Chime Financial Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 7, 2025

Key Takeaways

  • Positive Sentiment: Chime reported 37% year-over-year revenue growth in Q2 and expanded its adjusted EBITDA margin to 3%, up 18 percentage points from two years ago.
  • Positive Sentiment: Active members grew 23% to 8.7 million, with Chime now the top direct-deposit destination for US adults earning under $100K and less than 5% market penetration.
  • Positive Sentiment: Investment in AI and new tech cut cost-to-serve by nearly 30% since 2022, doubled support satisfaction via the Gen AI Voice Bot, and aims to automate nearly all member interactions.
  • Positive Sentiment: The MyPay on-demand paycheck advance reached over $300 million ARR, with transaction margins tripling in Q2 as loss rates improved toward a 1% target.
  • Positive Sentiment: Chime raised its outlook, guiding Q3 revenue of $525–535 million (24–27% growth) and full-year revenue of $2.135–2.155 billion (28–29% growth), with accelerating adjusted EBITDA margins.
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Earnings Conference Call
Chime Financial Q2 2025
00:00 / 00:00

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Operator

Good afternoon. Welcome to Chime's Second Quarter Fiscal twenty twenty five Earnings Call. Following the speakers' remarks, we will open the lines for your questions. As a reminder, this conference call is being recorded and a replay of the call will be available on our Investor Relations website for a reasonable period of time after the call.

Operator

I'd like to turn the call over to David Pierce, Vice President of Investor Relations and Capital Markets. Thank you. You may begin.

David Pearce
David Pearce
VP - Finance Strategy, Capital Markets & IR at Chime Financial

Good afternoon, everyone, and thank you for joining us for Chime's second quarter twenty twenty five earnings conference call. Joining me today are Chris Britt, our Co Founder and CEO and Matt Newcomb, our CFO. Mark Trouten, our COO, will participate in the Q and A. As a reminder, we will disclose non GAAP financial measures on this call. Definitions and reconciliations between our GAAP and non GAAP results can be found in our earnings release and our earnings presentation posted on our IR website at investors.chime.com.

David Pearce
David Pearce
VP - Finance Strategy, Capital Markets & IR at Chime Financial

We will also make forward looking statements on this call, including statements about our business, future outlook, and goals. Such statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those described. Many of those risks and uncertainties are described in our SEC filings, including our final prospectus filed on 06/12/2025. Forward looking statements represent our beliefs and assumptions only as of the date such statements are made. We disclaim any obligation to update any forward looking statements, except as required by law. With that, I'll hand it over to Chris.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

Thanks, David, and thank you all for joining our first earnings call as a public company. As you'll hear today, we're off to a very strong start. I'd like to begin by expressing my gratitude to our members for placing their trust in us and to our employees for their hard work and dedication that brought us to this moment. Over the past few decades, major industries like transportation, hospitality, and retail that were once dominated by legacy players have been upended by customer obsessed technology companies. New entrants offered consumers better experiences at lower prices, earning the trust of millions, and in the process, established a new generation of beloved brands.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

Their digital first business models allowed them to quickly and efficiently reach massive scale. This same transition is happening now in consumer banking, and I'm proud that has emerged as a clear leader with a mission to unlock financial progress for our members. We created Chime to help everyday people, starting with those earning up to $100,000 a year who've been overlooked by traditional banks. Not the unbanked, but the unhappily banked. Today, we're already the primary financial partner for millions, but our ambition is much bolder: to become the largest provider of primary account relationships in The US.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

And we're doing that as a technology company with a scalable and low cost operating model with a combination of recurring payments revenue, high gross margin, and very low credit risk. We've earned the trust of our members and will support them in all areas of their financial lives across spending, saving, building credit, borrowing, investing, and more. With our modern tech stack and radical cost to serve advantage, we can deliver innovative, personalized experiences to address each of these needs for free or low cost. And by utilizing AI built on our uniquely rich dataset, we're becoming an even more indispensable partner, deeply attuned to our members' individual needs, anticipating what's next, and guiding their financial progress every step of the way. And our vision isn't just aspirational, it's grounded in an attractive business model that's driving rapid growth at scale with strong operating leverage.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

In Q2, we achieved 37% year over year revenue growth, an acceleration relative to our seasonally strong Q1, when tax refund activity drives higher levels of reengaged active members, purchase volume and revenue. Our adjusted EBITDA margin rose to 3% in Q2, an 18 percentage point increase over the last two years. In Q2, we grew active members 23% year over year to 8,700,000, with the majority relying on Chime as their primary account relationship. Among US adults earning up to $100,000 annually, Chime is the top destination for those switching their direct deposit, thanks to our scalable, referral driven acquisition model. Despite our scale, with less than 5% penetration, we're barely scratching the surface of the opportunity to serve nearly 200,000,000 everyday Americans earning up to $100,000 Banking for this large segment of everyday people is an area ripe for disruption.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

In a recent shareholder letter, one of our nation's top bank CEOs reported that for low balance accounts, which make up the majority of their accounts, their cost to serve them are far greater than the revenue they earn. The reasons? First, high cost structures due to a combination of an in person approach to service delivery, physical branches, and legacy tech. And second, their net interest margin, or NIM driven business model, which doesn't work for everyday Americans with low average balances and who often don't fit their credit box. Without NIM to cover their high fixed cost structures, incumbents charge consumers over $18,000,000,000 in estimated fees in 2023, 95% of which were paid by everyday American households.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

