Varo is an American mobile-only neobank founded by Colin Walsh and Kolya Klymenko in 2015. Varo was conceived as a bank that would appeal to millennials and other consumers disillusioned with traditional financial institutions.
Varo makes money through interchange fees and brand partnerships where the company partners with companies with a similar mission to improve the financial health of consumers.
Varo also makes money via multiple fees including out-of-network ATM withdrawal fees, cash withdrawal fees, cash advance fees, and late payment fees.
Business Model Element
Analysis
Implications
Examples
Value Proposition
Varo’s value proposition includes: – Mobile-First Banking: Providing a digital banking platform accessible through mobile devices, allowing users to manage their finances on the go. – No-Fee Banking: Offering fee-free checking and savings accounts with no minimum balance requirements. – High-Yield Savings: Providing customers with the opportunity to earn competitive interest rates on their savings. – Financial Tools: Equipping users with financial insights and budgeting tools to help them make informed decisions. Varo delivers convenient, affordable, and feature-rich banking services to its customers.
Attracts customers seeking mobile-centric banking solutions. Eliminates common banking fees, making financial services more accessible. Offers competitive interest rates to incentivize saving. Empowers users with tools for better financial management. Provides a compelling value proposition in the digital banking space.
– Mobile banking accessible via smartphones. – Fee-free checking and savings accounts. – Competitive interest rates on savings. – Financial insights and budgeting tools.
Customer Segments
Varo serves the following customer segments: 1. Digital Natives: Tech-savvy individuals who prefer digital banking solutions. 2. Millennials and Gen Z: Younger generations seeking mobile-friendly banking options. 3. Unbanked and Underbanked: Individuals who may not have access to traditional banking services. 4. Savers: Customers looking for competitive savings account options. Varo targets a diverse range of customers with a focus on those who value digital convenience and affordability.
Attracts digitally native users and younger generations. Addresses the needs of the unbanked and underbanked populations. Appeals to savers interested in earning more from their savings. Targets a broad customer base with varying financial preferences.
– Tech-savvy individuals preferring digital banking. – Younger generations seeking mobile-friendly options. – Unbanked and underbanked individuals. – Customers interested in competitive savings.
Distribution Strategy
Varo’s distribution strategy includes: – Mobile App: Offering a user-friendly mobile app for customers to access and manage their accounts. – Strategic Partnerships: Collaborating with financial institutions and fintech companies to expand services and reach. – Marketing and Online Presence: Utilizing digital marketing channels and online platforms to acquire and engage customers. – Regulatory Compliance: Ensuring compliance with banking regulations and leveraging partnerships with banking partners. Varo’s distribution strategy leverages technology, partnerships, and digital marketing to reach and serve customers.
Provides a user-friendly mobile app for easy access. Expands services and reach through strategic partnerships. Utilizes digital marketing for customer acquisition and engagement. Ensures compliance with banking regulations through partnerships. Implements a technology-driven distribution strategy.
– Mobile app for convenient account access. – Partnerships with financial institutions and fintech companies. – Digital marketing channels for customer acquisition. – Regulatory compliance through partnerships.
Revenue Streams
Varo generates revenue through various channels: 1. Interchange Fees: Earning fees from transactions made using Varo debit cards. 2. Deposit Account Fees: Charging fees for certain account-related services. 3. Interest Rate Spread: Earning the difference between interest paid on deposits and interest earned on loans. 4. Premium Features: Offering premium account features for a monthly fee. Varo’s revenue is derived from a combination of transaction fees, account-related charges, interest income, and premium account offerings.
Earns income from interchange fees on debit card transactions. Collects fees for specific account-related services. Generates revenue from interest rate spreads on deposits and loans. Offers premium account features for additional monthly revenue. Establishes multiple revenue streams within its banking services.
– Earnings from interchange fees on debit card transactions. – Fees for specific account-related services. – Revenue from interest rate spreads on deposits and loans. – Premium account features with monthly fees.
Marketing Strategy
Varo’s marketing strategy involves: – Digital Advertising: Utilizing online advertising channels and social media platforms to reach and engage potential customers. – Educational Content: Providing financial education and resources to help users make informed decisions. – Referral Programs: Offering referral incentives to encourage existing customers to refer new users. – Customer-Centric Approach: Focusing on delivering a seamless and customer-friendly banking experience. Varo uses digital advertising, education, referrals, and customer-centricity to attract and retain customers.
