Chime’s Approach to Payday Lending Is Costly—for Chime
Fintech wants to go public, but losses on loans raise questions about growth.
Last summer, banking app Chime introduced a lending product that let customers borrow small amounts to get them through to their next paycheck. Typical payday lenders charge exorbitant fees, but Chime was making the loans largely for free.
The fintech’s big bet is that fronting cash to customers—and only charging people that want extra-fast advances—will boost customer loyalty while also providing some fresh revenue. But Chime is now learning the cost of the loans, just as it tries to convince Wall Street it can generate healthy growth and profits from its business of providing banking services for everyday Americans.