Chime (CHYM 5.02%) and Upstart (UPST 5.13%) are both high-growth fintech companies that serve lower-income customers. Chime offers fee-free digital banking services to customers who might struggle to open accounts at traditional banks, while Upstart uses its AI algorithms to approve loans for borrowers with limited credit histories.
Chime went public at $27 this June, but it now trades at about $24. Upstart went public at $20 in December 2020, and it now trades at around $47. Let's see why Upstart soared and Chime slumped, and if the former will continue to outperform the latter over the next few years.
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Chime is still growing, but its expenses are rising
Chime's online platform provides fee-free checking and savings accounts with overdraft protection, early pay tools, and other financial services. It also issues a Visa (V 0.38%) debit card (with fee-free access to more than 50,000 ATMs) and an entry-level credit card.
Chime's services are appealing to lower-income users who don't have enough assets to open higher-value, fee-free accounts at traditional banks. Its early pay tools are useful for people who live paycheck to paycheck, while its starter credit cards help them gradually build up their credit scores.
NASDAQ: CHYM
Key Data Points
Chime isn't a bank. It's supported by two FDIC-insured banks -- The Bancorp (TBBK +1.23%) Bank and Stride Bank -- which hold and manage its accounts. It generates most of its revenue by taking a cut of the swipe fees that Visa charges merchants whenever its cards are used.
In 2024, its number of active members rose 21% to 8.0 million, its purchase volume increased 25% to $115.2 billion, and its average revenue per active member (ARPAM) grew 16% to $245. Its total revenue increased 31% to $1.67 billion.
Chime's active member base grew to 9.1 million by the end of the third quarter of 2025. But its purchase volume still dipped sequentially throughout the first three quarters of the year. Its ARPAM also decreased sequentially in the second quarter and flatlined in the third quarter. It initially blamed that slowdown on tough comparisons to the seasonal surge in tax refund-driven spending in the first quarters of every year, but the macro headwinds likely exacerbated that pressure.
At the same time, its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margins shrank as it ramped up its marketing campaigns and rolled out more lower-margin features. That mix of slower sales growth and rising costs spooked the bulls.
But for 2025, analysts still expect Chime's revenue to rise 30% to $2.17 billion as its adjusted EBITDA turns positive. For 2026, they expect its revenue to grow 21% to $2.62 billion as its adjusted EBITDA nearly triples. That optimistic outlook suggests its near-term investments will pay off as the macro environment warms up again.
Upstart will profit from lower interest rates
Upstart doesn't issue any of its own loans. It's merely an AI-powered middleman marketplace that approves loans for a wide range of banks, credit unions, and auto dealerships. But instead of crunching traditional data like a borrower's FICO (FICO 7.25%) score, credit history, or annual income, Upstart aggregates non-traditional data points -- including previous jobs, standardized test scores, and GPAs -- to reach a broader range of customers.
That makes Upstart a valuable tool for approving loans for younger and lower-income borrowers with limited credit histories. It generates most of its revenue by charging its lending partners referral fees, which are collected as a small percentage of each approved loan. Its business flourished when interest rates were low, but it stalled out in 2022 and 2023 as rising rates curbed the market's demand for new loans.
NASDAQ: UPST
Key Data Points
But in 2024, Upstart originated loans grew 28% as its conversion rate (the percentage of inquiries leading to approved loans) rose 6.5 percentage points to 16.5%. Its total revenue rose 24% to $636.5 million, and its adjusted EBITDA -- which turned red in 2023 -- turned green again.
That growth was mainly fueled by the Fed's three rate cuts throughout the year. But it also automated more of its loans, gained more lending partners, and expanded its smaller auto lending and home equity lines of credit (HELOC) segments to reach more borrowers. It also focused on gaining more "super prime" borrowers to increase its take rates, boost its gross margins, and reduce its long-term dependence on riskier borrowers.
The Fed cut its benchmark rates two more times this year, and analysts expect Upstart's revenue and adjusted EBITDA to surge 63% and 2,066% in 2025 as those tailwinds kick in. For 2026, they expect its revenue and adjusted EBITDA to rise 22% and 42%, respectively.
The better buy: Upstart
With an enterprise value of $8.35 billion, Chime looks reasonably valued at 26 times next year's adjusted EBITDA. But Upstart, with an enterprise value of $5.38 billion, still looks cheaper at 16 times next year's adjusted EBITDA.
Both of these fintech stocks seem like promising investments. But Chime faces more direct competitors than Upstart, its growth is decelerating, it relies heavily on consumer spending, and its stock is more richly valued. That makes Upstart -- which has stronger growth rates, a lower valuation, and clearer near-term catalysts -- the better buy.
