Mobile banking FinTech Varo Money has raised $45 million in Series B funding as it strives to become a mobile-only regulated bank.
According to American Banker, the funding will be used by Varo to expand its talent pool, continue developing its product, boost marketing and continue to work toward its ultimate goal of becoming a regulated bank.
Varo applied for a national bank charter in July, which would enable it to become a regulated bank that can take deposits, pay interest, make loans around the U.S. and issue debit and credit cards – all via its mobile app.
“This next generation of consumers are looking for more affordable solutions that are technology -driven, that let them solve everyday banking problems with a few taps of the phone,” said Colin Walsh, its CEO and founder. “Our technology could help the masses, not just the people who can afford a private banker, to get ahead and improve their financial situations.”
Walsh, who calls himself a “reformed banker,” explained that with traditional banks, “there’s a reliance on overdraft fees, minimum balance fees and things that are quite punitive for people who are just starting out and don’t have lots of money."
In addition to offering checking and savings accounts and direct deposit, Varo also provides its customers with a debit card, a line of credit and an unsecured loan through its app. Customers are not subject to minimum balance requirements or foreign exchange and overdraft fees. Instead, Varo makes its money through interchange fees and interest income from loans. There are also future plans to pull fee income from partners in insurance, wealth management and student loans.
“We’re looking at how we can lower the cost of banking, particularly for people who have volatile cash flows,” Walsh said.
Global private equity firm Warburg Pincus, which led Varo Money’s Series A financing, and 30 other participants participated in this latest round, which will bring Varo's total amount raised to more than $78 million in less than two years.
“We had a large Series A round, and we still had a fair amount of money in the bank,” Walsh noted. “We felt the timing was right to go back to the market, particularly as we’re in the middle of this application process, to raise more capital.”
He also noted that the company continues to work toward its banking charter.
“We’re very actively engaged with the regulators,” said Walsh. “The OCC is not going to relax their standards, so it’s been a rigorous process. They’re definitely not just sitting on it. We speak regularly.”