Chime Financial & Circle Internet Group: It’s Time To Get Serious About The Future

“Enter by the narrow gate; for wide is the gate and broad is the way that leads to destruction, and there are many who go in by it. Because narrow is the gate and difficult is the way which leads to life, and there are few who find it.

Matthew 7:13-14

As a Christian this is not the most popular verse both for fellow Christians and those who oppose the Gospel. It is a very important verse however, as this statement was made by Jesus Christ. While it may be uplifting to call out Bible verses that speak about loving others, Jesus spoke a lot about hell and ramifications for those who do not accept Him as the only path to eternity and Heaven.

These verses resonate very well with investing in that many investors fall victim to short-term strategies that often become detrimental over time. Many of those same investors also ridicule or scoff at those with a long-term focus. This is why Warrant Buffet is quoted by saying, “In the short term, the market is a popularity contest. In the long term, a market is a weighing machine.”

Chime Financial, Inc. (CHYM) will be going public this week. I wrote an initial blog on Circle Internet Group, Inc. (CRCL) and it got me thinking a little bit about the future and the financial services sector. There are essentially two categories as options for the next generation of financial services investments that investors can choose to invest in.

One the one hand, there are companies like CHYM or Sofi Technologies, Inc. (SOFI) among many others that are focused on finding a layer to fit into within the legacy-based ‘financial stack’. These companies are not necessarily looking to innovate to compete directly against legacy banks, credit card companies, or other digital payment platforms. Instead, their focus is on younger generations and their interests and preferences, some of which can be shaped, to promote a stronger sense of customer service and product interest.

The other approach is based on a fundamental shift away from the legacy financial services model to provide innovative options that can replace and/or eliminate traditional mechanisms in use today. These include companies like CRCL and Coinbase Global, Inc. (COIN) among others, and include innovations such as Cryptocurrencies, digital currencies, blockchain, DeFi, among others that can replace checking/savings accounts, payment networks and processes, contract and purchasing data and arrangements, and many other areas of transactional structures.

The core drivers for CHYM’s revenue include the growth in active members and the average revenue per active member, or ARPAM. CHYM maintains two primary revenue segments including payments and platform-related revenue. On the payments side, CHYM relies upon interchange-based fees from debit and credit card transactions. As of Q1 2025, CHYM generated over $120 billion in purchase volume and has around a 1.1% take-rate equating to its interchange-based fees for payments revenue.

On the platform-revenue side, CHYM has a more diverse set of services including fees from access to out-of-network ATMs, MyPay instant transfer fees, net revenue based on high yield savings balances, partnerships revenue (which includes referral fees for third-party products), voluntary SpotMe tips, and fees from cash deposits made at locations outside the company’s free network. For those bullish on CHYM, this is the area where CHYM leverages the legacy-based transactional approach to offer more consumer-tailored products and services, but contrary to the company’s stance to shift from the legacy approach with fees, CHYM is highly dependent on this structure.

To the initial point above, CHYM, like other peers such as SOFI, represents a company that is highly wedded to the legacy financial services sector. These companies falling with the financial stack may witness a mid-term cadence of revenue growth, but longer term, there will be increasing options that allow financial services customers options where bank accounts and/or credits cards may not be necessary.

With CRCL going public last week and COIN being the largest Crypto platform in the U.S., a new dichotomy has emerged where investors need to think about the future of the financial sector, and which companies they perceive as the best opportunity. This is dependent on risk tolerances, whether aggressive-growth oriented, or more conservative, but regardless of tolerance or style, utility, function, and efficiency through innovation will win out over time.