How Does Chipper Cash Make Money? Analyzing Its Business Model

Executive Summary:

Chipper Cash is a financial technology company that offers various services related to investing and payments.

Chipper Cash makes money from fees on stock and cryptocurrency transactions, interchange fees, and payment fees.

Founded in 2018, Chipper Cash has become one of the fastest-growing startups in Africa. Its founders have collectively raised over $300 million in funding.

What Is Chipper Cash?

Chipper Cash is a financial technology (FinTech) company that offers various services related to investing and payments.

At the core of its offering stands the remittance service it provides. Users can send money to other accounts at a very low cost.

Citizens from Ghana, Nigeria, Rwanda, Uganda, South Africa, the United Kingdom, and the United States can use Chipper Cash to transfer funds across borders.

Chipper Cash has since taken advantage of its popularity to expand its product suite. For instance, members can apply for the Chipper Card, a Visa debit card that enables them to pay for goods and services using their account balance.

Furthermore, users can invest in stocks and cryptocurrencies like Bitcoin, on top of being able to pay their bills.

Businesses can also use Chipper Cash’s checkout feature and network API to accept payments from customers outside the network.

Chipper Cash itself can solely be accessed via the firm’s mobile apps, which are available for Android and iOS devices.

Detailing the Chipper Cash Founding Story

Chipper Cash, which is headquartered in San Francisco, California, was founded in 2018 by Ham Serunjogi, Maijid Moujaled, and Patrick Triest.

Serunjogi, whose parents owned a farm and a local IT service company helping other firms set up their infrastructure, had experienced first-hand how cumbersome sending money in and out of Africa was.

His father, for example, was once forced to fly all the way to South Africa with an envelope full of cash after his bank in Uganda, where the family is from, couldn’t process the money.

Serunjogi, however, had other things to focus on. Back in 2010, he participated as a swimmer in the first Youth Olympics in Singapore. His knack for both academia and athletics eventually allowed him to pursue an Economics degree at Grinnell College in Iowa, which awarded him a scholarship.

Iowa also ended up becoming the place where he met his fellow co-founders Moujaled and Triest who both were enrolled in the university, too.

Moujaled, originally from Ghana, had enrolled in Grinnell’s computer science program 2 years prior. Triest, who serves as Chipper Cash’s CTO, followed a similar path.

But first, it was time to make some money. Moujaled, after graduating, went on to work as a software engineer for Yahoo, Flickr, and Imgur.

Meanwhile, Serunjogi joined Facebook as a client manager for the UK market after sending cold emails to both Mark Zuckerberg and Sheryl Sandberg, which landed him an internship before graduation.

After a few years in the corporate and startup world, the co-founders finally decided to give it a go. Serunjogi quit his job at Facebook and moved in with Moujaled in San Francisco, with the latter supporting the team by continuing to work. Moujaled’s salary and combined savings of $30,000 served as the firm’s initial seed capital.

Within 6 months, the team managed to release the first version of Chipper Cash in July 2018. The app’s first test version enabled customers to send money from Uganda to Ghana at no cost.

However, the first 40 or so meetings that the founders took were a tough lesson to be had. Venture capitalists would frequently turn them down since they assumed that the African market wasn’t offering any attractive growth prospects – an assumption that has since been debunked, in large parts thanks to startups like Chipper, Kuda Bank, and Flutterwave.

Their first big break came in November 2018 when 500 Startups, one of the more prominent VCs, agreed to pour $150,000 into the firm. The cash injection enabled them to expand Chipper Cash into 2 new markets, namely Kenya and Rwanda.

And since Chipper was substantially cheaper than existing alternatives (Kenya’s M-Pesa was charging up to 2 percent per transfer, for example), it was able to quickly expand its user base. From there, the startup never looked back.

In May 2019, the team managed to raise $2.4 million in seed funding, which enabled them to launch its B2B product Chipper Checkout. They topped that up with another $6 million in December while expanding into Nigeria weeks prior.

Covid-19 and people’s inability only accelerated the need for sending money back home and across borders. This enabled Chipper’s management team to raise 2 more rounds throughout 2020, totaling $43.8 million.

The firm was also smart to capitalize on trends. In November, for example, it introduced the option to purchase and sell Bitcoin. It seemingly went from strength to strength, which meant even more money being raised.

In May 2021, Chipper Cash became a unicorn after raising $100 million in Series C funding. Then, in November of the same year, the now-defunct crypto exchange FTX and other investors poured another $150 million to extend the firm’s Series C round.

At that point, Chipper Cash already had more than 4 million customers, many of whom joined the service after the firm hired brand ambassadors like Burna Boy or Patrice Evra. Other initiatives certainly contributed as well.

In 2021 alone, Chipper Cash expanded into the United Kingdom (May) and the United States (October), launched stock trading features and a tip jar for creators, and more.

While the firm’s ascend was certainly impressive, it, unfortunately, couldn’t last forever. Chipper’s valuation, as a result of inflation, heightened interest rates, and thus declining investments, was slashed by over 40 percent.

Additionally, the Central Bank of Kenya (CBK), in July 2022, stated that both Chipper Cash and Flutterwave were not licensed to operate in the country. The poor year was capped off by Chipper laying off 50 employees, around 12.5 percent of its workforce, back in December.

With that being said, Chipper Cash remains one of the fastest-growing FinTech players in Africa. Its previous funding rounds should enable the firm to extend its runway and eventually reach profitability.

How Does Chipper Cash Make Money?