These are the people who are unhappy with their bank relationships and are coming to Chime. We pioneered a business model that succeeds when we earn our members' trust by designing products that are helpful, easy, and free. If they can't be free, we aim to be the lowest cost provider. This approach leads to a top of wallet primary account relationship, giving us a level of engagement and payments driven monetization that we believe is among the highest in consumer fintech. Chime is not a bank.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

Our member deposits reside in regulated FDIC insured accounts at our partner banks. We are an asset light technology company obsessed with addressing our members' most critical financial needs. Our early progress has been fueled by four distinct competitive advantages that we believe will continue to expand as we grow. These are: our low cost structure, our track record of product innovation, our primary account relationships, and our beloved brand. I'll now spend a few minutes walking through the progress we've made in each of these four areas in Q2.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

Our first competitive strength is our significant cost advantage, which allows us to serve customers at one third the cost of a large bank and one fifth the cost of a regional bank. This is fueled by our digital first bank partnership model and vertically integrated tech stack. The recent introduction of Chime Core, our proprietary transaction processing core and ledger, has enhanced our cost advantage and accelerated our product development velocity. In Q2, we successfully transitioned all new debit and savings accounts onto our new system. Our tech stack was also designed to centralize our data, which facilitates the deployment of AI to improve member experiences, while also significantly reducing our cost to serve.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

In May, we launched our Gen AI Voice Bot to all members, which more than doubled our satisfaction scores compared to our legacy voice system. AI powered tools now fully automate the majority of our support interactions and do the work of thousands of human agents. As a reminder, since 2022, we've reduced our cost to serve by nearly 30%. And over time, we think AI can power nearly all of our support interactions. AI is improving the way banking services are delivered, and we believe we're at the forefront.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

Our second competitive advantage is our track record of developing some of the most impactful product innovations in consumer banking and payments for everyday people. Last year, we launched MyPay, another hit product enabling members to access their earned wages on demand. MyPay is now an over $300,000,000 annual revenue run rate product, and another key driver of new member growth. In terms of risk, we made faster progress than planned on improving MyPay loss rates in Q2, which led to transaction margins for this product tripling in the quarter, and we expect further progress in the quarters ahead. Going forward, we think there's much more to do with MyPay, including our enterprise version offered through Chime Workplace, our employee financial wellness solution for employers.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

We expect to announce some of our early enterprise partnerships in the weeks and months ahead. Because of our strong performance across the business, including MyPay, we've raised our expectations for revenue growth and adjusted EBITDA for rest of 2025 relative to our previous internal expectations, which I'll have Matt walk through later. In Q2, we also started scaling Instant Loans, our installment loan product, which allows preapproved members to borrow up to $1,000 at affordable rates repaid over a three and six month period. Early results are encouraging, and we observed higher engagement and retention among members who take an Instant Loan, reinforcing our long term core spending relationship. Loss rates have been in line with our internal expectations as we continue our measured rollout.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

The final Q2 product update was our continued rollout of Chime plus our free premium membership tier. Chime plus showcases the products our members unlock with direct deposit, like SpotMe and MyPay, combined with enhanced benefits, including exclusive cashback deals, a higher interest rate of 3.75% on savings, and dedicated member support. Early results here are promising. We're already seeing Chime plus lead to higher direct deposit conversion and member retention rates. Chime plus is just the beginning of a broader effort to show our members that as they engage more, they get more with Chime.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

Our third competitive differentiator is our success in earning primary account relationships with the majority of our active members. Our approach has resulted in what we believe are among the highest levels of engagement, long term retention, and customer lifetime values in consumer FinTech. In Q2, our average active member did 55 transactions per month with us and engaged with our app an average of five times per day, positioning Chime as the center of their financial lives. Our real time view into the state of the everyday

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

American consumer consumer is showing healthy member spending and stable account balances. Even in an uncertain macro environment, our model focused on non discretionary spend and short duration liquidity products, as well as our privileged repayment position, is incredibly resilient. We grew our active members 23% year over year in Q2, while also reducing our member acquisition costs. We continue to see that over 50% of new members came to Chime from organic and member driven channels, including referrals. And our members don't just like Chime, they love Chime.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

They're passionate about us and they want to tell their friends about us. Our final competitive advantage is the market leading and trusted brand we've built in banking and payments. We're now a clear leader with unaided brand awareness of 40%, rivaling the two largest traditional banks in The US and the go to brand for the most critical needs of everyday Americans. Our brand building initiatives connect with culture. And in April, we celebrated Financial Progress Month, featuring partnerships with Deion Sanders, aka Coach Chime, and WrestleMania.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

In June, we announced our newest brand ambassador, Cooper Flagg, the NBA's number one draft pick with content that went viral on TikTok. We believe our combination of competitive advantages is only growing stronger as we demonstrated in Q2. And with that, I'll hand it over to our CFO, Matt, to discuss our financial results and outlook.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

Thanks, Chris. Good afternoon, everyone. Thank you all for joining us today. I'm excited to discuss our second quarter results and outlook. As Chris noted, we had a great second quarter with revenue of $528,000,000 up 37% year over year and continued adjusted EBITDA margin expansion.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

Given the strong performance across the business, we are raising our expectations for both revenue and adjusted EBITDA for the second half of the year relative to our previous internal expectations. Our Q2 financial performance was strong across the board. Payments revenue was $366,000,000 up 19% year over year, slightly ahead of purchase volume growth of 18%. Platform revenue totaled $162,000,000 up 113% year over year as we continued to see very strong MyPay performance. Gross profit was $461,000,000 yielding an 87% gross margin.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

