If you have read my recent post on banking with online non-banks (if you haven’t, it can be found here), a good follow up to it would be a recent article from The Financial Brand, “Eight Challenger Banks Traditional Banks Should Worry About.” I would highly encourage you to read the article before continuing to the rest of this post.
Of the eight banks listed, four are offered by traditional banks or are partnering with them. Of the remaining four, three are from non-U.S. companies attempting to find a U.S.-based partner to provide services here. The remaining company is Varo Money, a fintech company attempting to use the new OCC charter for fintechs to offer financial services.
I found this statement about them to be the most interesting: “Varo Money became the first mobile-only bank to receive preliminary and conditional approval from the Office of the Comptroller of the Currency to become a national bank. The wrinkle is that the FDIC has not given its blessing. Varo has since been making adjustments to satisfy that regulator and then plans to reapply.”
Did you catch that? Varo Money may not get FDIC insurance. This makes it a great example of my previous point: there is a lot more to offering financial services than just a great customer experience. Getting FDIC insurance is a key element of providing services as a financial institution, and it is incredibly difficult to achieve.
However, please note that I am not speaking to the viability of Varo Money; it’s likely they will do whatever is required of them to get FDIC insurance coverage. All I want to stress is, perhaps before you downplay the viability of “traditional” financial institutions, maybe you should consider walking a mile in their compliance- and regulatory-laden shoes to understand just how hard of a time they have.