Hey, great. Welcome, everyone. Glad to have you here this afternoon. Welcome to the afternoon session here at our UBS Global Technology and AI Conference. We're very pleased to have with us today the team from Chime, two members of the team joining us today. We have Matthew Newcomb, the CFO, who is here on stage with us. And we also have David Pearce, who is the head of investor relations, who is here in Arizona as well. So we want to say, starting off, thank you to both of you for making the trip here and being a big part of our conference.
Thank you for having us.
All right, excellent. Well, I think many in the audience here, just looking across, are very familiar with Chime. But for those maybe less familiar, just digging into the company, or those maybe on the webcast, maybe we can start with the intro to the company.
Sure. So we believe there is a secular shift happening in mainstream America towards digital banking that is helpful, free, and easy. And we believe Chime is very much leading the way, leading the charge on that. We created Chime to help the nearly 200 million U.S. adults making up to 100K unlock their financial progress. And this is a segment of the market that I think has been very much overlooked by the incumbents. And it's working. So 97% of our members tell us we have helped them unlock their financial progress. J.D. Power just came out with a report showing that more people in America are opening up checking accounts at Chime than any other institution. Among people making up to 100K, we're the number one destination for people switching their direct deposit relationship. And finally, J.D. Power just named Chime the number one bank brand in America.
We're not even a bank, and we're serving a broad segment of this market. In fact, people making over $75,000 a year are our fastest growing segment. I think if you were to sort of zoom out at a very high level for a second, the playbook that we're using, I think, is very similar to digital disruptors in adjacent categories, whether that's Amazon and retail, Netflix and entertainment, Uber and transportation. We are maniacally focused on solving critical needs for our customer base. We've radically innovated on cost structure, which enables us to deliver better value back to the consumer. We've earned some of the deepest levels of engagement and trust in our category. I think what that does is it allows us to be a real platform business. We're not a single point solution. We're actually helping our members across multiple areas of their financial lives.
I think it's very much still early days for us on that playbook.
All right, excellent. One of the hallmarks of Chime is your primary account relationships, industry-leading by far. You've made a point to highlight some of these. Maybe you could talk a little bit about some of the benefits of these relationships, both for you and for the members. Then, more importantly, how are you able to convert some of your members over to this primary account status?
I think we have had more success in this area probably than anybody else in the ecosystem. And I think at the core, what has enabled us to do that is this track record of product innovation. We, again, have been really maniacally focused on the core needs of this segment of the market. Historically, that's been products like Get Paid Early, SpotMe, our fee-free overdraft product, Credit Builder. I think you've seen our product velocity increase over the past year with launches like MyPay, Chime Plus, Instant Loans, fee-free tax filing. But I think maybe most exciting is the product velocity still ahead for us now that we have transitioned to Chime Core, which is our proprietary in-house payment processor and ledger. The first example of a product that we've launched on this new system is Chime Card.
And we've also got lots more in the hopper for next year across joint and custodial accounts, investment products, and even more premium membership tiers. And so primary accounts really drive our business. They give us a tremendous amount of engagement. Our average active member does 55 transactions with Chime per month. It drives habitual, recurring spend. It enables us to drive high levels of RPAM without relying on fees, and also incredible longevity in our cohorts. There's data out there that suggests the average tenure of a primary checking account is 15 years or more. We haven't been around that long. We don't have cohorts that old. But we do have cohorts that are now approaching 10 years, and they have not asymptoted. That really is the power of owning a primary account.
Again, in an ecosystem of a lot of point solutions, it's enabling us to really be a platform. We're serving our members across multiple areas of their financial lives. Our tenured cohorts now use four products on a monthly basis. Their RPAM is closer to $350 compared to $250. And that's just on our current product set. Lots more to do for our members over time.
All right, great. Thank you, Matt. Let's talk about, you touched on this actually earlier, the 75K number, and how that portion of your customers is growing faster. Maybe you could talk a little bit more about what you're doing to meet the needs of that higher-earning group of customers.
Yeah, so first and foremost, there are 200 million people making up to $100K. There's another 30 million people in the U.S. making between $100K and $200K. And we serve a broad segment of this universe today. I think in the past, there's probably been a little bit of a misconception that we serve the unbanked. That is not true. We serve the unhappily banked. 90% of our members come from prior banking relationships when they come to Chime. If you really look at the financial reality of this segment of the market, the reality is that a broad segment faces real financial challenges. Two-thirds of America lives paycheck to paycheck. Even among people making more than $100K per year, about 50% of them live paycheck to paycheck.
