Varo Money Gains FDIC Approval, Nears Becoming a Real Bank
Over the past few years, several FinTech companies have introduced their own banking services — rolling out savings accounts, debit cards, or both. These products are often the result of partnerships that the startups have with one or multiple banks in order to meet regulatory requirements and provide their customers with key protections such as FDIC insurance on funds. However this week one FinTech company took one big step closer to becoming a full-fledged bank in its own right.
On Monday, Varo Money announced that it had received approval from the Federal Deposit Insurance Corporation (FDIC) to receive deposit insurance. This comes after the company re-filed its application with the agency last summer. Prior to that, Varo had filed paperwork in 2018 but later withdrew that application.
With the FDIC signing-off on Varo’s request for a national bank charter and the Office of the Comptroller of the Currency previously granting preliminary approval back in September of 2018, all that’s left to do is gain the final seal of approval. If that happens, it would mark the end of a long road for the company, which initially submitted to become a bank in 2017. Upon approval, Varo would become the first mobile-only bank to hold its own charter.
In a press release announcing the milestone, Varo Money CEO Colin Walsh said, “Receiving an official bank charter has been part of Varo’s vision from the very beginning, and we are excited to progress through the necessary steps to accomplishing that goal.” He went on to discuss Varo’s mission and what becoming a real bank would mean for that goal, adding, “Despite historic economic growth, only 29% of Americans are considered financially healthy. Varo is committed to creating inclusive financial opportunities that deliver measurable benefits to all consumers. Becoming a fully chartered bank will give us greater opportunity to deliver products and services that positively impact the lives of everyday people around the country.” Meanwhile, also commenting on what a Varo bank charter would mean for the industry, Barefoot Innovation Group CEO and former OCC deputy comptroller Jo Ann Barefoot noted, “We should not underestimate how significant this is for the banking industry as it’s the first time a mobile-centric company is poised to be a chartered bank in the United States. Getting through this very high regulatory hurdle now opens the door for Varo to become the biggest mobile-centric national bank.”
Assuming that Varo does earn final approval, the company says it plans to expand its existing offerings. They note that this could include issuing credit cards and loans in addition to rolling out more savings products. Currently the company offers fee-free accounts with no minimum balance requirements or monthly service fees. They also feature free access to in-network ATMs and a well-above-average interest rate on savings.
At this point, it seems that Varo Money will indeed become a chartered national bank. This will surely open the door to other FinTechs — some of which have previously applied and withdrawn applications — while perhaps also providing them a better roadmap for the process. Of course, the deal is not yet done but here’s hoping that Varo can run the ball into the endzone. If they do they’ll be scoring a big win for themselves and the FinTech industry.