Challenger bank Varo raises $241m in funding

Mobile challenger bank Varo announced today through Cision PR Newswire it’s raised $241m in a Series D funding round.

The funding was co-led by new investor Gallatin Point Capital and existing investor The Rise Fund with participation coming from the singer Bono, movie producer Jeff Skoll, HarbourVest Partners, and Progressive Insurance. 

Varo said they will be using the funding to increase its product and service suite to include credit cards, loans, and additional saving products and as a result will hire new team members across departments including operations, marketing, risk, engineering, and communications. 

Speaking on the round Colin Walsh, founder and CEO of Varo said: “Varo was founded first and foremost to make a powerful impact on systemic financial inequality in communities across this country. As the first fully digital bank, Varo will bring our mission of financial inclusion to life and create more financially resilient — and thus healthier and stronger — communities. This new investment will enable us to complete the chartering process and leverage our modern banking technology to build on our track record of innovation and inclusion,”

The challenger bank offers a digital banking account with no need for brick and mortar stores, no monthly fees or minimum balance amounts, high-interest saving rates, no fee overdraft of up to $50, and more than 55,000 fee-free Allpoint ATMs worldwide which customers can access their money through. 

Varo uses Bancorp Bank who is a member FDIC which means deposits are insured to at least $250,000 and Varo also assures customers they never sell users’ personal data. 

However, this may soon change for challenger bank Varo due to their desire to become a traditional bank. 

Varo’s goal is to become the first and only fully digital bank to receive a national charter and in September 2018 the company received preliminary approval from the Office of the Controller of the Currency (OCC) and in February 2020 they announced they are the first FinTech to win approval for FDIC insurance. 

Maya Chorengel, co-managing partner of The Rise Fund explained why they invested in Varo by saying: “In the midst of all the economic challenges people are facing right now, the digital economy can still be a force for good. Varo’s focus on financial inclusion and the support they offer people to help manage their finances and reduce financial stress really matters at a time when so many American families are struggling in a volatile economy. And that’s why RISE chose to partner with the team at Varo,”.

Challenger bank Varo isn’t the only FinTech to be raising funds with Smarterly securing £7m in a Series A funding round, LUXHUB raising €7.4m in funding, and freelancer banking app Lili raising $10m.

San Francisco based Varo was founded in 2015 and launched in July 2017. Since then the company claims to have nearly 2 million banking and savings accounts with account growth up 60%, spend being up roughly x1.5 the usual amount, and deposits being up roughly x3.5 the usual amount since the beginning of 2020.

The company has people on its team with experience from the likes of Google, Visa, Pinterest, T-Mobile, acorns, Bank of the West, American Express, Capital One, and Trulia. 

This funding round brings Varo’s total raised capital to a total of $419m since being launched in 2017 with the company stating they are moving to the final stage of its bank charter journey.