What are the advantages and disadvantages of Chime acquiring a banking charter when compared to operating as a fintech?

Exactly, yes. It could also just affect how much interchange revenue that Chime would make itself. There's a number of basically different tiers of banks and a lot of them charge different interchange fees depending on how many deposits they have. 

I think this is actually something that affected Varo. They're of a size where they could get a bigger portion of interchange from debit transactions because they're operating as their own bank, and normally, you're splitting the interchange fee. 

Generally, with a debit transaction or credit transaction, the issuer gets a large chunk and the network gets a chunk.

The way it works in the partnerships is that the issuing bank will have an agreement with Chime, or whatever fintech they're working with, to give them back a cut of the interchange fee. 

Imagine you have a $10 transaction and the interchange fee is like 50 cents, some percentage goes to the network, like Visa or whoever, if it's a credit card, some percentage goes to the bank, and of that maybe 25 cents to the bank, maybe 10 or 15 will go back to their fintech partner.

By cutting out that middleman situation with the bank, you could just get all the 25 cents, we'll call it. But that only works if you're under a certain size. 

If you get too big, you can't charge as much for your debit interchange fee, but that's why credit interchange is higher and a lot of these companies were trying to go more on the credit world. So for Chime, we started out with this debit product and then we rolled out this credit builder product, probably because the interchange fees are just so much higher that it makes much more money for the company.

It's interesting too with the incentives because Chime started out as a company that basically provided fee-less banking for the average person who may not have had good credit. Slowly, they moved towards nudging people to get on a credit product because the company made more money from interchange and users loved the new product. In the case of Chime, their credit product was a pretty useful thing and helped a lot of people because it basically enabled credit access for folks who couldn't normally get it.