This Entrepreneur Raised Over $1 Billion To Build The First Customer-Oriented FinTech Platform In The US

In the rapidly evolving landscape of fintech, few stories stand out as vividly as that of Colin Walsh, founder of Varo Bank. He has had remarkable accomplishments, including raising over $1B and running a company with a team dispersed worldwide.

Colin has had an incredible career that spans decades and continents. In this exclusive interview, he talks about reaching the corporate heights of giants like GE and American Express to the helm of a groundbreaking digital bank.

Colin also talks about his experiences with going from having a team of 15,000 people to burning the midnight oil and building, scaling, and raising funding for Varo Bank. His story is a testament to resilience, innovation, and a deep commitment to financial inclusivity.

Listen to the full podcast episode and review the transcript here.

From Corporate Powerhouse to Startup Founder

Colin Walsh’s roots trace back to Westchester, New York, where his early life set the stage for a diverse and dynamic career. “I worked from a very young age,” Colin recalls, highlighting the work ethic instilled in him from childhood.

After attending college in upstate New York, Colin embarked on a corporate journey that would take him across the globe, starting with GE Capital and later at American Express (Amex) in London.

Colin’s career truly began to flourish when he joined Wells Fargo in California, a period marked by significant growth and transformation within the banking giant. He recalls joining just before the merger with Norwest and experiencing the dynamic energy in the bank.

Next, Colin had a pivotal stint in London during the financial crisis while working for Lloyds Banking Group and American Express. This nine-year experience gave him a unique perspective on global financial services.

The banking industry was teetering on the abyss, and Lloyds had to buy its largest competitor. Colin remembers playing a significant role in integrating the two banks. He then went on to work at Amex, overseeing their consumer business in countries across Europe.

Colin had the exciting role of leading large businesses but began to ponder how technology could better serve everyday consumers. “The products we were designing were for very affluent people in Spain, Italy, and Germany,” Colin reflects on his time at Amex.

“But I wanted to figure out how to use technology in a way that could help millions of people just trying to make ends meet and living paycheck to paycheck.”

The Inspiration Behind Varo Bank

This drive ultimately inspired Colin to return to the US and start Varo Bank. He talks about how his experiences working with big companies in the US and the UK shaped his worldview and perspective.

Colin developed a nuanced understanding of different consumers in different markets, what they need, how the economics of these businesses work in different markets, and how the regulatory structures work.

Colin also built empathy for people because regardless of where they were in the world, everyone has fundamental needs. Helping them early or at any point in their lives can give them more control over their money and build their self-worth.

Colin had the tools, means, and good fortune to build lots of different innovative products. Instead of using them for people who are already well-served, he wanted to use that experience for consumer interest and demand and make a difference.

His experiences helped Colin move into different geographies and types of businesses. They also gave him a strong foundation to start the company. Starting a new venture after leading massive teams was a stark contrast to Colin’s previous life.

“It was quite a crazy shift,” he admits, recalling the sudden loss of corporate perks and realizing that he now had to do everything himself—from financial modeling, analysis, and code writing to policy writing.

However, Colin’s extensive network and ability to clearly articulate the problems Varo aimed to solve helped him assemble a talented early team and attract investors. He also brought in folks who believed that the future of banking was going to be digital. Essentially, they were writing history.

Colin and his team knew consumers were moving much more towards digital adoption, whether it’s the generational shifts with Gen Z’s, Millennials, or the vast consumer market that was just not being served well by the incumbent institutions.

Colin’s narrative was about demonstrating how the business could get traction by building a very fulsome product offering. This product would meet the needs of consumers much more broadly than just having a narrow app-based solution.

The story also included aspects like operating within a regulated environment as a regulated institution. The first year in the journey was about getting investors excited about the concept and their buy-ins.

The Birth of Varo Bank: A Mission to Empower

Unlike traditional banks, Varo Bank was conceived as a “challenger bank” or “neobank” – a digital-first entity designed to disrupt the traditional banking model. However, it was not just another fintech startup but a more diversified financial model.

Varo was the first consumer fintech in the U.S. to receive a national bank charter from the Office of the Comptroller of the Currency (OCC), making it a fully regulated national bank.

Colin’s vision for Varo was clear: providing a comprehensive suite of financial services to help consumers gain more control over their money. “We are a tech-first, OCC-chartered national bank,” Colin explains, distinguishing Varo from other digital competitors.

The bank offers a range of products, from no-fee checking accounts and high-yield savings accounts to credit-building tools and personal loans, all accessible through a simple, user-friendly app.

One of the key differentiators for Varo has been its focus on serving the underbanked–those who traditional financial institutions often overlook. By offering services like fee-free accounts, instant money transfers, and automated savings tools, Varo has positioned itself as a lifeline for them.

The Varo Bank Business Model

Colin explains that they have very strong unit economics and make money on the flows. He understands that when consumers deposit their paychecks, they spend most of that money by the end of the week or month until they get the next one.