And so that's why I think our products, Credit Builder, getting access to short-term liquidity, no fees, that's why it's resonated with such a broad segment of the market. That being said, it is certainly true that as you move to the higher end of the segment, there are other value props that rise in importance. It is why we have things like high-yield savings. We offer 3.5% on high-yield savings accounts, 8X the national average. It's why we just launched Chime Card, which offers rewards, 1.5% cash back on rotating categories. It's why next year we're going to launch things like, again, joint and custodial accounts, investment products, even higher membership tiers. And so we are having some success with this, as I mentioned, as you mentioned. 75K+ is our fastest growing segment. And we're serving them well, too.
We retain this segment of our member base at essentially the same rate as our average active member. So there's no real notion of members moving on from Chime or graduating from Chime. In fact, it's quite the opposite. Our members are growing with Chime. And I think you see that in our cohorts, where they adopt more products over time. And we're able to drive higher RPAM, rates of RPAM over time as well.
All right, excellent. We're going to go to another big topic for Chime, which has been the ungating efforts that have been going on for the past year or so. Maybe you can share more about why you decided to pursue this strategy, this ungating strategy, and what have the benefits been thus far?
Yeah, so historically, we've been really focused on earning and bringing our members into Chime and having them adopt us as a primary account right out of the gate. And I want to be clear, that remains our focus today. And as I mentioned earlier, we are the number one destination among people making up to 100K, switching their direct deposit relationship in the U.S. That being said, doing that's kind of like getting married on the first date. And we know that that doesn't necessarily work for everybody. People might want to try before they buy. But the Chime experience as a non-direct depositor hasn't really been that good, to be honest. We haven't really given members a lot of reason or ways to try before they buy. And so we felt like we were just leaving some opportunity on the table.
So we've made a deliberate effort over the last year or so to make it easier to get started with Chime. We've done things like ungated certain value props from the direct deposit paywall. So now you can get Credit Builder without being a direct depositor, as an example. We've made it easier to fund your Chime account with a debit card instantly, with Apple Pay, with mobile check deposit. And these things are working. They're already having a positive impact on our business. We're seeing some of the highest first-time activation rates among new enrollments that we've ever seen as a company. That's helped us accelerate our new member growth. We've added 1.6 million new actives over the last year. That compares to 1.2 million for the prior 12 months. That's helped us bring down our CAC.
At the same time, we're also monetizing these yet-to-be primary accounts in a more material way. The transaction profit per active member that's not yet a primary account is up about 20% versus where it was a year ago. So all this amounts to actually better unit economics. Our recent cohorts are tracking the five- to six-quarter transaction profit payback versus seven quarters or so previously. So it's already having an impact. I will say, though, ultimately, the goal is the same. The goal is to convert these members to a primary account relationship over time. And we're actually seeing some early success with that. We're seeing an increase in the number of people that are converting to Chime at a later stage, late-stage conversion to direct deposit. And we think there's still lots more we can do there.
So I think zooming out, the way to think about this is this is an important evolution of our new customer acquisition funnel. But it's just that. It's an evolution. It's not a change to the ultimate strategy of earning primary account relationships that drive this very sustained return ROI on our new customer acquisition spend, 8X LTV to CAC. That really remains the core focus of the business.
All right, excellent. We're going to move on to another topic. You alluded to this earlier, but we can expand upon it. So the competition with the incumbent banks, which is really who your primary competitors are. Maybe talk a little bit about that. Specifically to that, one of your tools to compete, as we know, is Chime Core, right? So maybe you could talk a little bit about what Chime Core means and how it benefits you in that competition, but then also some of the financial aspects associated with Chime Core as well.
We like to say that we fish where the fish are. The reality is that pretty much all primary accounts in America sit at the incumbent banks. We feel like we've got some real structural advantages that are enabling us to compete so well with these institutions. The first is cost structure. One of our nation's leading bank CEOs, in his shareholder letter earlier this year, said that the cost to maintain the majority of his accounts is higher than the revenue that he earns from them. In contrast, we have a $250 RPAM that we monetize at roughly 70% transaction margin. Our cost to serve is about a third or fifth that of an incumbent bank. I don't know if there's a better summation of our opportunity, honestly, than that. Chime Core, to your question, has played a key part in this.