Reaches and engages potential customers through digital advertising. Empowers users with financial education and resources. Encourages customer referrals through incentive programs. Prioritizes customer satisfaction and convenience in its approach. Implements a comprehensive marketing strategy in the digital banking space.
– Digital advertising on online platforms. – Financial education and resources for users. – Referral programs with incentives. – Customer-centric approach to banking services.
Organization Structure
Varo’s organizational structure includes: – Executive Team: Leadership responsible for strategic direction and decision-making. – Technology Team: Engineers and developers working on the mobile app and digital infrastructure. – Customer Support: Providing assistance and support to Varo customers. – Compliance and Legal: Ensuring adherence to banking regulations and legal requirements. Varo maintains an organized structure to manage its digital banking operations efficiently and effectively.
Led by an executive team responsible for strategic decisions. Employs a technology team to develop and maintain the mobile app. Offers customer support services for user assistance. Ensures compliance with banking regulations and legal requirements. Maintains an organized structure to support digital banking operations.
– Executive team leading strategic decisions. – Technology team developing and maintaining the mobile app. – Customer support for user assistance. – Compliance and legal teams for regulatory adherence.
Varo is an American mobile-only neobank founded by Colin Walsh and Kolya Klymenko in 2015.
Like many similar platforms, Walsh and Klymenko founded Varo to create a bank that would appeal to millennials and other consumers disillusioned with traditional financial institutions. The company was also founded with the social mission to lower the cost of banking and help consumers improve their financial health.
To that end, the Varo platform offers no-fee banking, low-interest personal loans, automated savings tools, and customizable in-app spend tracking and financial goal setting. Some of these features were facilitated by Varo securing a national bank charter from the United States government in August 2020 – the first consumer fintech company to do so.
In keeping with its company mission, Varo offers an affordable no-fee bank account with no minimum balance. There are no transfer fees, foreign transaction fees, and there is also no fee for replacing a lost or stolen debit card.
However, the company does earn revenue through various other charges and also makes money via brand partnerships.
Below is a look at the particulars of each revenue stream.
Interchange fees
Whenever a customer uses their Varo Visa debit card, the participating merchant must pay an interchange fee to Visa which is then shared with Varo.
Brand partnerships
Varo also partners with other mission-driven companies that seek to help people better manage their finances.
The products and services of these brands are offered to Varo customers through the company’s existing marketing channels. Alternatively, Varo may cross-sell certain brands in its app as an alternative user service such as bills and insurance.
Varo is compensated when a user purchases from one of these brands, with the exact fee determined by the contractual agreement between both parties.
Other fees
Aside from interchange fees, Varo also charges other fees including:
Out-of-network withdrawal fees – customers are charged $2.50 per withdrawal when using an ATM outside of Varo’s network.
Cash withdrawal fees – over-the-counter cash withdrawal fees also attract a $2.50 charge.
Cash advance fees – customers are charged $3 for a $50 cash advance, $4 for a $75 cash advance, and $5 for a $100 cash advance. These fees are waived for military personnel and their families.
Late payment fees – a $15 late payment fee is charged for every late payment in the Varo Believe Program, which is an initiative that helps a customer rebuild their credit score by making regular scheduled payments.
Key Highlights
Foundation and Mission:
Founded in 2015 by Colin Walsh and Kolya Klymenko.
Aimed at millennials and consumers seeking alternatives to traditional banks.
Focused on reducing banking costs and improving financial health for consumers.
Value Proposition:
Mobile-first banking accessible through smartphones.
No-fee checking and savings accounts.
High-yield savings opportunities.
Financial tools for insights and budgeting.
Customer Segments:
Digital natives and younger generations preferring digital solutions.
The unbanked and underbanked without access to traditional banking.
Savers looking for competitive interest rates.
Distribution Strategy:
A mobile app for banking services.
Strategic partnerships with financial institutions and fintech companies.
Digital marketing for customer engagement and acquisition.
Revenue Streams:
Interchange fees from debit card transactions.
Fees for certain banking services and transactions.
Brand partnerships with mission-aligned companies.
Interest rate spreads and premium feature offerings.
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Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