Chipper Cash makes money from fees on stock and cryptocurrency transactions, interchange fees, and payment fees.

The business model strategy that Chipper Cash pursues is based on using its free money remittance service as a customer acquisition channel to then upsell them into other products.

Traditionally, sending money has been a very costly endeavor, especially when talking about the African continent. In 2017, the year before Chipper Cash was launched, immigrants sent a total of $41 billion back home to their friends and families.

In exchange for that service, banks and payment processors were charging exorbitant fees that sometimes reached double-digit percentages. Even the above-mentioned M-Pesa, which was only launched in 2007, imposed fees of up to 2 percent.

Chipper Cash, by enabling its users to get rid of those fees, has been able to grow its user base at a rapid pace. Key to that strategy has been the simultaneous expansion into as many countries as possible to enable cross-border payments.

Once users are tied to the service, Chipper Cash can upsell them into products and services that it then makes money on. And since the users are already in the ecosystem, introducing new money-making products can often be done for free (e.g., notifications or emails) instead of costly marketing campaigns.

Interestingly, the same playbook has first been adopted by Wise (formerly TransferWise) whose business model strategy was also based on low-cost cross-border payments.

Let’s now take a closer look at each of those revenue streams in the section below.

Interchange Fees

Chipper Cash offers a virtual debit card in conjunction with Visa. Said card can then be used to pay for goods and services at any merchant that accepts Visa payments.

Whenever a person uses their debit or credit card a so-called interchange fee is applied, which is paid by the merchant.

Now, that fee may vary greatly depending on a variety of factors, including the type of card (debit vs. credit card), the country, the category of the product or service being purchased, and so forth.

A debit card, whether issued by Mastercard or Visa, normally incurs interchange fees of 0.50 percent plus fixed fees of $0.10 per transaction.

The interchange revenue is then split between all the involved parties, namely Chipper Cash, Visa, and potential local partners.

In the United States, for example, Chipper Cash announced a partnership with card issuance platform Highnote, which distributes the cards on its behalf.

As I’ve mentioned above, the strategy is to use free money remittance as a customer acquisition strategy and then upsell them into other revenue-generating solutions. 

FinTech startups like Chime utilize a similar strategy and now derive a significant portion of their revenue from interchange fees.

Investment Fees

Chipper Cash, throughout the past few years, has introduced various investment products that enable members to purchase and sell stocks or cryptocurrencies.

On the crypto side, Chipper Cash offers the option to purchase and sell Bitcoin. Meanwhile, members can purchase shares of thousands of companies like Amazon, Netflix, and more.

Each transaction, whether it’s a purchase or sale, incurs a transaction fee of 1 percent. So, if a customer purchases $100 worth of Amazon shares, then he or she is charged $1.

Stock purchases are insured for up to $500,000 by the Securities Investor Protection Corporation while stock balances are protected by the Federal Deposit Insurance Corporation (FDIC).  

Payment Fees

The last revenue stream of Chipper Cash is the payment fees it imposes on businesses utilizing its Network API.

The Chipper Network API enables businesses to collect (recurring) payments from customers in multiple currencies while benefitting from comparatively low fees. Businesses can also pay suppliers or issue instant refunds.

Chipper Cash, in exchange for all of those services, charges a fee of 1 percent for all payments businesses collect.

Apart from paying little fees, businesses also benefit from being able to access authenticated customers.

Credit card fraud is one of the biggest problems across the African continent, with businesses losing billions of dollars every year.

Chipper Cash takes on that burden by verifying the identity of each of its members, thus ensuring that the money they use for payments is theirs.

Chipper Cash Funding, Revenue & Valuation

Chipper Cash, according to Crunchbase, has raised $302.2 million across 6 rounds of venture capital funding.

Notable investors include the now-defunct crypto exchange FTX, SVB Capital, Ribbit Capital, Raptor Group, 500 Global, and many others.

Chipper Cash is currently valued at $2.05 billion (post-money) after raising $150 million in Series C funding back in November 2021.

The company generated $75 million in revenue during the fiscal year 2021, up 4x from the $18 million it made back in 2020.

Who Owns Chipper Cash?

Chipper Cash is a private company, which means that its ownership is not actively being disclosed to the public.

However, there are a few data points that help us dissect how much the firm’s founders continue to own.

What we do know is that Chipper Cash raised a total of $250 million in Series C funding in two tranches (the first one being $100 million, the second one $150 million).

Investors in those two rounds valued the firm at $2.05 billion. As a result, they acquired a stake of roughly 5 percent in the first round (= $100 million / $2.05 billion) and 7.5 percent in the second one.

This calculation does not take secondary sales, i.e., existing investors selling their stake, into account. Unfortunately, Chipper did not disclose its valuation during its 4 previous funding rounds.

It can be assumed, though, that the founders had to give up less equity with each new round. This is because the riskiness of the business diminishes with each subsequent round as more data points (e.g., revenue, profit, user growth) are generated.

The founders likely gave up around 20 percent in each of the 2 seed rounds they raised in 2019, then another 30 percent combined during the firm’s 2020 Series A and B rounds.

Ham Serunjogi, Maijid Moujaled, and Patrick Triest probably own somewhere between 20 percent to 30 percent of the company.

This calculation is supported by Forbes, which estimated that Serunjogi and Moujaled each own around 10 percent of Chipper Cash. Triest, who largely remains in the background, probably has a substantially lower stake.

Hi folks, Viktor checking in! Years of experience in various tech-related roles have led me to start this blog, which I hope provides you with as much enjoyment to read as I have writing the content.