And transaction profit, which is gross profit less transaction and risk loss, was $363,000,000 yielding a 69% transaction margin, driven in part by our faster than planned progress on MyPay loss rates. Finally, we continued driving operating leverage with $16,000,000 of adjusted EBITDA in Q2, a 3% margin, representing an 18 percentage point improvement over the last two years. Given this is our first earnings call, I'd like to take a step back and help connect our mission, strategy, and member aligned business model to our financials. We believe there are four core elements that are critical to understanding our financial model. First, we have payments based revenue model driven by recurring, largely non discretionary member spend.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

Second, we have multiple levers enabling us to drive rapid growth at scale across active members, average revenue per active member or RPAM and transaction margin. Third, our success earning primary account relationships drive strong unit economics with an estimated LTV to CAC of roughly 8x. Finally, our high transaction margin and a largely fixed OpEx base drive strong operating leverage and incremental margins. Let me jump into each of these themes. We have an asset light payments based business.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

69% of our revenue in Q2 was payments revenue, earned from interchange based fees on the purchase volume generated by Chime members using their Chime branded debit and secured credit cards. We believe the combination of scale and growth we've achieved on our purchase volume is unmatched in the industry. We are now one of the largest and fastest growing card portfolios in The US. In Q2, purchase volume totaled $32,000,000,000 up 18% year over year, coming off our seasonally strong Q1 when members received their tax refunds. The important thing to understand is, because our members use Chime as a primary account, this purchase volume is highly resilient and habitual, concentrated in essential, everyday, non discretionary items like food, gas, and utilities.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

This drives durable, long lasting cohorts in our business. It also gives us what we think is a very unique business model in our category. Compared to many consumer fintechs that primarily generate revenue from lending, consumer charges, or trading fees, our model generates high quality, recurring, and in our case, high margin payments revenue. Our model is very low credit risk. Mid teens percent of revenue was from credit and liquidity products as of Q2.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

And where we do extend credit, it's in a low risk way. Small dollar and highly diffuse among our member base, short duration with average repayment periods of less than a week on SpotMe and less than two weeks on MyPay, and underwritten by direct deposits, which gives us both a data and first in line repayments advantage. We think our model is analogous to SMB payments and usage based SaaS businesses, which monetize a core payments relationship and then deepen this engagement by cross selling value added services. The second theme is our multi dimension growth opportunity across active members, RPM and transaction margin. In Q2, we grew active members to 8,700,000, up 23% year over year, while simultaneously bringing down tax by over 10% year over year.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

One quick note, we see seasonality in our active members as well. Tax refund activity in Q1 results in a larger number of members reengaging with us on an active basis, resulting in seasonally high quarter over quarter net adds in Q1 and lower net adds in Q2. 23% year over year active member growth in Q2 was in line with growth in Q1 and an acceleration from 2024. Great progress, yet still early days in our journey to serve the nearly 200,000,000 everyday people making up to $100,000 annually in The US. Second is our RPM profile, which we believe is among the highest in consumer FinTech, despite very little of our revenue coming from mandatory fees.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

Our high RPM is driven by our deep engagement and a top of wallet card position. As we've expanded our platform, we've grown RPM significantly. In Q2, we grew RPM by 12% year over year to $245 fueled by the continued breakout success of MyPay. We think there is still a massive opportunity ahead, certainly as we continue to add new products to our platform, but even as we continue to drive adoption across our existing product base. In Q2, our most engaged active members, those using six or more of our products each month, generated over twice as much RPM as our average active member.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

Finally, transaction margin. Our gross profit margin less transaction and risk loss, including losses related to our liquidity products such as MyPay and SpotMe. In Q2, our gross margin was 87% and our transaction margin was 69%. Over the last several years, driven by our investments in technology and increasing scale, we've grown our transaction margin substantially from 66% in 'twenty two to 74% in 'twenty four. Starting in Q3 'twenty four, we brought our transaction margin down with the initial launch of MyPay, a positive but lower margin product compared to the rest of our business.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

A great example of the power of primary account relationships, we've already scaled MyPay, which we believe is the lowest cost earned wage access product in the market, to an over $300,000,000 annual revenue run rate product. Now, as is typical for new credit products and similar to what we saw when we rolled out SpotMe several years ago, as MyPay begins to mature, as cohort season, and as our underwriting improves, we're seeing MyPay economics improve substantially, and that's happening even faster than we planned. While our regular quarterly reporting will focus on overall levels of transaction risk loss, we wanted to highlight a few additional details of our MyPay economics today, given how rapidly the product is maturing. In Q1, MyPay loss rates were just north of 160 basis points of advanced volume. In Q2, we drove loss rates of approximately 140 basis points.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

Great progress toward our steady state loss rate target of approximately 1% for our existing MyPay product. This progress, combined with continued strong usage rates, is what enabled us to triple MyPay transaction margin quarter over quarter in Q2. We expect continued progress over the coming quarters, which is driving accelerated adjusted EBITDA margin growth in our guidance, which I'll discuss shortly. The third theme is our strong unit economics. The combination of our highly engaged primary accounts, our ability to effectively cross sell and increase RPM, and our strong long term retention rates and transaction margin drive long lasting cohorts of transaction profit.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

We have cohorts now nearing a decade old and still going strong. Our unit economics illustrate why we believe primary accounts are the most valuable relationships in financial services, driving differentiated lifetime values relative to single point solutions with more cursory levels of engagement. These differentiated LTVs drive strong and sustained returns on our investments in new member acquisition, enabling us to generate an estimated LTV to CAC of approximately 8x in our business today. The final theme is about how our high transaction margin and a largely fixed OpEx base enable us to drive strong operating leverage and incremental margins. In 2024, our incremental adjusted EBITDA margin was 46%.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

