Mobile banking applicatione de Varo Money.
Varo "Bank has more than more than tripled its valuation after being granted a national banking charter last year, CNBC has learned.
The company is expected to announce on Thursday that it has raised $ 510 million in a round Table Series E led by hedge fund Lone Pine Capital and comprising dozens of new and existing investors. The company's valuation has reached $ 2.5 billion, up from about $ 700 million after its previous one. fundraising, according to people familiar with the subject.
Varo is the latest digital bank to raise a multibillion dollar valuation while attracting millions of new customers unhappy with traditional institutions. bigger competitors like Chime , "which partners with FDIC-backed banks to manage deposits, Varo is a fully regulated bank. , having won the first national "charter for a company consumer fintech in July 2020.
"There is an element of legitimacy in operating as a real bank which is very powerful at the end of the day " said the CEO and founder of Varo, Colin Walsh, in a phone interview. "We are directly regulated, everything we do comes under scrutiny.
By owning his bank, Varo, based in San Francisco has an array of financing and cost advantages over most of its competitors, according to Walsh. This has enabled it to offer higher interest rates, instant cash advances and access to the Zelle payment network, he said.Varo has teamed up with Bancorp.
"We have effectively cut out the middlemen," Walsh said. "These are real costs that we have reduced and can now use to create more value for our customers and for our shareholders.
Varo has doubled its accounts receivable to four million and tripled its income in the 13 months after obtaining its charter, he said.
The start-up owns its customers' data, rather than ceding it to a partner bank, has he declared. deliver more personalized user experiences in the future, said the CEO. This can be essential as it builds its product set to potentially include investment and cryptocurrency functions. FinTech companies like Square and Revolut hustledslowly growing to become all-in-one apps for all things finance.
"Customers don't want to have a dozen apps on their phone to manage their financial life , they want a trusted vendor to help them navigate through the different things they 're trying to solve, "Walsh said.
Walsh, a former executive at American "Express , made the bet at the beginning of the development of Varo to research a bank charter. He started the process in 2017, and as some competitors were gaining customers at a breakneck pace, Varo dropped in over " three years satisfying the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Federal Reserve.
"We kind of did it in reverse orderthe Silicon Valley playbook, which is, you know, you just have to find a niche, scale real fast, and then figure out the rest, ”Walsh said. "Now it's about composing it in a way that creates a very profitable business that will have a huge impact on the lives of our consumers.
Walsh added that Varo is evaluating options for eventually going public as well as expanding overseas. Armed with his charter and more than $ 500 million to spend on customer acquisition and product development, the CEO seemed eager to compete with other fintech companies.
"They've been working on it longer," Walsh said. "Now the fun begins.
Become a smarter investor with CNBC Pro .
Get stock picks, analyst calls, exclusive interviews and access to CNBC TV.
Register to start a free " trial today .