Last year the Office of the Comptroller of the Currency discussed their intent to allow FinTech companies to receive “special purpose national bank” charters sometime in the near future. While the details of that plan are still being debated, one would-be bank intends not to let that slow them down. As American Banker reports, Varo Money has filed an application to become a national bank — but one that operates exclusively via mobile devices. As Varo’s CEO and co-founder Colin Walsh explains, “We’d be the first national bank in U.S. history that is designed for people who want to bank on their cell phones. We’re suddenly now putting a personal banker in your pocket.”
Varo was first founded in 2015 and, through a partnership with The Bancorp Bank, launched their app last month. This app not only allows users to set up banking features, including direct deposits and bill pay, but also incorporates elements of other popular personal finance apps like Mint. For example Varo users can link their other bank accounts in order to monitor all of their money from one place. Additionally the company has positioned itself as a more consumer-friendly banking option, boasting no overdraft, foreign transaction, or minimum daily balance fees.
Despite their decided lack of brick and mortar branches, Walsh says the rest of Varo Money’s business model resembles a traditional bank, hence the decision to apply for a regular bank charter instead of waiting for the FinTech version. And, while Varo’s current model mirrors one taken by Simple and other online institutions, it says that receiving a bank charter of their own would improve their operations. Walsh states, “The bank charter will simplify our model and allow us to offer a fuller suite of products on a nationwide basis.”
While Varo’s charter approval would be a big moment for mobile banking and FinTech overall, there are reasons to believe it’s a long shot at this point. First of all a new bank charter would need to be approved by both the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC). Furthermore the pair has only granted a handful of charters in recent years, leading many doubting that a mobile-only bank would have much luck pleading their case. Walsh acknowledges as much, telling American Banker, “It is such a high hurdle. This is incredibly demanding and complicated, and both the OCC and the FDIC have been very clear that while they’re interested in what we’re doing, it’s not going to be easy.”
Of course another factor in Varo’s bid will be its ability to prove sustainable profitablity. With their app only launching within the past month, it’s difficult to know how things are going so far. That said, Walsh claims the app has not only been getting downloads but account applications as well, leading to thousands of users and, apparently, some revenue.
All in all, Varo’s campaign for a national bank charter — along with SoFi’s pursuit of a similar goal — is an exciting step forward regardless of whether it comes to fruition anytime soon. First off, it could put more pressure on regulators to work through their differences and move forward on a solution for FinTechs (although it’s unclear if Varo would be interested in the proposed “special purpose” charters). Additionally the various press this announcement has received demonstrates the interest that journalists and consumers alike have in emerging financial technologies. As for the end result of this fanfare, we’ll just have to sit back and wait.