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Protocol | Fintech

Chime's not a bank. It's expanding overdraft protection anyway.

The company's CEO said it's been "clear" that it's a technology company. But it's doubling down on a popular banking feature.

​Chime CEO Chris Britt says his company's not a bank.

Chime CEO Chris Britt says his company's not a bank.

Photo: Kimberly White/Getty Images for TechCrunch

Chime, which was valued at $14.5 billion last September, is expanding its fee-free overdraft product, SpotMe, to help customers who are living paycheck to paycheck.

The challenger bank has grown quickly in recent years by focusing on consumers who have been overlooked by traditional banks targeting higher-income consumers, said CEO Chris Britt.

Chime is now increasing the amount that it will allow Chime users to overdraft on their accounts from $100 to $200. The feature was used by 2.5 million of its members over the past year.

The increase is a meaningful difference for Chime users and is one of its most asked-for product improvements from customers, Britt said. "It may not sound like much, but a lot of Americans live paycheck to paycheck," he said. "Having a little short-term liquidity is helpful."

The feature is used to buy things like gas or groceries, he said. Some gas stations place $100 holds on purchases, so some customers could require an overdraft even if they are not technically below $0 on their account.

The feature is only available to Chime users who are using direct deposit with Chime. Chime solicits tips when customers repay the negative balance.

The overdraft product and its lack of fees differentiates Chime from traditional banks, which charge overdraft fees and fees on savings accounts, Britt said. Many banks and credit unions offer programs that move funds from linked accounts to cover overdrafts without charge, though some charge a fee. Citibank offers a Checking Plus line of credit that covers overdrafts automatically, but imposes a fee on basic accountholders and charges interest on the balance.

Chime recently stopped using the term "bank" after a settlement with California regulators, since Chime is not regulated as a bank.

"If you watch my interviews over the years, we try to make very clear ... Chime is not a bank," Britt said. 'We have bank partners that hold the money, so there shouldn't be any confusion around that. We're making sure consumers understand the fact that we're not a bank, we're a fintech company."

Chime's bank partners, Bancorp Bank and Stride Bank, hold deposits for its customers. Disclosures to that effect appear in small type on Chime's homepage under the large words "Banking that has your back."

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