Chime filed documents for its initial public offering (IPO) in March. Alongside these filings, Chime announced a new product designed to help tighten its grip on its target customers, the Gen Zs and millennials underserved by traditional financial institutions. When a cutting-edge fintech neobank announces a new product, credit unions should sit up and pay attention.
So, what did this multibillion-dollar fintech, with reportedly 22 million customers, launch as its new offering to attract and retain customers?
Or, in Chime’s terminology, Instant Loans. Chime’s Instant Loans are loans of up to $500, paid back in equal monthly installments. They’re offered to customers regardless of their credit score, driven by transaction-based underwriting.
Chime joins other leading fintech neobanks like Dave and Varo Bank, meeting the needs of younger, underserved adults with microloans that solve short-term liquidity problems. As much as credit unions talk about competing with for-profit banks, nimble fintechs are just as formidable in competing for banking relationships with younger consumers. And, with more than 22 million customers, of which 75% are Gen Z and millennials, they have the market share to prove the neobank is winning and it’s here to stay.
What does this mean for credit unions?
Three things.
- The younger members you’re trying to attract need solutions to solve short-term liquidity issues. Of the microloan borrowers Salus sees, 88% are Gen Z and millennials, averaging around 29 years old.
- Gen Z and millennials expect these products because they see them everywhere in the market now. If your credit union isn’t offering these small-dollar loan products, be prepared to lose existing younger members to the competition. For over 70% of the mid-to-large credit unions in the U.S., your members are already applying for microloans elsewhere because you’re not offering them.
- If you’re unwilling to look beyond members’ credit scores to approve microloans, they will never reach the demographic that wants them. Nearly all (95%) microloan borrowers who paid back their microloans with Salus on time didn’t have prime credit scores when they applied.
The needs of consumers continue to evolve rapidly, and the providers capable of meeting those changing needs earn the right to serve that consumer. Chime’s announcement confirms what the market has been saying for several years: For Gen Zs and millennials, the era of microloans as a necessary product to help attract and retain young members is here. And as a credit union, you can choose to meet them where they are or choose to be left behind.