In contrast to incumbent banks, platform allows us to efficiently scale our services over a growing active member base without needing to make massive investments in infrastructure or people. In addition, our OpEx base is heavily concentrated in discretionary investments and growth. These factors make our OpEx base very scalable and have allowed us to drive strong operating leverage across every OpEx category. In Q2, non GAAP OpEx represented 66% of revenue, an 11 percentage point improvement year over year and a 19 percentage point improvement over the last two years. That operating leverage has translated to meaningful adjusted EBITDA margin expansion, which we expect to accelerate in H2.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

Turning briefly to our balance sheet, we remain well capitalized. Net of transaction expenses and tax withholding payments made on vested RSUs, we raised $448,000,000 in proceeds from our IPO. As of the end of Q2, we had $1,100,000,000 in unrestricted cash and marketable securities on our balance sheet. We also had $444,000,000 available to draw under our revolving credit facility. Finally, turning to our third quarter and full year outlook, we're pleased to provide guidance that exceeds our previous internal expectations, driven by the broad business strength we're seeing.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

In the third quarter, we expect revenue between $525,000,000 and $535,000,000 resulting in year over year revenue growth between 2427%. We expect adjusted EBITDA between 12,000,000 and $17,000,000 and an adjusted EBITDA margin between 23%. For fiscal year twenty twenty five, we expect revenue between 2,135,000,000.000 and $2,155,000,000 resulting in year over year revenue growth between 2829%, and adjusted EBITDA between 84,000,000 and $94,000,000 and adjusted EBITDA margin of 4%. I'd also highlight a few things expect our revenue growth to be driven predominantly by the continued growth of active members, following the strong growth in ROI we've seen to start the year. As a reminder, we began scaling MyPay in Q3 of last year.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

As a result, we expect platform revenue year over year growth rates to see some natural normalization in the second half of the year as we lap this initial rollout. What's really exciting is that driven by our progress on MyPay economics, we expect the strong top line growth we've driven over the last year to begin to really flow through to the rest of our P and L, with accelerating adjusted EBITDA margin growth in the back half of the year. We expect adjusted EBITDA margin to grow between five and six points year over year in Q3, ahead of both Q1 and Q2, with further expansion in Q4. On an incremental adjusted EBITDA margin basis, we expect to return to the mid-40s or higher by Q4, faster than we previously anticipated and great progress toward our long term adjusted EBITDA margin target of 35% or higher. And with that, I'll turn it back to Chris to wrap us up.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

Thanks, Matt. Before we turn to your questions, I want to reiterate how proud I am of this team for raising the bar for core banking services in America. Our member aligned model, track record of product innovation and proprietary tech stack now enhanced with AI are meaningfully improving the user experience for everyday consumers while helping us build a loved and trusted generational brand. With that, I'll open it up for questions.

Operator

Thank And we will take our first question from Tien Tsin Huang with JPMorgan. Please go ahead.

Tien-tsin Huang
Tien-tsin Huang
Senior Analyst at JP Morgan

Hey. Good afternoon. Congrats again on the IPO and the, the first public earnings call for you guys. Glad to be on it. Just want to to start maybe and and ask you, for an update on the strategy of of widening the funnel and lifting restrictions.

Tien-tsin Huang
Tien-tsin Huang
Senior Analyst at JP Morgan

I know that was talked about during the roadshow, and it's early. But are you getting the results that you wanted? Any interesting learnings or impact to gross ads or product attach retention, that kind of thing?

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

Yeah, sure. Thanks. Thanks, Tien Tsin. Appreciate the kind words. You know, I think coming coming out of a really strong Q1, which is obviously always a seasonally strong quarter for us, we continue to see great progress at the top of the funnel, 23% growth year over year in terms of actives, with lower tax down about 10%.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

And so, you know, we're growing these primary accounts while also successfully trying to drive earlier engagement we talked about, as you indicated, was about our, we call our day one initiatives trying to make chime even easier to use right out of the gate. And so we have had some great success in terms of expanding our funding rails, making it easier to add money to an account as a new member, opening up Apple Pay, for example, mobile check deposit, and also providing introductory access to certain value props that historically have been behind the paywall, if you will, of direct deposit. So things like credit building and, and getting people using our P2P, and these sorts of things before direct deposit. And it's the success has been great. We're seeing increased amounts of activation rates among enrollees and funding rates, which we feel good about, you know, sort of increasing the size of the pawn to fish in.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

We're seeing higher adoption rates of our credit building, you know, credit builder card, which is good. As you know, that's a higher interchange product for us. So, it's good for the business as well, while also being helpful for our members. And, you know, I think it's this whole area of initiative is around the recognition that there isn't going to be a single path to converting people to direct deposit, which is always our number one goal. We know that some people are going to want to date a bit before they get married.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

And so we feel really good about this strategy. I think you're seeing it in the numbers in terms of the ads at the top of the funnel.

Tien-tsin Huang
Tien-tsin Huang
Senior Analyst at JP Morgan

Okay. Great. That's good. Good summary there. Just my quick follow-up.

Tien-tsin Huang
Tien-tsin Huang
Senior Analyst at JP Morgan

I wanted to ask on MyPay. The transaction margin there, really impressive. Maybe give a little bit more on what's driving the momentum. Are you seeing higher attach usage? And curious about sustainability given again what you've learned so far?

