Bank Regulation

Varo Money Applies For Charter To Become A Mobile-Only Regulated Bank

Varo Money, the digital banking fintech that has investment backing from Warburg Pincus, filed for a national banking charter and deposit insurance, putting the Trump administration’s policy to extend bank charters to fintechs to the test.

According to a report in the Wall Street Journal, by filing for the banking charter it puts the startup on the path to become a regulated bank that could take deposits, pay interest, make loans around the country and issue debit and credit cards all via a mobile app.  This, noted the report, is a departure from other fintechs based in the U.S. such as PayPal and LendingClub, which bristle at looking like traditional banks. Another fintech looking to become a bank is Social Finance, known as SoFi, which started out in student lending but has expanded into a host of other services. The Wall Street Journal reported SoFi is looking to become an industrial bank in Utah. Meanwhile, the paper noted a group of venture capitalists based in San Francisco bought stakes in CRB Group of New Jersey, which is a bank that has partnerships with fintech software companies.

Varo, for its part, started out in 2015 partnering with banks but now wants to do it on its own and thus the national banking charter it is seeking from the  Office of the Comptroller of the Currency and its efforts to take deposits from the Federal Deposit Insurance Corp. In an interview with the Wall Street Journal, Colin Walsh, chief executive and co-founder of Varo, said recent talks with regulators led the fintech to speed up its plans to get its own charter.  The move comes as the White House is looking to entice new entries into the banking market. Last week, acting head of the OCC,  Keith Noreika, said, “The federal banking system [needs] to be more inclusive,” reported the Wall Street Journal, noting the regulator is in talks with interested companies. Varo has raised more than $27 million from Warburg and is looking to raise $160 million from new investors to lower Warburg’s stake and to provide the bank with capital, noted the report.


Featured PYMNTS Study:

More than 63 percent of merchant service providers (MSPs) want to overhaul their core payment processing systems so they can up their value-added services (VAS) game. It’s tough, though, since many of these systems date back to the pre-digital era. In the January 2020 Optimizing Merchant Services Playbook, PYMNTS unpacks what 200 MSPs say is key to delivering the VAS agenda that is critical to their success.

Click to comment