Mobile banking company Varo Money created a digital bank aimed at people seeking affordable financial services, and a new round of funding will help boost its efforts to promote financial inclusion for all Americans.
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The San Francisco-based company closed a $241 million Series D round, co-led by new investor Gallatin Point Capital and existing investor TGP’s The Rise Fund, U2 lead singer Bono, and Jeff Skoll, a global entrepreneur and movie producer. Other new investors joining the round include HarbourVest Partners and Progressive Insurance.
Varo last raised money in 2019, a $100 million Series C. In all, the company has raised just under $420 million, Varo’s co-founder and CEO Colin Walsh told Crunchbase News.
He started the company four years ago to put a bank product in the market to help those people not served by an incumbent bank. Walsh estimates there are 150 million Americans who are underserved or overcharged.
“Varo fills that white space,” Walsh said. “We are also tech-driven to help eliminate costs and help people stretch their money, as well as repair and access credit.”
The bank now serves 2 million accounts and deposits have grown 350 percent since the beginning of 2020, he said.
The new round of funding will be used to drive Varo’s growth and help it develop a range of financial products, such as credit cards, loans, wire transfers and other services that fintechs may be limited to by their sponsor banks, Walsh said.
Part of that growth includes becoming the first and only fully digital bank to receive a national charter, a process that started back in 2017, Walsh added. One of the charter requirements is accumulating $104 million in equity, which this funding helps Varo accomplish.
In addition, Varo aims to provide its users with education—tips and tools on building financial resilience–and has also brought on partners to offer services such as insurance, credit repair and reducing bills.
Meanwhile, the company is working on opening Varo Bank; developing the range of new products and services to enhance the overall customer experience, Walsh said.
“I see us moving to profitability next year and an IPO in a few years time,” he said. “Varo has an important role to play in the banking industry and broadly in society.”
Illustration: Li-Anne Dias