Chime, a 5-year-old digital banking startup, has passed 1 million customers and $4.5 billion in transaction volume. Now, it wants to drive up user interactions with its cards by incentivizing customers to make Chime cards their first choice of payment. Currently, its revenue comes from interchange fees, or costs merchants pay to financial institutions every time customers use their card to pay. The San Francisco company markets itself to millennials as mobile-friendly and fee-free, with incentives to drive user adoption of its cards. Because of its proprietary backend technology, interchange revenue has been good so far, but it plans to grow revenue even more by expanding its offerings. On average, Chime users turn out an average of 40 transactions per user per month. Many customers, said CEO Chris Britt, have changed their bill-payment option as a result of a bill-switch feature called CardSwap that takes the customer to the payment page of a subscription site and automatically swaps out their current account details for those tied to their Chime card. Chime also offers debit card rewards at selected merchants, and referral bonuses for customers who recommend others and add direct deposits. Customers can also opt to get their pay check two days early. “CardSwap by Chime appeals in its simplicity,” wrote Celent senior analyst Zilvinas Bareisis, in a recent report. “Chime’s overall business model is based on convincing its customers to make their Chime card ‘top of wallet.’” Getting customers to change their bank, historically, has been a challenge among U.S. customers. Recent research shows that the average U.S. customer holds on to their bank account for 16 years -- but times are changing, said banking technology company Kony’s chief marketing officer, Carlos Carvajal. Companies like Chime appeal to younger customers who are comfortable doing all their banking in a digital, easy-to-use interface. The company said half of new customers come from word-of-mouth referrals. "[Younger customers] don’t have the same sense of loyalty [to bank brands],” said Carvajal. Chime has a clean, simple, modern-looking app, which will resonate with millennials and help guide them.” Still, others are skeptical of this view, with a Cornerstone poll from earlier this year noting that very few customers prioritize banking with a digital-only institution over incumbents. Most of Chime’s customers are between 28 and 34 years old and earn $50,000 to $70,000 a year, with a significant portion of them located away from both coasts, the company said. The top urban centers for Chime’s customers are Atlanta, New York City, Chicago and Dallas. The company has so far raised $42.5 million in funding. Looking ahead, Chime is looking to add services to generate additional revenue, including credit, loans and a marketplace to refer customers to products from partner companies, Britt said. It’s a model others like MoneyLion and European challengers like Monzo and N26 are using. Competition in the neobank space is an ongoing risk, particularly if customers resist turning over their direct-deposit relationships to the upstart. Chime has yet to reach profitability -- few neobanks have -- but Britt said Chime is focusing its efforts on growing the business. Chime has increased its product and marketing spend by five times over the past year. Despite the growth of digital-only challengers, he said, the market is big enough for several of them to thrive. “The market is primed for new entrants in this category -- every day there’s a headline story about a big bank doing something bad,” he said. "We’ve created a product that stuck a chord with a big portion of our country frustrated by traditional big-bank options."