As many U.S. consumers struggle with financial health, established banks often don’t provide the personal tools and guidance needed to help customers improve their financial situations. Filling that unmet demand was the impetus for mobile banking app Varo Money.
“Consumers continue to struggle building savings and we believe that most of the big established banks no longer provide them the personalized tools and guidance they need to improve their financial situations and weather financial storms,” says company co-founder and CEO Colin Walsh, who previously held leadership roles with American Express and Wells Fargo, among others.
Formed in October 2015 by Walsh and other financial services veterans, San Francisco-based Varo already has racked up significant funding and partnerships with industry heavyweights, including The Bancorp (which provides private-label banking services for Varo accounts), Galileo Processing, Digiliti Money (formerly Cachet Financial Solutions) and Yodlee Money. After a beta test run in early 2017, the Varo app is on target for a midyear launch—and the company envisions big things ahead.
Mobile banking apps have proliferated in recent years as mobile devices have reached ubiquity and players new and old attempt to reach customers through the mobile channel. To stand out from the crowd, Varo relies on a few key competitive advantages, according to Walsh. “Our app can replace six to eight apps out there that only do one thing,” he notes. “Users can aggregate their bank accounts—even those outside of Varo—to get a complete and integrated picture of where their money is, while also accessing insights about their spending and setting goals.”
Meanwhile, the Varo team’s experience in banking and financial technology, along with an advisory panel of consumer “co-creators,” gave the company insight into how people approach their relationship with money and what users need from a mobile banking app.
“Our team is made up of people with tons of experience in banking who know what needs fixing, working with the best techies in the industry to build it,” Walsh says. “Building a mobile banking platform from the ground up, we will be able to change the economic paradigm of banking and use the power of the platform to focus on our customers’ needs first.”
Those needs range from the traditional—Varo features a physical Visa debit card to make in-store purchases—to the high-tech. The platform will be fully compatible with Apple Pay—and in late 2016, the company unveiled “Val” a mobile chatbot that serves as a digital money coach, providing advice on spending, savings and borrowing habits, which is due to launch in early 2017.
Val is a prime example of Varo’s consumer-centric design imperative, built specifically to meet the preferences of younger consumers and digital natives. “Based on the research we have conducted, many millennials would rather engage with a bot than walk into a bank branch,” Walsh notes. “We also believe that a well-trained bot can deliver a more consistent and compliant experience for our customers.”
Val also is particularly well-suited to serve another consumer segment Varo is targeting—those who Walsh describes as “hands-off” when it comes to managing their money. Those customers don’t like actively managing budgets and spending. Instead, they prefer to simply set up systems that work in the background so they can minimize the amount of time they have to spend thinking about money.
An AI-based bot like Val can help “hands-off” consumers by sending push alerts when something needs a customer’s attention, or “all good” notices when things are going smoothly. “We believe there will be elements of our product that will appeal to both groups, but will likely focus on the ‘hands-off’ market first,” Walsh says.
Further down the road, Varo has its sights on becoming a chartered national bank, enabling the company to offer deposit and lending products under one roof, FDIC deposit insurance and economic efficiencies to keep the costs of those services low, says Walsh. “We’ll be able to change the economic paradigm of banking, using the power of the platform to focus on our customers’ needs first.”
Varo believes that approach is the key to standing out from the competition, which includes some of the biggest names financial services. “Clearly the biggest banks have the most recognizable brands,” Walsh notes. “But the big banks don’t have the best reputations. We believe our biggest opportunity is to build products and services that add value to our customers’ lives and solve real problems for them.”