so much if you’re spending $130 million in sales & marketing?

Compare that to Nubank (different geography and client base), which achieved single-digit CACs in core markets like Brazil by embedding distribution directly into its product flow. Nubank doesn’t need to pay users to tell their friends because the product does that work natively. Chime, by contrast, grew through spend, heavy, externally fueled, strategically disciplined, but huge spend nonetheless. Using past years and some estimates they’ve spent close to $2 billion over teh past 4 years on marketing. And while that got it to scale quickly, it doesn’t lay the groundwork for sustainable acquisition economics once the easy dollars dried up.

Chime did what it needed to do to get growth and get to IPO. And as a result, users arrived, onboarded smoothly, set up direct deposit, activated cards, and started transacting, volume scaled, swipe activity surged, and interchange lit up like clockwork. But while the front-end kept expanding, the underlying architecture never matured. Chime remained a toll booth like wrapper on top of someone else’s infrastructure, and the business has not yet evolved beyond the original container. There’s still no lending engine, no underwriting system, no proprietary ledger, no credit product, no embedded investing or advisory layer, no vertically integrated mechanics that turn activity into deeper economics. Just a push to get you my dear friend the reader, to spend more money.

This superficiality is a big risk to the future. Maybe not immediately, and not visibly to the average user, but in the margin stack, in the regulatory exposure, and eventually, in the market’s willingness to pay a premium for what is still, fundamentally, a rented interchange fee engine riding Visa and Mastercard’s rails.

The Chime Toll Booth, Tough but Fair.

The core of Chime’s revenue engine isn’t a product. It’s a toll. The company doesn’t earn on credit spread, and it doesn’t monetize through subscriptions or advisory. It earns when users spend, specifically, when they swipe debit cards issued through Chime’s Durbin-exempt partner banks. And please for a minute allow me to explain a regulatory nuance that gives Chime it’s edge. The Durbin exemption, created by the original Durbin Amendment in 2010, allows small banks, those with less than $10 billion in assets, to collect a much higher interchange rate (credit & debit card fee), often as high as 1.5% per transaction, compared to the regulated cap of ~0.6% that applies to the largest institutions. JPMorgan can only charge you 60 basis points. Smaller banks that Chime partners with almost 3x that.

Chime accesses that higher take rate not by being a bank itself, but by partnering with The Bancorp Bank and Stride Bank, who serve as the legal account issuers while Chime handles the front-end experience, user onboarding, and day-to-day engagement. Both of those do everything in their power to stay below $10 billion in assets.

The whole play is smart. It’s entirely legal. But it’s structurally exposed. It’s regulatory arbitrage, partner with the banks that fly beneath the Durbin limit and charge fees to you the customer that are 3 times larger than they would be at a bigger bank.

If you use Chime I bet you didn’t know this. If you invest in Chime I bet you had no clue. But this is regulatory arbitrage at it’s finest.

Buried inside that S-1, under the section titled “Risks Related to Our Business and Industry,” Chime acknowledges what any operator in this space already knows: there is growing political pressure to close the Durbin loophole. Merchant lobbies are sharpening their arguments. Lawmakers on both sides of the aisle are looking to reclassify how interchange exemptions apply. And payment reform advocates are pushing to widen the definition of “regulated issuer” to include program managers, fintechs like Chime, who benefit from the exemption even though they themselves are not banks. If the rules change, and if that exemption is narrowed or reinterpreted to capture Chime’s debit volume under the regulated regime, the result would not be incremental. It would be immediate. Chime’s effective take rate would drop by more than 50%, and because there is no offsetting credit book, no lending margin, and no fee-based product suite to soften the blow, the compression would hit the P&L with full force.

There’s also been talk of raising the Durbin asset cap, from $10 billion to $30 billion, which would, in theory, give Chime’s partner banks more breathing room to scale before triggering the regulated rate. But this should increase competition from bigger banks that have better tech and would be both positive and negative for Chime. Positive in that their banks can grow more. But negative because the real risk isn’t about thresholds. It’s about control, and Chime doesn’t have it. It rents access from banks that rent volume from card networks that operate under laws written to protect competition, not perpetuate arbitrage. The second that framework shifts, even slightly, the entire interchange model collapses into a regulated margin that wasn’t built to support a high-CAC, no-lending neobank.

And remember, if people stop using Visa and Mastercard in lieu of stablecoins from Circle (or Paypal or Amazon) … this revenue goes poof.

Should We Have to Pay to Move Money?

There’s another shift happening just beneath the surface, subtle in motion, but foundational in consequence, and it has everything to do with the tolls that Chime relies on to monetize movement. For more than a decade, interchange fees on debit card transactions, those invisible slivers paid by merchants every time a customer swipes, have quietly powered the economics of neobanks. Chime’s entire model runs on the back of those fees, collected at Durbin-exempt rates through small-bank partnerships, and clipped off every point-of-sale tap and paycheck-funded purchase. But just as stock trading commissions collapsed in the face of Robinhood’s zero-fee model, interchange is showing signs of the same kind of compression, not because anyone wants it to disappear, but because the rails are evolving faster than the business models built on top of them.

In the graphic below, why can’t Fiona and Joe pay each other without the scrape? Why do the two banks (or bank and a Fintech company and Visa) get to make money off me trading dollars for goods?

So if, and when programmable dollars can move peer-to-peer at near-zero cost, when stablecoins settle instantly across chains, when FedNow lets you send a thousand dollars without hitting Visa or Mastercard at all, the idea of paying 1.5% for card-present access starts to look outdated. And when that access is no longer scarce, when every fintech offers instant transfer, 24/7 liquidity, and a wallet that works on a Sunday, then the features Chime built its identity around stop being differentiators. They become table stakes. The selling point becomes the standard. And the margin that once flowed reliably from volume starts thinning in silence.

