Chime made a big bet on microloans. What should credit unions learn from it?

In his CUInsight article, "Chime Made a Big Bet on Microloans. What Should Credit Unions Learn From It?", James Chemplavil examines how fintech companies like Chime are successfully engaging Gen Z and Millennial consumers through microloan offerings. Chime's Instant Loans, which provide up to $500 in small-dollar loans repayable in equal monthly installments, utilize transaction-based underwriting rather than traditional credit scores. This approach has enabled Chime to attract over 22 million customers, with 75% belonging to younger demographics. The article emphasizes that credit unions need to adopt similar strategies to remain competitive and meet the evolving needs of these generations.

Chemplavil outlines three key takeaways for credit unions: first, younger members require solutions for short-term liquidity challenges; second, the prevalence of microloan products in the market has set new expectations among these consumers; and third, reliance solely on traditional credit scores may exclude many creditworthy individuals. Data from Salus indicates that 95% of microloan borrowers who successfully repaid their loans did not have prime credit scores at the time of application. By embracing alternative underwriting methods and offering accessible microloan products, credit unions can better serve younger members and strengthen their position in the financial services landscape.

‍