Chime (CHYM.US) acquired Stride Bank for $590 million to "buy a license," transitioning from a financial technology "challenger" to a "chartered bank."

Chime Financial Inc. (CHYM.US) has reached an agreement to acquire its long-time partner Stride Bank for $590 million in cash, marking a key step in the fintech company's operational integration. According to a statement released on Tuesday, Stride will be renamed Chime Bank and will become a wholly-owned subsidiary of Chime. For more than seven years, Stride has been one of Chimes banking partners, although Chime had previously also worked with Bancorp Bank. Once the transaction is complete, Chime stated that it will consolidate all banking operations under Stride and plans to keep the bank's asset size below $10 billion "for the foreseeable future." Chime has provided customers with checking accounts and other financial products over the years, and by becoming a bank itself, it will be able to conduct such business at a lower cost. Reducing reliance on external partners not only saves Chime some expenses but also lowers funding costs through capturing its own deposits while granting the company greater control over its service processes. Chime expects this deal to yield around $100 million in net synergies. As of the time of publication, Chimes stock price surged 9.3% after hours, while Bancorps stock price plummeted 11.5%. Chime CEO Chris Britt stated in an interview: Although we will have a bank-licensed subsidiary, we do not intend to transform into a traditional bank model that heavily relies on fee-driven revenue. We see this as a critical milestone in our evolution from challenger to industry leader, which is a highly strategic step. Encouraged by this move, Chime has raised its earnings guidance. The revenue forecast for the third quarter has been increased from $680 million to $690 million to $705 million; the full-year revenue forecast has also been raised from approximately $2.73 billion to $2.75 billion to between $2.76 billion and $2.77 billion. Under the more relaxed regulatory environment of the Trump administration, many of Chime's competitors have sought to obtain Bank of America Corp licenses. Just last week, UK-based Revolut Ltd. received conditional approval for a Bank of America Corp license, following earlier steps taken by institutions like Nu Holdings Ltd. Additionally, a number of digital asset companies have also submitted applications for banking licenses. Britt stated that compared to applying for a new bank license, directly acquiring an existing bank helps accelerate entry into the banking sector and enables Chime to retain many of the business processes it has built with Stride. Fintech peers SoFi Technologies Inc. and Happen Inc. (formerly LendingClub) have also achieved similar transformations through bank acquisitions. Britt noted: Through the acquisition, we can achieve our strategic vision more quickly, without going through the cumbersome approval process and the slow ramp-up period usually associated with new licenses. He also mentioned that applying for a new license requires a significant amount of capital, and we prefer to deploy funds into a mature operating bank with a trustworthy team, high net asset yield, and that is already profitable. Chimes revenue primarily comes from fees generated by customer debit card transactions. Britt stated that this model will not change, as the company plans to maintain its asset size below the critical $10 billion thresholdonce that level is exceeded, the bank would face regulatory constraints on debit card fee caps. The statement indicated that the transaction is expected to be completed in the first half of 2027, pending regulatory approval.