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

Yeah, sure. Maybe I'll start and pass over to Matt on the risk performance. But maybe just to level set, we're so excited about this product. You mentioned it's a $300,000,000 run rate business already just about a year in. And if you just look at the actual offering itself, you know, with MyPay everyday people have the opportunity to access the $500 of their paycheck on demand for free before the paycheck actually arrives.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

And if they want it instantly, can they can get it for a low fee of $2 That's, you know, less less than a cup of Starbucks. So the team's proven an ability to, to manage this product incredibly well in terms of the risk. But importantly, for us is that not only is it a profitable product, it's getting better, but it's also a really key element of the suite of value propositions for why people come to Chime in the first place. It continues to show in survey research and activation that this is one of the top reasons that people come to Chime. But maybe you want to talk to some of the success on the risk side, Matt?

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

Yeah, thanks, Chris. As Chris mentioned, we're very pleased with the continued progress on my pay. That's true both on the top line, but also on our margin and loss rate specifically. We did see attach rates on the product tick up sequentially quarter over quarter. That's driven by the continued strong interest in this product among our member base.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

But what I will say there too, there's also a little bit of seasonality here. Seasonality with respect to the usage of our liquidity products, utilization of liquidity products does tend to be a touch lower during Q1 after members have higher balances when they receive their tax refunds. But in general, we're seeing a very strong and continued great product attach. But as I mentioned in our earlier prepared remarks, what's really exciting is our faster than planned progress on loss rates. And that is again, what drove loss rates to closer to 140 basis points in Q2 from just over 160 basis points in Q1.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

Again, great progress towards what we think is a more reasonable steady state loss rate on this product of approximately 1%. And so when you put that together, the loss rates plus continued strong engagement, that's what's enabled us to triple our MyPay transaction margin quarter over quarter. In terms of what's driving that, I'd point out a couple of things. Number one, this is sort of the natural evolution of the new credit product is cohort season as the product matures, loss rates do tend to improve. So I think we're just sort of following a natural course there, but we're also improving our underwriting as we learn on this product iterate on it over time.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

If I sort of zoom out for a second, it's really the same playbook that we use for SpotMe, where we actually saw about a 50% improvement in loss rates today versus when we launched the $200 version of that product. So really excited about this progress. Again, that's a key reason behind why we've raised our expectations for adjusted EBITDA margin growth in the back half of this year relative to our previous internal expectations. And as I mentioned, we expect to return to the mid-40s or higher incremental adjusted EBITDA margin by Q4.

Tien-tsin Huang
Tien-tsin Huang
Senior Analyst at JP Morgan

All right. Well done. Thank you.

Operator

Thank you. And we will take our next question from James Faucette with Morgan Stanley. Please go ahead.

James Faucette
James Faucette
Managing Director at Morgan Stanley

Great. Thank you very much. And I want to echo the congratulations on being public and all the work that's gone into getting to where you are today. I want to follow-up on, Matt, just kind of your comments around loss rates on MiPIC, etcetera, really impressive performance here in the last quarter, and appreciate wanting to get those loss rates down to 1%. But how are you thinking about the pace that makes sense to get them to those levels versus using MyPay as an effective way to grow and engage with new customers and expand engagement with existing customers?

James Faucette
James Faucette
Managing Director at Morgan Stanley

Just trying to make sure that we're kind of level set correctly in terms of how quickly we should expect that to continue to improve.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

Yeah, thanks for the question, James, and appreciate the comments there as well. So, a few thoughts here. You're exactly right. We control the dials here on MyPay loss rates. And I think the journey that we're on here is continuing to iterate between continued improvement in loss rates and making sure that the member experience on MyPay is best in class and everything that our members would expect.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

And so that certainly may mean that the trajectory on loss rates may or may not be linear. We oftentimes want to make sure that we're looking at the holistic picture. If there's ways to offer a little bit more member impact on MyPay that can drive bigger impact to our overall business in terms of engagement, retention, or direct deposit attached. Those are trade offs that we would make all day. That being said, given the faster progress that we've seen on this, I don't think you should think about that 1% loss rate as a long term target.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

This is really a level that we could foresee getting to really in the quarters ahead, the medium term. And so we're quite excited about the progress here overall.

James Faucette
James Faucette
Managing Director at Morgan Stanley

Good, good. Yeah, that should be really exciting. And then, Chris, I wanted to ask just in terms of, obviously, MyPay as a product has a lot of potential as a way to engage with enterprise. And I know that you've talked about enterprise and workplace initiatives to help grow engagement for potential Chime members, etcetera. Can you give us an update on that initiative and kind of the milestones we should be tracking over the coming quarters as to its progress.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

Absolutely. Thanks, James. Appreciate it. For this one, I'm going to pass over to Mark Cotraten, our COO. He looks over this part of the business and is closest to it. So why don't we take it, Mark?

Mark Troughton
Mark Troughton
Chief Operating Officer at Chime Financial

Thanks, Chris. Hi, James. I think just to level set for everybody on the call, Chime Workplace is the division of Chime where we deliver our products as a free employee financial wellness solution through large enterprises. And we use Workplace to partner with employers. And the goal here really is to unlock a new acquisition channel for partner accounts for Chime.

Mark Troughton
Mark Troughton
Chief Operating Officer at Chime Financial

I think it's fair to say that we continue to be increasingly excited about Chime Enterprise and Workplace. And we have a team there, a well established team that actually pioneered the whole enterprise sale of Earned Wage Access products. The team has built a strong pipeline. We have launched a number of partners. And I think it's fair to say that so far what we're seeing there in terms of adoption and satisfaction is actually exceeding our expectations.

