VARO MONEY TO BECOME THE US’ FIRST FULLY LICENSED DIGITAL BANK: US-based neobank Varo Money has been granted preliminary approval for a national bank charter from the Office of the Comptroller of the Currency (OCC), which it appliedfor last year. This could mark the first digital-only bank in the US to become a fully licensed bank. Currently, Varo Money still relies on a partnership with The Bancorp Bank to offer financial services including savings, loans, and account-based offerings. Obtaining a national bank charter would allow Varo Money to further expand its product suite and provide its services in all 50 states. Additionally, it could further streamline its operations, and lower costs by eliminating any fees it pays to the incumbent.
Going down the traditional route may be more lucrative for neobanks than applying for an alternative charter. Varo Money’s decision to take the traditional route to apply for a banking license should allow it to offer a wider range of services. Perhaps more notably, though, this is now the only path that appears poised to actually yield a charter for a US-based fintech. In the past, other players including Square have opted to apply for an industrial loan charter (ILC), but no applications have been approved since 2008, and Square has now temporarily withdrawn its application. And, while the OCC also recently started to accept applications for its fintech charter, the implications of this process are not yet clear. For now, it seems that the traditional route is the most fruitful option for fintechs looking to become a bank, even though it’s also likely the most tedious.