We have now transitioned our portfolio entirely to Chime Core, again, our own payment processor and ledger. And that's reducing our processing costs by over 50%. The second advantage is really around our focus, our focus on serving the needs of this customer segment. We are not trying to say that the traditional banks are out to get the everyday person or the mainstream American, but they just don't have a lot of incentive to innovate for this customer when they're upside down on their unit economics. And I think the product experience and product suite really shows that. That's all we care about. That's why we've been so focused on launching things like SpotMe, Credit Builder, Get Paid Early. These are the things that matter most to everyday Americans. And then lastly is brand. We now have unaided awareness that is rivaling, essentially, the top three banks in America.
But I think more importantly is that everyday folks think about Chime are more prone to think about Chime as solving their most critical financial challenges. They really are thinking about us as the key for their primary financial needs. So yeah, these are some of the key advantages. I think the other piece of Chime Core is that it's enabling us to innovate faster. I talked about product velocity. That is a key piece of how we think Chime Core is going to really stand us in good stead going forward.
All right, Chime Core covered well. Thank you. Let's move on to another exciting topic for Chime, which is Chime Card. So you talked about this a little bit earlier as well, but maybe talk a little bit about what you're seeing with this product and talk about the benefits that the company could see over time. And then if you don't mind, I'll have a quick follow-up.
Yeah, so Chime Card is our latest innovation. Again, we built Chime Card on Chime Core. It's really the first product that we launched on the new core system. And the way to think about it is it makes banking with Chime that much more rewarding. So Chime Card is a secured credit card, and it offers direct depositors 1.5% cash back on a rotating set of categories. It also comes with a premium card design. And of course, as a secured card, it helps our members build their credit. This really comes on top of all the benefits that you get from Chime Plus available to direct depositors, like fee-free credit building, early access to your pay through MyPay, free overdrafts, 8X the national average high-yield savings rate, priority member support.
This is a combination of value props that is just unmatched relative to what you could get in an incumbent institution, and so we're quite excited about Chime Card across a few different, actually, dimensions of growth. The first is take rate, so Chime Card is a secured credit card. Net of rewards, it earns about 175 basis points on transaction volume. That's about 50% higher than our average take rate in the portfolio today. The second dimension is new customer acquisition. We think Chime Card is potentially a great new customer acquisition tool. We're just starting to promote it now. You'll see it in some of our holiday ad campaigns, so stay tuned for that, and then third is engagement. Rewards on Chime Card are only available to direct depositors.
And so we think this is a great additional incentive for people to bring more of their financial lives to Chime, spend with us, and then get the benefit. This is part of a broader strategy, again, to help our members understand that as they do more with Chime, they get more with Chime. And so we're quite excited about some of the early results. Among people who are adopting this product, new cohorts of members, they're using it for about 80% of their spend. So it's early days. We have a lot more to do. It's a very new product, but we're very excited about this as a growth lever.
Great, thank you. And that follow-up is, so if a new member were to go to Chime today and sign up, can you talk about the onboarding flow and how this card is presented to them and maybe just directionally the proportion of new customers that are adopting the Chime Card?
Yeah, so if you are a new customer coming to Chime, in the onboarding flow, you're going to see Chime Card first. That is now the primary option that we are surfacing to you as a customer. Kind of all the benefits of the existing product, but of course, with rewards, the ability to build your credit and a new premium card design. So as a result of that, we're seeing pretty solid adoption rates among new cohorts of members coming into Chime. There's always going to be a portion of members that prefer debit. That's just the sort of secular reality. But by surfacing this early in our members' journey when they're just under their habit formation, we do think there's a great opportunity to drive attachment on this product among new cohorts of members.
Existing members, we are also beginning to give them the opportunity to adopt this product. They're a little bit deeper in their habit formation. That's probably a little bit of a harder piece to solve, but it is something that we're also going to work on over time as well.
All right, excellent. Let's move on to some of the liquidity products. So clearly, Chime is a payments-based business, right? You're driven by largely non-discretionary everyday spend. But in the recent past, you've moved a little bit more into some of the liquidity products, such as MyPay and Instant Loans. And maybe you could just talk a little bit about the advantages to your business for offering those. And I would preface it by saying the way we (my words, not yours) the way we like to describe it is it's CAC that pays for itself and then some. And it sort of certainly drives the core business and the core revenue.
