Feb 10, 2020 - Economy & Business

Varo gets long-awaited FDIC nod of approval

Illustration: Rebecca Zisser/Axios

The FDIC has given Varo Money its official seal of approval, according to Varo CEO Colin Walsh.

Why it matters: It's the crucial second step for Varo to become a national bank, following the Office of the Comptroller of the Currency granting its own preliminary approval back in October.

  • Up until now, digital banks have had to piggyback on older, more established banks for their banking operations. (Or else, like Goldman Sach's Marcus and BBVA's Simple, they're subsidiaries of bigger banks.)
  • Varo Money is now set to receive the first "de novo national bank charter" ever given to a fintech startup. That should give it a level of freedom and flexibility its competitors lack.

Background: Digital banks have dreamed of this day since Bank Simple first launched in 2012, but it's been a long time coming. While Goldman Sachs received its bank charter in one day in 2008, the process for Varo Money has taken more than three years.

  • Bank regulators have worried that VC-backed startups are too thinly capitalized to survive a crisis or avert a bank run, or that they lack the necessary depth of banking expertise. Varo has now shown that those concerns can be addressed.

What they're saying: "From a regulatory perspective, this is a recognition that technology-driven banking is now mainstream," Walsh tells Axios. "This has been a three-year process, and we've spent tens of millions of dollars on it. That's something of a moat for us. It's hard to find investors willing to put that kind of money upfront without the certainty of reaching the finish line."

Be smart: The move means that Varo will finally control its own deposits, and it will be able to use them to fund loans. That will give Varo a significant advantage over other challenger banks like N26, Aspiration and Chime.

What's next: Walsh sees final approvals coming in Q2, at which point accounts will start being transferred over from Bancorp, Varo's current partner bank. Once Varo has access to all of its customers' data and money, it will start being able to offer new products like credit cards, joint accounts and certificates of deposit.

Go deeper

Joe Walsh on the issues, in under 500 words

Joe Walsh holds a news conference after his election to Congress in November 2010. Photo: Bill Clark/Roll Call)

Editor's Note: Walsh dropped out of the race on Feb. 7, 2020. Below is our original article on his candidacy. He is the second Republican to drop his challenge.

Former Illinois Rep. Joe Walsh, who claimed he "helped create Trump" while announcing his candidacy in late August, is 1 of 3 long-shot Republicans running against the president for 2020. Walsh is pro-impeachment, but his previous support for Trump could complicate his popularity among "Never Trump" Republicans.

Go deeperArrowUpdated Feb 7, 2020 - Politics & Policy

Fintech investors avoided early-stage companies in 2019

Reproduced from CB Insights; Chart: Axios Visuals

Fintech investment fell in 2019, as the number of deals and the total amount of money invested both declined significantly from 2018's record pace.

The big picture: The biggest decline was in early-stage investing, which saw the lowest number of deals in five years, according to data from CB Insights. Later stage series B+ companies, on the other hand, saw funding rise to five-year highs.

The Fed continues its digital currency push

Illustration: Rebecca Zisser/Axios

The Fed is developing its own real-time payments and settlement service and reviewing 200 comment letters submitted late last year about the proposal, Fed governor Lael Brainard said in a speech Wednesday.

What's happening: Central banks around the world have been working to issue digital currencies amid a decline in the use of cash and an increase in dependence on commercial banks for payments. Private companies like Facebook and its Libra cryptocurrency also have spurred central banks into action.