The Office of the Comptroller of the Currency (OCC) granted preliminary approval for the charter in September of 2018. Now, with the FDIC’s blessing, the company said it will begin the last leg of its quest to become a full-fledged, genuine bank.
The charter application is indicative of a shift in the banking industry toward technology and a renewed commitment to financial inclusion, according to the company’s announcement.
“Receiving an official bank charter has been part of Varo’s vision from the very beginning, and we are excited to progress through the necessary steps to accomplishing that goal,” said Colin Walsh, CEO of Varo Money, in a statement. “Despite historic economic growth, only 29% of Americans are considered financially healthy. Varo is committed to creating inclusive financial opportunities that deliver measurable benefits to all consumers. Becoming a fully chartered bank will give us greater opportunity to deliver products and services that positively impact the lives of everyday people around the country.”
Colin Walsh @colindwalshsf
I am thrilled to share that the FDIC has approved Varo Money Inc.'s application for Federal Deposit Insurance. A truly landmark moment in banking history. #challengerbanks #innovation #banking #fintech #financialhealth #financialinclusion
Per the FDIC bank decision (PDF), the organization considers relevant “statutory factors enumerated in section 6 of the Federal Deposit Insurance Act” when determining how to process applications for the insurance. As such, those factors include:
- “Financial history and condition”
- “Capital adequacy”
- “Future earnings prospects”
- “General character of management”
- “Risk to the Deposit Insurance Fund”
- “Convenience and needs of the community”
- “Consistency of corporate powers”
Other businesses, like Chime, offer similar services but do act independently to provide those services. Chime, for example, partners with FDIC banks but does not itself have the insurance. Those with accounts, according to Chime, are insured for $250,000—the standard maximum amount—through its partner banks, The Bancorp Bank and Stride Bank, N.A.
“We should not underestimate how significant this is for the banking industry as it’s the first time a mobile-centric company is poised to be a chartered bank in the United States. Getting through this very high regulatory hurdle now opens the door for Varo to become the biggest mobile-centric national bank,” said Jo Ann Barefoot, CEO of Barefoot Innovation Group and former deputy comptroller of the OCC in a statement. “It also opens the door to enabling tens of millions of Americans who have been underserved to gain access to affordable FDIC-insured banking, which will build financial health and security for individuals and communities.”
Varo Bank now must complete both the FDIC and OCC conditions for Federal Reserve membership in order to complete its quest, reads the announcement. Once a charter is approved, the company announced plans to offer loan, credit cards and savings products.