As it prepares to go public, digital bank Chime is rolling out a slew of new features, including a significant increase in its annual percentage yield (APY) to 3.75% for customers who agree to direct deposit their paychecks into a Chime savings or checking account. This move is seen as a bid to attract more customers and improve customer stickiness, a key metric for investors.

The new APY offering is a significant jump from the national average savings account yield of 0.61% APY, according to Bankrate's survey of institutions as of the week of March 24. Even for customers who don't opt for direct deposit, Chime's standard APY of 2% remains competitive in the market. Chime Chief Product Officer Madhu Muthukumar didn't explicitly state that the move is aimed at increasing customer retention, but it's clear that the company is looking to incentivize users to stick with its platform.

Chime has been growing rapidly, with 7 million customers and $1.5 billion in annualized revenue as of last summer, according to Forbes. The company has declined to provide updated figures, but its valuation has soared to $25 billion after raising $1 billion in 2021. Chime has raised a total of $2.65 billion from investors, including Forerunner Ventures, Menlo Ventures, Crosslink Capital, Sequoia, SoftBank, Tiger Global, and many others.

The company filed confidential paperwork to go public with the U.S. Securities and Exchange Commission in December, but has declined to comment on potential IPO timing. As Chime gears up for its public debut, it's clear that the company is focused on demonstrating its ability to attract and retain customers.

To be eligible for the 3.75% APY, Chime customers must become members of Chime+, a premium membership tier that requires direct deposit of their paychecks. There is no charge to join as a premium member. Chime markets itself as a bank alternative for everyday Americans, touting its lack of overdraft, maintenance, or low balance fees, as well as no account minimums.

Chime's customer base skews slightly female, with members mostly in their 30s and "gainfully employed," according to Muthukumar. The company has also expanded its offerings to include a credit card that helps users build and improve their credit, as well as a redesigned app, expanded "deals" or discounts, cashback offers, and dedicated customer support.

In a crowded fintech market, Chime is just the latest company to get creative in its efforts to woo customers. Last week, Robinhood announced that it would begin offering wealth management and private banking services to retail investors, touting a 4% APY on savings, as well as assistance with estate planning and taxes, among other things. As fintech companies continue to innovate and compete for users, it's clear that the battle for customer loyalty will only intensify.

With its new APY offering and expanded features, Chime is making a strong play to attract more customers and improve customer retention ahead of its IPO. As the company prepares to go public, it will be closely watched to see if its efforts pay off.