Fintech Varo gets US bank regulator approval

Varo Money, a mobile-only finance start-up, is a step closer to becoming a full-scale bank following the FDIC's approval of the fintech company’s national bank charter application.

This means Varo Money may now take customer deposits.

Over the last number of years the US has seen many fintech and community bank partnerships where the likes of Varo, Chime, Robinhood and Square focus on customer interface apps leaving it to the banks that they partner with to  hold customers’ money.  Other examples of these types of partnerships include Apple and Goldman Sachs for the Apple Card and Google with Citi for a debit card.

The deposits in the Varo arrangement are currently held by Bancorp. Those customer deposits will soon be transferred over to Varo subject to a few regulatory hurdles.

Varo, valued at $417.8 million is backed by TPG and Warburg Pincus.  It has someway to go to achieve the lofty valuations of newcomer US digital banks, such as Chime last valued at $5.8 billion.

While non-US fintechs, such as Revolut and N26 are eyeing the US banking sector, none have progressed to an almost fully chartered bank status.  Irish HQed fintech TransferMate partnered with Wells Fargo in 2019 to deliver "Global Invoice ConnectSM"  which is used by  US-based international businesses looking for more cost-effective solution for receiving payments from their global customers. TransferMate, while not a bank, is licensed across the US as a money service business, complementing its licensing and registration  in Europe, Australia, Asia and the Middle-East.

Other examples of fintech heading into banking territory include:

• Grasshopper - the first new commercial bank chartered in the Northeast in more than ten years. It was the ninth bank to receive a charter since the 2008 financial crisis, according to the company; 
• Square - has applied to the FDIC for a  special industrial loan company license;
• Robinhood - applied to the Office of the Comptroller of the Currency for a national bank charter but pulled that application in November 2019.

Source: https://www.cnbc.com/2020/02/11/start-up-bank-varo-gets-approval-to-become-a-full-scale-bank.html.  Consider following the author Kate Rooney.
https://www.independent.ie/business/irish/transfermate-seals-major-deal-with-us-giant-wells-fargo-38124846.html 

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Posted by Peter Oakes (www.peteroakes.com / Twitter @oakeslaw @US_Fintech @FintechUK_HQ @FintechIreland)
#FintechUS #USFintech
See also www.UKFintech.com www.FintechIreland.com
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