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.
Origin story
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.
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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.
