Mobile Bank Varo Money Refiles for FDIC Insurance
For years one of the big questions surrounding FinTech is whether startups could one day become their own independent banks. Although a few companies have attempted to obtain charters of their own, they’ve had varying levels of success — none of which have been overwhelmingly positive. However, as Crowdfund Insider reports, this week Varo Money reapplied for FDIC insurance, moving them one step closer to becoming a true bank.
This latest development comes just shy of two years after Varo first applied for a national bank charter. It’s also nearly one year since the Office of the Comptroller of the Currency (OCC) granted the FinTech conditional approval on said charter. In their approval, the OCC wrote “The proposed Bank will be a full-service bank with a nationwide footprint. The Bank’s proposed business model combines a traditional retail banking approach with modern technology. The Bank proposes to offer banking products through mobile, online, and phone-based banking channels and intends to include traditional loan and deposit products.”
Unfortunately completing the second half of the charter requirements — obtaining FDIC approval — has proven more difficult for Varo. The company first applied for the insurance last fall but ended up withdrawing. Should the FDIC choose to sign off this time, the OCC would then need to grant final approval. If all goes to plan, the FinTech could be an independent bank as early as next year.
To outsiders, Varo operating as a full-fledged bank might not seem like such a big deal. That’s because several online institutions offer FDIC insured accounts, giving general consumers the impression that they’re all the same. In reality, many of these online banks are partnering with FDIC insured institutions in order to accept deposits. Thus, were Varo Money able to finally receive their bank charter, it would set them apart from the crowd in a big way.
Beyond the novelty of Varo being a mobile-only bank with its own charter, such a structure would also give them operational benefits. Speaking to Business Insider, Varo Money CEO Colin Walsh said, “You just don’t control your own destiny when you’re operating that model as much as you do when you’re actually an independent bank. Us having that sort of several-year lead on going through that regulatory process and getting on the other side of that regulatory process will allow us to compete in a way that many of the FinTechs will struggle in terms of having the breadth of products and having some of the cost advantages.”
While it’s certainly no guarantee that Varo Money will be able to seal the deal on their banking charter dreams, the firm does seem optimistic. Moreover their success could have big impacts for future FinTechs to do that same. It may be some time before the charter process is complete for Varo Money but it will definitely be worth watching.