Chime's new office in Vancouver and legal incorporation in Canada signals a future rollout of services there
- Chime's new office in Vancouver and legal incorporation in Canada portends a future rollout of services there.
- But it will face stiff competition in a heavily banked market dominated by local incumbents.
- Insider Intelligence publishes hundreds of research reports, charts, and forecasts on the Banking industry with the Banking Briefing. You can learn more about subscribing here.
The neobank has opened its first non-US office in Vancouver and legally incorporated in Canada, BetaKit reports. The office currently houses only a 20-person engineering team, but Ryan King, Chime co-founder and chief technology officer, told BetaKit that the neobank intends to bring 100 people there by the end of 2021, including in other departments like product management. While Chime remains available only in the US, King said that an international expansion isn't inconceivable, and that Canada would be a natural choice.
The neobank has been on a roll in the US, locking down a funding round in September that more than doubled its valuation. Chime raised a whopping $485 million Series F in September that lifted its valuation from $5.8 billion in December 2019 to $14.5 billion now—making it the most valuable US fintech catering to retail customers. The neobank also inked an agreement with Cardtronics in October to bring greater access to surcharge-free ATMs to its customers.
If Chime does enter Canada, it will face a hostile environment—though it could capitalize on growing dissatisfaction with incumbents to snag a foothold. Canada will boast a projected 4.2 million digital-only bank account holders by the end of 2020—but the vast majority of these accounts belong to just two incumbent-owned institutions: Scotiabank's Tangerine, and CIBC's Simplii.
The parents are two of Canada's big five banks, alongside TD Bank, BMO, and RBC, and the group's market dominance means that neobanks looking to break into Canada have little choice but to partner with them, creating a less diverse and competitive digital-only bank space than in the US and UK. Moreover, Canada's unbanked population is tiny—99% of adults have a bank account—presenting an obstacle to grabbing new customers.
But neobanks like Chime still have an opening: According to J.D. Power's 2019 Canada Retail Banking Satisfaction Study, sentiment toward large incumbent banks is starting to sour among younger Canadian consumers, largely due to growing dissatisfaction with nonautomated channels, including in-branch and assisted online services. With incumbents' physical advantage diminished, Chime could steal away disillusioned customers by leveraging its digital capabilities to target young demographics.
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