For decades, many credit unions have treated the basic checking account as a "loss leader." It was a gateway product, a low-margin account needed to capture a new member in the hope of one day selling them the real products: an auto loan or a mortgage.
This model is now failing.
A new generation of members doesn't want a complex, bundled relationship; they want the "ultimate product"—a simple, digital-first checking account that just works.
And fintechs like Chime are winning them, not by being a bank (they aren't one), but by building a superior business model. While many credit unions are still debating fee structures, Chime has turned the checking account—the very product CUs ignore—into a powerful revenue engine.
If credit union leaders don't understand how Chime's model works, they will lose the next generation of members before they even have a chance to compete.
The Misaligned CU Model
For many credit unions, the checking account is a strategic dilemma. The "free" checking account is a cost center, supported by members with high-yield loans. The "fee-based" checking account, which generates revenue from monthly maintenance or minimum balance fees, is a relic of the past.
This leaves a third, problematic option: monetizing the account through punitive fees, namely Overdraft (OD) and Non-Sufficient Funds (NSF).
This model is fatally misaligned with the "People Helping People" philosophy. It creates a predatory dynamic where the institution's financial health becomes dependent on its members' financial missteps.
Younger, tech-savvy members see this clearly. They don't view these fees as a "service"; they view them as a penalty for not being wealthy. And so they are flocking to a model that promises never to penalize them.
Deconstructing the Chime Business Model
Chime's strategy is brilliant in its simplicity. It’s a "platform" model, not a traditional bank model. Chime is a technology-first company whose banking services are provided by partners like The Bancorp Bank and Stride Bank.
This frees Chime to focus 100% on the member experience, which is built on a few non-negotiable promises:
- No Monthly Fees
- No Overdraft Fees (their "SpotMe" feature is a non-punitive, free, small-dollar line of credit)
- Get Paid Early (a feature based on ACH timing)
The critical question is: If Chime isn't making money from fees or interest, how does it survive?
The answer is Interchange.
Chime built its entire business model around revenue from debit card interchange fees—the small percentage fee charged to the merchant every time a member swipes their card.
The Power of Strategic Alignment
This is the core insight that credit union leadership must understand.
Chime's model is non-punitive and perfectly aligned with its members' success.
- Chime wants its members to use their accounts.
- It wants its members to be financially active.
- It wants members to use their debit card for everything.
Chime only makes money when its members are successfully transacting.
The traditional, punitive CU model is the exact opposite. It often makes the most money when its members are in distress. One model builds trust; the other destroys it.
Chime's members are not a "segment" to be "cross-sold" a mortgage. They are the entire business. The checking account isn't a gateway; it is the product.
The Takeaway: Stop Competing on Features, Start Competing on Models
For years, the credit union response to Chime has been tactical. "They have 'early pay'? We need 'early pay'!"
But you cannot "feature" your way out of a broken business model.
This is a strategy problem, not a technology one. Adding "early pay" to an account that still carries the threat of a $35 overdraft fee is missing the entire point. It's putting a modern feature on a predatory product.
Credit union leaders must stop asking, "How do we get our checking account members to take out a loan?" and start asking, "How do we build the best checking account on the planet for our chosen member segment?"
The answer involves a fundamental shift: away from a punitive, fee-driven model and toward a non-punitive, interchange-driven model. It requires seeing the checking account not as a cost center, but as the central, revenue-generating pillar of your relationship with the next generation.
A Postscript: The "Chime of the Future" and the Stablecoin Threat
The Chime business model is undeniably brilliant for the current landscape. But it is built on a foundation—debit card interchange—that is tied to payment rails (Visa and Mastercard) that may soon be obsolete.
What happens when stablecoins, FedNow, or other new payment rails allow for instant, near-free money movement? The interchange fee disappears. And with it, Chime's entire revenue model.
This is the long-term strategic threat that Chime's investors are watching. But this is also where Chime's true strategic genius can shine, and it's the final lesson for credit unions.
Chime's product (the debit card) may be temporary, but its philosophy (a non-punitive, aligned model) and its asset (the trust of millions of members) are permanent.
The "Chime of the future" must evolve its platform—moving from a reliance on a single product (the card) to a true marketplace platform built on its core asset: the member relationship.
Its primary asset is not the card; it is the trusted customer relationship. When you have the trust and engagement of tens of millions of people, you can swap out your revenue model.
Instead of interchange, Chime's future is likely as a financial marketplace or super-app.
- It can leverage its deep member data to offer best-in-class products from partners—like a personal loan from SoFi, an insurance policy from Lemonade, or an investment account from a robo-advisor.
- Chime could then take a referral fee for this "matchmaking."
This new model example is still perfectly aligned. It is non-punitive and member-centric. Chime's job evolves from processing payments to being its members' most trusted financial agent.
This is the ultimate lesson for credit union leaders. Chime's success was never about the plastic card; it was about the focus and strategic alignment of its business model. Even as the payment rails get disrupted, that philosophy will allow it to evolve, while institutions still stuck in a punitive, misaligned model will be left behind.
If this topic resonates with your credit union's challenges, schedule a private consultation to discuss how our strategic frameworks can help.
