Sometimes the road less traveled makes all the difference, as Robert Frost wrote. That was the road taken by Colin Walsh and his team of tech and fintech experts four years ago when they created the mobile bank Varo Money and decided to pursue a national bank charter. If all goes well, they will soon find out if the less-traveled route is the better one.
Varo Money, like all other challenger banks, has had to partner with a sponsor bank to gain access to the regulated banking system and be able to offer insured deposits. In Varo’s case it has been The Bancorp Bank. Many challenger banks have grown rapidly under that hybrid model, including Varo, but Walsh, CEO and Co-Founder, persisted in his belief that operating directly within the regulated banking system, ultimately would prove to be an advantage.
“There are limits to what you can do when working with a partner bank,” he tells The Financial Brand. “As the digital bank grows, for example, it could quickly break through the sponsor bank’s capital reserve limits. And there is risk to the digital bank as well if the partner institution runs into compliance ‘conduct’ issues.”
Thus, almost from the start Walsh began the process to obtain a national bank charter from the Office of the Comptroller of the Currency.
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