Yeah, so you're exactly right. The core of our business is this asset-light, payments-driven business focused on non-discretionary spend. So two-thirds of our revenue comes from interchange-based fees, and about 70% of the transaction volume driving that revenue is in non-discretionary categories, the biggest ones being gas, groceries, restaurants, the type of spend that I think sticks with you really regardless of the macro environment. I think that gives our model a ton of resiliency. At the same time, when you own direct deposit relationships, you do get tremendous advantage in offering members access to short-term liquidity credit for a couple of reasons. One, we have a ton of data on our members. We see essentially all their inflows and all of their outflows. And number two, we have a privileged repayment position. We are essentially the top of the repayment stack.
We offer members access to MyPay, to SpotMe, to an instant loan. The next time their direct deposit comes in, we get paid back first. And that is a fundamentally different risk profile than I think is typical, or at least the way people typically think of consumer credit. In some ways, the way I would say it is we've sort of flipped. We've sort of done a 180 on the way that these businesses often work, which is typically you think about the sort of top of the funnel adverse selection game. We acquire a direct deposit relationship first and then only offer those members access to liquidity. So again, this is a very different risk profile. It's very short duration. SpotMe repays in less than a week. MyPay in less than two weeks. It's small dollar and highly diffuse. And again, underwritten by direct deposits.
And so yeah, you know I think we've got a lot of advantages. And what this essentially amounts to in the end is an ability to price our products very competitively while keeping our loss rates low and our risk profile low. And so today, these products are about 20% of revenue. We think it's an awesome opportunity of continued growth for us. But I wouldn't go so far as to sort of think that Chime's going to transform into a lend-centric or balance sheet-heavy business anytime soon.
Excellent. All right, covered very well. Let's move on to the next one. This is kind of an industry question, kind of a Chime-specific question. So a little bit of the state of the consumer and then the resilience built into the very non-discretionary spend associated with Chime's business model. So sometimes there's talk of this K-shaped recovery in the economy or K-shaped economy. But you guys shared that on your Q3 call, at least at that time, that you were seeing resiliency. Maybe you could talk a little bit about what you're seeing thus far throughout the quarter and then longer term, that resiliency built into the model.
Yeah, so we serve obviously millions of people in a primary account capacity. And so we think we've got a pretty great real-time view into the state of the everyday consumer. And I do feel like we've done a broken record on this, but the gist of it is we just continue to see a lot of resiliency despite all the headlines around this. We talked about how non-discretionary forms the majority of our spend, but discretionary continues to hold up well. In fact, it's growing faster than non-discretionary. We saw, for example, in Q3, a number of quick-service type restaurants talk about lower foot traffic. And they kind of alluded to that being macro-driven. We look at our data for those particular names. We see the same thing, but we don't see it for restaurants as a whole.
Restaurants as a whole have been very resilient and steady and continue to grow at a very steady rate. So we're not quite sure that's macro-related, I guess, is one way to say it. We just had Black Friday. Black Friday, too, was very much in line, I think, with what you're hearing from others. A solid report. We took a look at apparel and merchandise spend, and that was up among people shopping on Black Friday about 10% year over year. That was a little bit higher growth than what we saw last year. So overall, again, very steady trends on that front. Beyond spend, we also see a lot of steadiness in employment. We have not seen, despite even this morning's report from ADP on payroll, we've not seen an uptick in unemployment insurance coming into Chime. Account balances continue to grow year over year.
Usage of our liquidity products remains very consistent. Loss rate's very consistent. So again, a lot of steadiness in the business. And just the thing that zooming out, what I would say on this, too, is just we just have a model that I think can work well both in good times and in tougher times. Again, non-discretionary spend. To the extent that there is joblessness and our members receive unemployment, it's probably going to come to Chime where their primary account. We saw this in droves in the early stages of COVID. Our liquidity products are very short duration, so we can very nimbly adjust if we do see a blip in the night. And I think more broadly, oftentimes when times are tougher, people sort of take stock of what they're spending on and are a little bit more thoughtful about that.
We feel like we're the lowest-cost producer in this category, the lowest-cost options in the market, and in many ways stand to benefit when times are tougher. They need things like access to short-term liquidity, credit building even more, so good in good times, but maybe even great in tougher times.
All right, excellent. We're going to move on to another exciting topic, which is Chime Enterprise. So you've already announced a few big partners, including Workday. Maybe talk a little bit about these and how they fit into the overall strategy with Chime Enterprise.
