There’s more funding for the so-called neo banking space this week with news San Francisco-based Varo Money has pulled in $27m in fresh investment. Like its peers in the space, the firm aims to offer a simple, intuitive banking experience as well as helping its customers to gain greater oversight and control of their finances.
Varo Money is currently in the process of looking for a banking partner to offer services like deposits and lending, but says it may in the future apply for its own licensing. Live trials are set to start later this year. The news comes as activity in the neo-banking space continues to heat up, with Denmark’s Lunar Way, based in Aarhus, planning to launch in the not too distant future.
The company was founded by strong finance stock including Colin Walsh, who previously headed up American Express in the UK as CEO and previously worked at Wells Fargo and Lloyds. His co-founders also include Mykola Klymenko, former VP of tech at Lending Club, who is the firm’s CTO. Indeed the firm is bristling with big names. Backing in the company was led by private equity firm Warburg Pincus, with its MD David Coulter, also former CEO and chairman of BankAmerica joining the startup’s board.
Startup at a glance
> Services will include a debit card, deposits and lending services
> Real-time budgeting and spending analysis
> Status: looking for a sponsor bank to team up with
> Eventually plans to get its own charter
Amid all the activity happening in the banking sector right now, it can be easy to mix up some of the new labels being assigned to new entrants. Varo Money sits in what is being called the neo bank space, with other examples in the US including Moven and Simple. The model here is for a startup to develop a new interface to banking services like a current account and then partner with an established bank to provide those actual services. In Europe, an example is Number 26 in Berlin, which partnered with Wirecard to provide its banking services. With rumours that the firm could be looking for its own license, it seems the definition of a bank is likely to become more blurred.
It should be noted that neo banks are therefore different to the so-called challenger banks, examples of which include Atom, Mondo and Tandem in the UK. These players want to offer banking services, but build them on new, cheap and agile infrastructure without any of the legacy platforms, costs and processes while catering to the demands of the modern consumer.
“The US banking market is undergoing a huge transformation and Varo is ideally positioned to offer a unique and unrivalled banking service to our target customer base,” says Walsh. We have the team, strategy, product vision and execution capabilities to change the way that people interact with their banks – empowering customers to achieve a better financial future.”
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