Mark Troughton
Mark Troughton
Chief Operating Officer at Chime Financial

So we don't have any specific announcements to make today, but we hope to be sharing more here in the coming weeks and months.

James Faucette
James Faucette
Managing Director at Morgan Stanley

Very good. Thanks, everybody, and have a good day.

Operator

Thanks. Thank you. And our next question comes from Will Nance with Goldman Sachs. Please go ahead.

Will Nance
Will Nance
Vice President at Goldman Sachs

Hey guys, thank you for taking the question and echo the other congrats on the call so far about the IPO and around the first quarter out the gate, awesome to see. I wanted to ask on just some of the spending trends that you guys saw in the quarter. I think if we look at kind of spend volume per customer, that number has been down kind of low to mid single digits the last couple of quarters. And I know think Tien Tsin asked about the widening the funnel initiatives. And so I'm sure there's some mixed dynamics going on there.

Will Nance
Will Nance
Vice President at Goldman Sachs

So wondering if you could talk about that trend and help us decompose that a little bit. What are you seeing on the underlying spend levels per customer? And just for modeling purposes, how would you kind of how would you help us think about kind of that metric on a go forward basis? Thanks.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

Sure. Maybe I'll take that. And then, Matt, if you have anything to add. Maybe just some context here. We are now at an over $130,000,000,000 run rate in terms of purchase volume across our portfolio.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

So back in 'twenty four, that would make us just on our debit card portion, the sixth largest debit issuer in America and growing at a rate that's, you know, compared to the rest of the top 10, our rate of growth is nine times faster. So, we've achieved very nice scale and also continue to grow. It is true that as we add new actives at the top of the funnel and push our service offerings so that people are able to engage with us in a lighter weight way out of of the gate that on a per active basis, average spend per active came down a little bit. Think this is an early results show that this is an investment worth making because we know that not everyone is going to immediately convert to direct deposit. So we think that this is a good investment for us.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

I'll also just highlight that, you know, are a nominal payments business. So we've benefited from some inflationary tailwinds over the past few years. Know, was something like 8% in 2022 and now down to a little under 3%, 2.7% June. So, that provides a little bit of, you know, headwinds in terms of like the actual spend per customer that happens. But, you know, we're going to continue to invest in what we have from the earliest days of this company from day one, which is developing people into primary direct deposit relationships, because we know that that's the best way to develop aligned long term relationships and be able to unlock the best product experience for them.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

I think you may see a little bit of choppiness from quarter to quarter. But at the end of the day, the amount of spend that we have on our active member base is I think significantly higher than you'll typically see in the industry.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

Yeah, just to add to this, to quickly comment on overall spend trends as well as we're seeing very steady trends. So if you take a look at our primary account users, our more tenured users, you're seeing continued growth among those users. So the per active metric that you referenced here is really just driven by mix shift. And so I think the high level trend that you're seeing in our business of a steady spend, stable trends is very much aligned with I think what you're hearing around the industry at this point of healthy consumer. And that's true both across discretionary and non discretionary categories.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

Of course, we are a heavily concentrated non discretionary spend business. We help our members pay for their everyday expenses, which is steady regardless of the cycle. But again, we're seeing steady trends really across the board.

Will Nance
Will Nance
Vice President at Goldman Sachs

Awesome. Appreciate all that color. And then just on the MyPay outside the direct deposit base initiative, I was wondering if you could comment on some of the proposed bank fees that are out there. Does this have any impact on just the unit economics or cost structure of that product? And just any thoughts on whether that is meaningful enough to change strategy or pricing there?

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

Yeah, maybe just to comment on that pricing proposal, one of the banks proposed pricing for access to data. Look, we believe that consumers should have the ability to move their data to whatever service provider they want without having to incur fees for it. I think we're quite a bit different than most fintechs out there and that we own the primary account relationship. So we are the ones that actually have the data and the majority of our deposits are coming to us from that direct deposit relationship. So I don't think that if that change were to happen, it wouldn't affect us.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

And it sounds like based on what the CFPB recently came out with it, that pricing actually isn't going to happen anyway, or is unlikely to anytime soon. But as it relates to our MyPay Day one, MyPay Day one is just one experiment that we're trying at the top of the funnel, again, in the vein of trying to make interacting with QIIME, getting access to some features from the early days available to members before they engage with direct deposit, you know, potential changes would have, you know, essentially, you know, negligible impact on that product, which again, is an experiment that's part of a broader suite of services available to people from the outset of the relationship. But we'll be learning more over the course of this quarter and beyond on the effectiveness of that product and how effective it is in getting people to ultimately sign up for direct deposit and primary account relationships. Awesome.

Mark Troughton
Mark Troughton
Chief Operating Officer at Chime Financial

I think, Christian, just to add to that, it may be also worth just saying that, look, don't think this is going to happen. But even if charging for access to back end transactions became the industry norm, the reality is that it's probably a net benefit to child as somebody who has a lot of primary account relationships. So we really don't see this idea of charging for access as having any sort of negative impact on CHIME at all.

Will Nance
Will Nance
Vice President at Goldman Sachs

Great. Appreciate that clarification, and thanks for taking the questions today. Nice job today.

Mark Troughton
Mark Troughton
Chief Operating Officer at Chime Financial

Thank you.

Operator

Thank you. And we will take our next question from Darrin Peller with Wolfe Research. Please go ahead.

