Chime, one of the largest digital banking startups in the U.S., has agreed to stop conflating its offerings with those offered by banks in its marketing and advertising messages, per a March settlement agreement with California regulators. Chime has until May 15 to implement its terms and until June 15 to complete quality-control tests.

Why should we care?
With the growing number of fintech startups that offer banking services in partnership licensed banks, regulators are taking a harder line on fintechs giving the impression they might be banks. Chime’s prior use of the URL chimebank.com (it currently redirects to chime.com) and use of the terms “bank” and “banking” in other marketing materials caught the ire of the California Department of Financial Protection and Innovation. “At all relevant times herein, Chime was not licensed to operate as a bank in California or in any other jurisdiction, nor was it exempt from such licensure,” it said in the settlement agreement. At least one major bank competitor of Chime is unhappy about nonbanks’ use of the term “bank”: “Words like banks, savings account, and others are things that … neobanks and challenger banks should not be allowed to use,'' Green Dot CEO Dan Henry said on the company’s first-quarter earnings call this week. The California settlement will likely nudge other fintechs that don’t have banking charters to be careful about use of the terms “bank” or “banking” when referring to their product offerings in marketing materials. Chime’s homepage now says “Chime is a financial technology company, not a bank. Banking services provided by The Bancorp Bank or Stride Bank, N.A.; Members FDIC.”