Chime the no-fee mobile bank valued at $ 500 million on the last round used part of its funds on its first acquisition. The deal is about Pinch a start-up that was meant to help millennials and other young adults get better credit. He was best known for a service called PinchRent, which allowed users to increase their credit score over time by timely reporting rent payments to credit bureaus.
Studies have shown that millennials can sometimes have trouble improving their credit or are not aware of what their credit scores mean . And, like any young demographic group, they may also be victims of shorter credit histories, which also impacts those scores.
Pinch's goal was to provide his users with a different way to increase their scores, rather than just using credit cards or paying off their loan on time.
To do this, she consolidated the rent information and forwarded it to credit bureaus. (Offices may take rental information, but they do not work with individual owners – this is where Pinch came in.)
Since its creation in 2016, more than 80% of people in its service have increased their score from 10 to 100 points.
The start-up was preparing to announce a $ 1.8 million financing from Homebrew and Collaborative before its acquisition.
Pinch was only in a beta test phase before joining Chime, and was also planning to launch a full public launch. Instead, she terminated her service in warning users by e-mail that her last business day would be June 27, 2018.
When the service closed, she was in talks with Chime. But the agreement itself was only concluded on Tuesday, we understand.
Chime refused to share the terms of the deal, but noted that it was a stock-only transaction and investors were happy.
The acquisition includes the core team of Pinch (5 to 10 people, depending on the course of the offers) and the founders Maia Bittner and Michael Ducker ] who will now help the mobile bank launch credit and loan products over the next six months.
Previously, Bittner co-founded the Rocksbox subscription startup and worked as a Sequoia Capital recruiter. Ducker, meanwhile, praised Microsoft and Twitter before launching Pinch.
Chime, whose user base is 90% of generation Y, may or may not revive Pinch's paid service, but will soon be ready.
"I am thinking in particular after the 2008 crisis, there was only general mistrust of the big banks. But also, people have seen how the amount of credit [they have] can create challenges in their lives, "says Chris Britt, CEO of Chime, about the difficulties faced by its users to boost their credit.
"And younger consumers are having so much trouble repaying their student loans that the last thing they want is to get more debt from a credit card," he explains. explaining why young people are turning to debit cards.
He says Chime's goal now is to help meet this group's credit needs with a millennium-focused product package.
"In fact, the debit card and the checking account do nothing to improve your credit score. As we think about the future series of products we want to deploy, we are very committed to helping our members in this part of their lives, "he adds.
Chime is now one of the millennial-centered mobile banks on the market, which eliminates traditional bank charges as well as traditional investing. Others like Simple and Stash are also available, but Chime raised more than $ 110 million making it the most important in terms of funding.
The company also shared new numbers – it claims to have more than 1.7 million bank accounts on its platform – and opens more than 150,000 accounts per month – according to Wells Fargo. It expects to exceed 2 million bank accounts and total transaction volume to $ 10 billion by the end of the year.
Later, Chime could venture to invest, but not before his user base is ready.
"So we are thinking about how to help our members throughout their financial journey. We start with the checking account, make sure you pay all your bills, and then we make sure you have a savings account balance, because you should have a savings account before starting daily trading, "says Britt.
"It's irresponsible to encourage day-to-day operations if you do not have the financial means … I think investment accounts and retirement accounts are a priority," he notes. -he.