How Does Varo Make Money?

  • 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. 

The social impact of Varo as a neobank is considered especially important, with a 2017 U.S. Federal Reserve report suggesting 40% of Americans would not be able to cover a $400 emergency expense without borrowing money or selling a possession. 

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 September 2021, Varo raised $510 million in Series E funding to be valued at $2.5 billion. In announcing the deal, the company revealed it had doubled its user base to 4 million and tripled its revenue in the previous thirteen months. Varo is now the third-largest neobank in the United States after Chime and Simple.

Varo revenue generation

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.

Connected Fintech Business Models

Fintech Business Models

fintech-business-models

Venmo Business Model

how-does-venmo-make-money

Stripe Business Model

stripe-business-model

Coinbase Business Model

coinbase-business-model

How Does Zelle Make Money

how-does-zelle-make-money

Klarna Business Model

how-does-klarna-make-money

Affirm Business Model

affirm-business-model
Started as a pay-later solution integrated to merchants’ checkouts, Affirm makes money from merchants’ fees as consumers pick up the pay-later solution. Affirm also makes money through interests earned from the consumer loans, when those are repurchased from the originating bank. In 2020 Affirm made 50% of its revenues from merchants’ fees, about 37% from interests, and the remaining from virtual cards and servicing fees.

Afterpay Business Model 

how-does-afterpay-make-money
Afterpay is a FinTech company providing as a core service the “buy now pay later” solution. When a consumer purchases a product, Afterpay pays the seller and asks the consumer to pay 25%. The remaining 75% is paid in three, fortnightly installments that are also interest-free. Afterpay, in turn, makes money via merchant and late fees.

Quadpay Business Model

how-does-quadpay-make-money
Quadpay was an American fintech company founded by Adam Ezra and Brad Lindenberg in 2017. Ezra and Lindenberg witnessed the rising popularity of buy-now-pay-later service Afterpay in Australia and similar service Klarna in Europe. Quadpay collects a range of fees from both the merchant and the consumer via merchandise fees, convenience fees, late payment, and interchange fees.

Revolut Business Model

how-does-revolut-make-money
Revolut is an English fintech company offering banking and investment services to consumers. Founded in 2015 by Nikolay Storonsky and Vlad Yatsenko, the company initially produced a low-rate travel card. Storonsky in particular was an avid traveler who became tired of spending hundreds of pounds on currency exchange and foreign transaction fees. The Revolut app and core banking account are free to use. Instead, money is made through a combination of subscription fees, transaction fees, perks, and ancillary services.

Main Free Guides:

Scroll to Top
FourWeekMBA
[class^="wpforms-"]
[class^="wpforms-"]