OCC Announces Preliminary Approval of Fintech Bank’s National Bank Charter

Written by Eamonn Moran

Last fall, we reported that one fintech company – Varo Money, Inc. – a mobile banking startup helping customers solve financial problems, manage money and reach financial goals, applied to the Office of the Comptroller of the Currency (OCC) for a national bank charter and to the Federal Deposit Insurance Corporation (FDIC) for federal deposit insurance to form Varo Bank, N.A. Last week, the organizers of Varo Bank, N.A. issued a press release announcing that they have been granted preliminary approval by the OCC of their application to form a de novo national bank, and claiming that this step puts Varo “on track to become the first all-mobile national bank in the history of the United States.” Varo Bank, N.A. is currently in formation and will obtain its final national bank charter upon completion of organizational steps and satisfaction of the OCC’s conditions, as well as approval from the FDIC to obtain insurance and Federal Reserve membership. In submitting its national bank charter application in late July 2017, Varo Money, Inc. decided not to wait for the OCC to finalize its fintech charter plan.

“This is a historic moment and marks the start of a new era in banking. We founded Varo because we saw that banks weren’t serving the majority of their customers very well, and we wanted to fix that. So we decided to build a bank from the ground up with the goal of improving consumers’ financial health through better technology and a more efficient business model,” stated Colin Walsh, co-founder and CEO of Varo Money.

“This preliminary approval from the OCC is a signal that regulators recognize the value technology can bring to banking for all Americans,” said Jo Ann Barefoot, CEO of Barefoot Innovation Group and formerly deputy comptroller of the OCC and senior fellow at the Harvard Kennedy School Center for Business and Government. “Technology is not only lowering costs for consumers, but it's also adding new benefits such as budgeting and money management that's seamlessly available on a smartphone. The result is that more Americans will be empowered with better tools to improve their financial health. Varo's success is a breakthrough moment for consumer banking and is setting a new standard.”

We have reported extensively on the OCC’s recent decision to begin accepting applications for special purpose national bank (SPNB) charters from fintech companies. We have noted that qualifying fintech companies also may apply for federal charters under the OCC’s authority to charter full-service national banks and other special purpose banks, such as trust banks, banker’s banks, and credit card banks, and the OCC has emphasized that a national bank charter is only one of several available options for companies engaged in the business of banking. Other options include pursuing state banking charters, appropriate business licenses, and partnerships with other federal or state financial institutions. Instead of pursuing a SPNB charter, Varo is seeking a full-service national bank charter from the OCC. A SPNB charter is a particularly attractive option for those fintech companies that would face obstacles to obtaining a full-service national bank charter because of their own non-financial activities or those of an affiliate.

Stay tuned as we will be posting additional insights here once there are further updates or developments.

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