As a result, they need to rely on borrowed money to bridge the gap or cover emergency expenses. Relying on the Varo Bank app, folks can also work with a range of partners and access different services that Varo does not offer directly but monetizes on the back of them.

Colin explains that over the last couple of years, they have been building out the lending side of the business and putting in place the right kind of risk management controls for responsible lending. This process is now a bigger part of their suite of services.

Colin points out that some of the other neo banks today have revenues from merchant interchange, particularly debit interchange. However, Varo Bank has a much more diversified monetization source in the business.

The Product-Market Fit and Fundraising

In the initial years when Colin started the company, they worked with a sponsor bank partnering with it to launch a debit card with savings features and a range of checking account features.

When Varo received its charter, the bank’s platform enabled vertical integration, which was an advantage. The other advantage from the bank’s standpoint was that they were no longer sharing interchange or incurring the cost of having a sponsor bank.

This factor quickly helped on the economic side. Colin reveals how they have raised more than $1B for Varo Bank. Investors were strongly convinced about the importance of what Varo Bank was doing, the role it could play in the industry, and the size of the TAM they were going after.

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Colin also demonstrated a solid foundation and regulatory approvals to build a scaleable platform. Early investors included Warburg Pincus, TPG, HarbourVest Partners, Lone Pine Capital, and Gallatin Point Capital on the cap table.

Navigating the COVID and Post-COVID Crisis

As Varo Bank got FDIC approval, COVID hit, and everyone went remote. Colin remembers the intense competition because of the heavy investment in digital-only services. Varo Bank not only successfully navigated the pandemic but also the period of hyper-competition when CACs went up quickly.

Colin and his team also had to deal with the 2021-22 period when capital froze and became scarce thanks to interest rates increasing. This resulted in a bank crisis where several banks like SVB and First Republic collapsed.

Colin credits their original business plan as the asset that helped them overcome the crisis. They significantly scaled back the marketing machine to preserve capital and become more efficient with their acquisition economics. They also focused on providing a broader range of services.

Colin outsourced and offshored many of their servicing operations and went much more into chat-based and AI-based service operations. They embedded AI into almost every part of the customer lifecycle to become highly efficient.

At the same time, they continued building the product platform that met their consumers’ full range of needs. Colin recalls how they had to invest heavily to scale the business and build the platform, product set, and technology suite.

However, the result was that Varo Bank is now better positioned than ever to become the next major player in the US digital banking market and FinTech space. They were able to achieve this position despite a lot of newcomers in the space competing for the same dollars.

Varo Bank could make this happen because it operated within the regulated system and didn’t rely on regulatory arbitrage.

It controlled its regulatory destiny and avoided the existential risk often faced by non-bank fintechs. Colin and his team also delivered strong unit economics with more vertical tech and banking services integration.

Most importantly, Varo Bank served mass market customers efficiently using solutions and a technology platform. It has scaled to a point where it has a 400-strong team operating in the US and at least 300 employees working from remote locations worldwide.

Instituting a Robust Company Culture

Colin stresses the importance of a strong company culture. His experiences working for several years at large organizations taught him valuable lessons he instituted when building Varo Bank. The most crucial was being customer-oriented.

Varo Bank’s number one value is borrower customers first. Taking ownership, having respect, making it better, and continuing to stay curious are the hallmarks and foundations of the culture. Over the years, Varo has opened support functions in different countries worldwide.

However, Colin ensures that the culture carriers from within the company’s core work with those partners to ensure that the values are still lived in different operations in more remote locations.

Regardless of where in the world people may work, they feel very connected to the company’s mission, purpose, and values. Colin believes every founder should ensure that consistency is maintained at every step, despite the challenges they may encounter, some unexpected.

A strong sense of purpose can ensure employees stay resilient. Believing in what the company is doing is crucial for customers, employees, and investors.

Vision for Varo Bank

Colin’s vision for the future is a world where there is mass adoption of Varo Bank’s solutions. The app already has the best NPS scores for any bank in any country. The winning factor is customers talking about how the bank has changed their lives.

Colin’s journey from Westchester, New York, to founding the first consumer fintech in the U.S. to receive a national bank charter from the Office of the Comptroller of the Currency (OCC) has been truly inspirational.

Listen to the full podcast episode to know more, including:

• Colin Walsh’s journey from corporate banking to founding Varo Bank showcases resilience and a commitment to financial inclusivity.
• Varo Bank was the first U.S. consumer fintech to receive a national bank charter, emphasizing its role as a regulated, tech-first institution.
• Varo Bank focuses on serving the underbanked, offering fee-free accounts, instant transfers, and automated savings tools.
• The bank’s diversified business model includes strong unit economics and a focus on responsible lending practices.
• Colin raised over $1B for Varo Bank, demonstrating a solid foundation and investor confidence in the bank’s mission and market potential.
• Despite challenges during the COVID-19 pandemic, Varo Bank efficiently scaled operations and enhanced its product platform.
• A strong, customer-oriented company culture is central to Varo Bank’s success, with a mission to change lives through accessible financial services.

 

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