Darrin Peller
Managing Director at Wolfe Research, LLC

Hey, guys. Thanks and congrats on the first quarter out. I want to understand a little bit more your thought process going forward now that you've had some really good success for about a quarter to two quarters on the ungated new users, ungated to direct deposit that was touched on before. How do you think about the mix going forward around that, your strategy? And then, I guess, how does that play into what we should think about modeling CAC?

Darrin Peller
Managing Director at Wolfe Research, LLC

It was obviously down and there's been really good word-of-mouth that's been driving a very strong CAC for a while, down 10% year over year again. I guess I'm just curious if that plays into it to some degree. But more importantly, just as an add on, how do we model that? How do you want us to model that going forward?

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

Thanks for your question. And I'll take it if you want to add too, Matt, you can. But like I said, we feel really good about this strategic decision to make QIIME easier to use right out of the gate. And I think, you know, the key for us is a combination of giving people that are new to the story, to the platform, giving them enough to get a taste of Chime services, but also at the same time, make it clear that as you engage with Chime and you do more with us, you're going to get more from us. And that's really the strategy behind products like Chime Plus, which really is an effort to package all of the best features of Chime that you get when you engage with us as a primary account holder using direct deposit, getting higher rates on your savings account, getting access to these core liquidity services of MyPay and SpotMe and additional benefits and services.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

You're going to continue to see from us an investment into ways to make Chime more accessible for people out of the gate, but also even more rewarding to our members as they engage with us. So we think, you know, creating this larger pool of members to, you know, engage with us is a decision that makes sense. It's a natural one for us. Especially as we layer on a suite of offerings that get better as you engage more, we think it's a natural win win. Still have lots of people that come through the top of the funnel and have already decided that they want to switch their banking to Chime and others that are going to engage in a lighter weight wait for a period of time.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

And look, the top of the funnel and the cost save on that side is the result of just great execution from our product and marketing team, opening up new channels, new video channels, using AI at the top of the funnel, having even more success with member referral programs. I mean, that's what's really driving our success at the top of the funnel and the efficiency that we're having in that area. We're going keep pushing on that because we really like the ROI on those investments.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

What I'd add to that, Darren, is in addition the great progress on CAC is we're also driving higher LTVs. You're really seeing that in the growth in RPM as an example, growing 12% year over year in Q2. And so when you put these things together, what you're seeing is improvement in our already strong unit economics. And they're translating to payback periods that are now more in the zone of five to six quarters for our most recent cohorts compared to seven quarters that we mentioned in our S1 a few months ago. And those payback periods support longer term LTV to CACs of 8x or higher.

Operator

Thank you. And we will take our next question from Timothy Chioda with UBS. Please go ahead.

Timothy Chiodo
Timothy Chiodo
Managing Director at UBS Group

Great. Thank you for taking the question. I want to see if we could circle back to Chime Workplace again a little bit and dig into it a little bit just to bring it to life. So clearly you've stated that it's going to be a great low CAC channel, brings in a lot of members, and I think the beauty of it is it kind of replenishes itself as those employees who have Chime accounts move on to other jobs, they can stay with you and it kind of replenishes. So it seems like a great channel.

Timothy Chiodo
Timothy Chiodo
Managing Director at UBS Group

I wanted to see if you could bring to life a little bit more the conversations with these large enterprise merchants. I know you mentioned there's a few over the next few weeks that you might be able to announce. But when you go in and speak to them, I mean, is the status quo? Are they speaking to competitors? Are they maybe using a competitor?

Timothy Chiodo
Timothy Chiodo
Managing Director at UBS Group

Is this totally new to them? Is there any pushback? Or is it just sort of inertia and where it falls on their priority list? Thanks a lot.

Mark Troughton
Mark Troughton
Chief Operating Officer at Chime Financial

Yeah, sure. That's a great question. I think in terms of are they new to the category versus do they have an existing provider, I think a lot of them are new to the category because the penetration is still really low in this market. But there obviously are some that we're speaking to who have an existing provider and may be considering a switch. So I think that probably gives you an indication there.

Mark Troughton
Mark Troughton
Chief Operating Officer at Chime Financial

I think it's probably worth discussing what we think our competitive advantages are and why we think they're actually open to the calls and why we think we actually stand a chance on this channel. And really, there's a few things. The first one is historically, this market has been approached by people who are just offering earned wage assets. It's a sort of narrow point solution. And really, our solution is much broader.

Mark Troughton
Mark Troughton
Chief Operating Officer at Chime Financial

It's offering broader financial wellness, part of which is earned wage access, but it goes beyond into credit building and savings and broader financial health. And so when we chat to an employer, we're actually able to address not only a portion of the employee base that's interested in earned wage access, which may be 30% or 40%, but actually we're able to address 100% of their employee base, number one. Number two, if you just bring it back to the earned wage access piece, our belief here is that offering is superior to the extent that we are offering up to 100% access to 100% of wages without any fees at all. Just to remind people on the call, the Chime workplace option actually is different to the consumer option. We offer up to 100% of earned wages with no fee, irrespective of whether you want to receive it immediately or delay.

Mark Troughton
Mark Troughton
Chief Operating Officer at Chime Financial

That offering is absolutely unmatched to the market and really compares very favorably against other earned wage access providers who are charging $3 to $4 per draw, where members may be paying $40 a month and where the top quartile may be paying in excess of $70 or $80 a month. So that's a strong advantage for us. And then I think the third core advantage there for us is really the Chime brand and our installed base, where given our scale and our installed base of customers, we're able to drive greater adoption and satisfaction through this. So we think those are the advantages that are resonating today in those sales calls. But as we'd indicated earlier, we're not at the point here where we're going to be discussing specific customers and partners that we've launched.