That isn’t failure. It’s just compression. And it doesn’t break the model all at once. It just rewrites the math underneath it, one frictionless transaction at a time.

What Has to Happen to Win? Chime’s Valuation and Revenue Growth.

As of last week Chime entered the public market with a $11.6 billion valuation and 2024 revenue of $1.7 billion, according to its S-1. That puts it at a 6.8x forward revenue multiple, which in this market isn’t reckless, but it’s not cheap either, especially for a consumer-facing neobank with no lending stack, no spread, and a revenue model tied almost entirely to Durbin-exempt debit swipe.

And at 6.8x, the market isn’t just pricing in continued growth, it’s assuming margin stability, regulatory protection, and uninterrupted consumer momentum, all flowing through a fee structure that Chime doesn’t own and can’t control. If everything goes right, if user growth compounds, swipe volume scales, and take rate holds, that multiple compresses naturally as revenue expands. But if any single gear slips, the math works in reverse.

So what has to happen?

To justify $11.6 billion at a more digestible 4x revenue multiple, Chime would need to hit $2.9 to $3 billion in annual revenue, nearly double its current run rate, without lending, without credit products, and without layering in any high-margin services. That means more users, higher debit intensity, and no meaningful degradation in interchange rates or CAC efficiency. And it has to do all of that while the rails underneath it are shifting, while programmable dollars, FedNow, and stablecoins start offering faster, cheaper, more flexible alternatives to swipe-based money movement.

They also tout an ARPAM (average annual revenue per active member) of $300 plus. Which also kind of doxes the fact that only about 5 to 7 million users of theirs are “active”, but is towards the top of the industry of fintechs. I think SoFi is around $300 to $400 whereas a Cash App is in the $200 range. I present this to say they could also get people to spend more to support the bull case.

And so zooming back out, this isn’t horribly priced, but still a lot has to go right for this to work. They have to keep doubling revenue while managing marketing spend which is easier as a private company, but harder as a public one.

An aside, Chime proudly cites its Net Promoter Score above 70, and that matters because loyalty is a moat in the short run. But NPS doesn’t defend against economics and it doesn’t preserve take rate. It doesn’t stop users from quietly drifting toward wallets that settle faster, cost less, and start offering yield. And lest we forget, First Republic Bank in Califorinia also touted a high NPS (I believe in the 80s) and their customers all fled en masse the second it was rumored that the bank wasn’t stable. So loyalty is there, until it isn’t.

Chime’s business works, and the revenue is real. But at 6.8x, investors aren’t just buying a brand. They’re underwriting the continuity of a monetization model that’s under review. And if that model holds, Chime can grow into the number but so much has to go right here that it makes me skeptical. I won’t be buying this one.

The VC to Retail Capital Cycle. A Cautionary Tale.

Chime followed the script. It raised venture capital, launched a sleek and frictionless interface, leaned into the aesthetic of trust, and wrapped it all in a brand that promised freedom from fees, faster access to paychecks, and the sense that your bank was finally on your side. Growth came next, fueled by paid acquisition and a referral program that looked viral but spent like performance marketing. The pitch was familiar but clean: build equity through user delight, ride the narrative through to an IPO, and let public markets inherit the story while the core economics caught up to the valuation.

This isn’t fraud. It isn’t misdirection. It’s how the game is played. But every game has rules. And every playbook assumes the rules don’t change.

Chime was built for an environment where money moved in batches, where ACH was the default and not the drag, and where the only way to access value in motion was to ride Visa or Mastercard and clip a fee along the way. That world still exists, but it’s being chipped away, not loudly, not all at once, but line by line, rail by rail, transaction by transaction. And when the infrastructure shifts, when programmable dollars flow through wallets without needing cards, when FedNow clears in seconds, when tokenized deposits start replacing balances instead of complementing them, the model built on card-present monetization doesn’t break outright. But it does need a new reason to exist.

Closing Thoughts

Chime deserves credit. It didn’t just make banking look better, it made it feel better. It understood, like Rory Sutherland has said for years, that perception is a product. It turned the pain of overdrafts into relief, the delay of direct deposit into access, the clutter of legacy UX into calm. And that mattered. Because in a system where most people feel nickel-and-dimed or ignored, Chime gave them something cleaner, faster, and more fair. That’s not just good marketing, it’s progress and it should be rewarded.

But good design doesn’t fix structural exposure. Because behind the clean UX and low-friction onboarding is still a tollbooth. A very slick, very friendly tollbooth, but a tollbooth nonetheless. Chime makes money when money moves through rails it doesn’t control, charging fees it doesn’t set, governed by rules it didn’t write. That’s fine when volume is growing, when CAC is subsidized, and when the market is forgiving. But what happens when the rails evolve? When programmable dollars move freely? When the margin disappears and the model still expects to be paid?

That’s the irony here. Circle IPO’d days before Chime filed. And if Circle wins, if stablecoins and tokenized flows and instant settlement become the rails of record, then Chime’s model doesn’t just come under pressure. It becomes redundant.

And maybe that’s the point. VC capital funded the CAC. The narrative funded the valuation. And now, with no margin and no moat, the baton is being passed to the public markets, to retail, to institutions, to whoever believes the growth can hold while the infrastructure reshapes underneath it. This isn’t malicious. It’s the game. But every tollbooth eventually gets replaced, by faster roads, cheaper networks, or better paths.

What Chime built was real. What it delivered was better. But if the money stops moving through the lanes they rent, the model stops working. And not because users are angry. Just because they’re gone.

Until next time,

Victaurs