Varo Chief Colin Walsh Steps Down as Bakkt’s Ex-CEO Takes Over

Neobank Varo is undergoing a change in leadership.

Colin Walsh, who founded the company, has departed from his role as chief executive, according to a report Sunday (Feb. 16) from FinTech Business Weekly (FBW).

Walsh, who will remain on Varo’s board, will be succeeded by Gavin Michael, former CEO of cryptocurrency exchange Bakkt. Michael announced his departure last year, saying he would remain in an advisory position at Bakkt until March 2025.

“Michael will have his work cut out for him,” the FBW said. “While Varo highlighted a 22% increase in revenue, 38% improvement in net income, and 31% reduction in customer acquisition costs in 2024, it is still far from profitability, posting a net loss of $65 million last year.”

And while it landed a banking charter in the summer of 2020, the report added, Varo is still mostly an interchange-driven business, with 55.8% of the company’s revenues last year coming from interchange.

PYMNTS has contacted Varo for comment but has not yet gotten a reply.

FBW’s Jason Mikula argues that Michael has “limited room to maneuver,” in helping improve things at Varo, as the company has already cut major sources of spending like employee compensation and marketing.

“It seems exceedingly unlikely Varo can cut its way to profitability; rather, it needs to grow to an asset size that’s more appropriate for its fixed cost base,” he wrote.

Elsewhere in the neobank space, PYMNTS wrote last month about the momentum these organizations have gained in lending to small and medium-sized businesses (SMBs), which offers vast market potential.

In just the U.S., there are more than 33 million small businesses in operation, employing around 46% of the workplace, according to U.S. Chamber of Commerce estimates. In Great Britain, there are 5.6 million smaller firms doing business, according to government data.

“For many of these firms, cash flow remains a challenge. PYMNTS Intelligence has found that a majority of SMBs must grapple with delayed payments; about 60% struggle with cash flow,” the report added. “Loans and other credit products (such as virtual cards and expense management solutions) can prove useful when helping smaller firms survive, much less thrive.”

However, one recent survey from the U.S. Federal Reserve on small business lending found that a little more than half of large banks can approve “a small and simple loan in one business day or less, compared with only 29% of small banks.”