Mark Troughton
Mark Troughton
Chief Operating Officer at Chime Financial

But we do hope here in the coming weeks and months to be able to share more specifics with you of the progress in the channel.

Operator

Thank you. And our next question comes from Andrew Jeffrey with William Blair. Please go ahead.

Andrew Jeffrey
Research Analyst, Financial Services and Technology at William Blair

Hi. Thank you for taking the question. Great to be involved on this first public call. Matt, I had a couple of questions actually, one's housekeeping. Could you give us a sense of what you think interchange rates are going to look like?

Andrew Jeffrey
Research Analyst, Financial Services and Technology at William Blair

I know that's a function of mix between credit spend and debit spend as we think about building our models for the rest of the year. And then also, you give us the fully diluted share count just so we can calculate enterprise value correctly?

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

Yeah, thanks, Andrew. Appreciate the questions. So, on the interchange rate side, I think what we're seeing there in general is a lot of stability. So what you're seeing on year over year basis in Q2 was a slight uptick in rates relative to the year prior. But in general, our expectation is for stability across both debit and credit volumes.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

Of course, credit earned significantly higher interchange rates versus debit. This is for our secured credit card. And so that remains a big opportunity for us as we continue to drive adoption of our credit building services for our members. On the fully diluted share count question, What you'll see in our filings is a share count of approximately 100 and I'm sorry, $370,000,000. That's our issued share count as of the of Q2.

Operator

Thank you. And we will take our next question from Sanjay Sakhrani with KBW. Please go ahead.

Sanjay Sakhrani
Managing Director at Keefe, Bruyette & Woods (KBW)

Thank you and congrats again. I had a question about RPM. Strong growth in the second quarter excelled a bit versus 1Q. I know MyPay and other initiatives are going to help. Just curious how we should think about the growth trajectory over the course of the year and into next.

Sanjay Sakhrani
Managing Director at Keefe, Bruyette & Woods (KBW)

Maybe Matt, you could help us with sort of how the sequencing of that would play out over the course of that time.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

Yeah, thanks. I'm happy to take that one. So a couple of quick thoughts on this. The first, what I would say is, we've certainly benefited on the RPM side over the last year from the launch of MyPay. That's been a key contributor of our growth in RPM over the last four quarters. Naturally, we are now facing the sort of one year anniversary of the launch of my pay. And as a result of that, you should expect some natural normalization of our RPM growth rate as we lap that initial launch, which again was in Q3 of last year.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

We ramped through throughout the course of Q3. So in Q2 twenty five, we're sort of growing off of a lower base versus Q3. And so that's, I think the progression there on the RPM side. Well, I just sort of stay on top of that, of course, that we're really excited about is again, after driving such strong top line from my pay, what we're now expecting over the course of the second half is again for that strong top line to really start to flow through rest of our P and L. And again, that's a key reason why our guide is calling for an acceleration to our adjusted EBITDA margin growth in H2 relative to H1.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

As a reminder, we expect adjusted EBITDA margin expansion to accelerate about five to six points year over year in Q3. That's ahead of both Q1 and Q2 of this year. And we also expect even further expansion in Q4. And again, on an incremental adjusted EBITDA margin basis, we expect to return to the mid-40s or higher by Q4.

Sanjay Sakhrani
Managing Director at Keefe, Bruyette & Woods (KBW)

Yes, that's very helpful. And I guess like my follow-up was actually on the margin. I mean, Chris mentioned AI, obviously, that could be quite enhancing to efficiency, the strong incremental margins that you have. What kind of timeline do you think we could expect to get to sort of the longer term goals that you have on the operating margin? Like what do you think it can happen over an intermediate term? Thanks.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

Yeah, so as a reminder, we think that on a more steady state basis, our adjusted EBITDA margin should approach 35% over time. And I think that the progress that we've made on EBITDA margin growth the first half this year and our expectations for the back half of this year, again, returning to mid forties or higher and gives us a strong line of sight to get to those levels. The other thing I would say is, the path that we take there, I think also depends on our levels of growth investment. Such a significant portion of our OpEx are based off discretionary investments and growth. And so we have the dials there to trade off over time as well.

Matt Newcomb
Matt Newcomb
CFO at Chime Financial

So you should not think about that as a decade long target for us, but of course, we're gonna continue to invest in this business over the next couple of years as well.

Operator

Thank you. And it appears that we have reached our allotted time for questions. I will now turn the call back to Chris Britt for closing remarks.

Chris Britt
Chris Britt
CEO, Co-Founder & Director at Chime Financial

Appreciate it. And I just want to thank everyone for joining the call today. We look forward to spending more time with you in the weeks and months

Executives
    • David Pearce
      David Pearce
      VP - Finance Strategy, Capital Markets & IR
    • Chris Britt
      Chris Britt
      CEO, Co-Founder & Director
    • Matt Newcomb
      Matt Newcomb
      CFO
    • Mark Troughton
      Mark Troughton
      Chief Operating Officer
Analysts
    • Tien-tsin Huang
      Senior Analyst at JP Morgan
    • James Faucette
      Managing Director at Morgan Stanley
    • Will Nance
      Vice President at Goldman Sachs
    • Darrin Peller
      Managing Director at Wolfe Research, LLC
    • Timothy Chiodo
      Managing Director at UBS Group
    • Andrew Jeffrey
      Research Analyst, Financial Services and Technology at William Blair
    • Sanjay Sakhrani
      Managing Director at Keefe, Bruyette & Woods (KBW)
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