There are a number of startups looking to disrupt traditional banking. We’ve covered Chime, Zero and Jiko, just to name a few.
Another one of those is Varo Money and they’ve raised $45 million led by private equity giant, Warburg Pincus and The Rise Fund, a global impact fund that’s part of another private equity firm, TPG. (That’s the one U2’s Bono is involved with).
Investors believe there’s a huge market opportunity to disrupt big banks and build a more cost-effective and consumer-friendly platform that appeals to Millennials.
Young people “want something that is really simple and intuitive,” Varo Money CEO Colin Walsh told TechCrunch. “We think that this is the beginning of what could be a fairly disruptive change in a very established industry.”
Varo offers an FDIC-backed bank account backed by The Bancorp Bank. Varo also applied for its own bank charter.
Varo provides loans as well. The business uses a “machine learning algorithm to predict incoming income and their bills,” said Walsh. This helps them target customers for loans at just the right time.
The startup believes one of its biggest selling points is that it doesn’t have overdraft fees, minimum balance charges or foreign transaction fees. The only fees are for ATMs that aren’t in-network. (The app shows you which partnering machines are nearby.)
Maya Chorengel, senior partner with The Rise Fund, said she invested because they’re “confident in Varo’s ability to scale successfully as a business and advance the financial health of its customers in the short and long-term.”
Varo wouldn’t clarify exactly how many people use its product, but Walsh says it has “tens of thousands of customers.” It just launched last June.
He plans to use the funding for marketing and to “lay the foundation to become a national bank.”