Yeah, so as a reminder, we acquired a small company called Salt Labs late last year. Salt Labs was founded by the founding team of DailyPay, which really pioneered the earned wage access B2B space, and so with that acquisition, we established Chime Enterprise, and the goal of Chime Enterprise is to sell the suite of Chime products as a holistic financial wellness solution to employers for them to offer to their employees, and what's exciting for Chime is that this, we believe, offers us a chance to establish a new strategic, low-cost, and kind of evergreen channel for new customer acquisition growth coming to Chime. Early days, we're excited by the progress, so we've announced a couple of initial partnerships, both with Workday and UKG, obviously large human capital management platforms.
The way to think about that is that this really enables any Workday or UKG customer to pretty seamlessly switch on Chime Enterprise to offer to their employees, and then we've also announced three direct deals with employers, so Ubiquiti, Etech, and a company called Maxwell Group on the smaller side so far. And those companies are still ramping up. Employees are adopting the product, but I would say right out of the gate, the adoption that we've seen has surpassed our expectations. We've been really excited about that, and I think what makes us excited about this as a category going forward is we think we've got a couple of really strong advantages to compete. Number one, most of the players in this space are kind of monoline players. We're going to market with a full suite of services. Number two, cost.
MyPay at work customers get access to up to 100% of their earned wages for free. That is very different than the monoline players that are charging upwards of $40 a month sometimes. And then third is our brand. When we go talk to some of these employers, a high single-digit % of their employees are already banking with Chime, so we're sort of a recognized brand. And so we're really excited about this. This is an enterprise sales cycle. It takes time, but we're excited about the pipeline and more to come on that.
Excellent. All right, well, in the time that we have left, maybe we could just group the final two questions together because they kind of go together. But we'll talk a little bit about the growth framework. You've highlighted many of the drivers during this presentation, but maybe just highlight some of the growth levers that are most important to you, Matt. And then lastly, around your AI efforts and how they relate to operating leverage and some of your potential long-term profit margins.
Yeah, there's really two big growth levers in our business: active members and RPM. Actives, today we've got nine million. There's 200 million people making up to $100K. Just getting started, we think we've accelerated our pace of active member growth. We've added 1.6 million over the last year compared to 1.2 the year prior, and we're very excited about new product initiatives, including in enterprise, to continue to drive growth. On RPM, when you own a primary account relationship, you are in this very unique position to be able to cross-sell additional products, and I think we've proven that over and over with high-yield savings, with Pay Anyone, with SpotMe, most recently, certainly with MyPay, which grew from zero to a $350 million revenue run rate product in a year.
That's really the power of having a customer relationship that is in the app every single day, again, transacts with us 55 times a month, and thinks of us as their central financial hub. And when you put those two things together, again, you get this cohort performance that almost looks a lot like a subscription business. It just continues to spit off transaction profit year after year. Again, cohort's now 10 years old without ever asymptoting. And so we're really excited about still being early days across, I think, both of these dimensions.
On the AI side and margin side, I think if you were to boil down the unit economics of our business, what we're essentially doing is we're scaling a highly recurring portfolio of payments revenue that monetizes that roughly 70% transaction margin, retains on a net dollar basis above 100% year over year over a largely fixed expense base. There's a lot of operating leverage in a model like that. And I think you've seen that from us. You've seen adjusted EBITDA margin grow substantially. You've seen OPEX as a percentage of revenue come down substantially. And we think that's only going to accelerate from here, partly because of AI and partly because we now have this major migration to Chime Core behind us. On the AI side, I think where we're seeing the biggest impact of the business today is in our customer support function.
So we launched a GenAI chatbot in Q1, a GenAI voice bot in Q2, and most recently in Q3, we pointed GenAI at one of the most labor-intensive parts of our customer support function, which are dispute investigations. And the impact is awesome. It is basically cutting agent handle time in half, but it's also providing a better member experience. It's helping our members get their disputes resolved more quickly. And the impact of that, the numbers sort of speak for themselves. We've seen the highest customer service NPS scores that we've ever seen as a company in Q3. And so we're just at a point now where we don't feel like we need to grow our OPEX base as quickly as we have historically to meet our ambitious growth targets. We're going to keep headcount roughly flat over the next year.
You should expect to see that translate to an accelerating profit margin story. Nine points improvement in Q3. We expect 11 points improvement to adjusted EBITDA margin in Q4, mid-50s incremental, which we expect to grow even further in 2026.
All extremely clear. Matt, excellent job. Really a pleasure having you up here and having both you and David here in Arizona. So thank you so much for being a big part of this event.
Thanks, Tim.