March 6, 2024

Innovating for the Underserved: Interview with Varo Bank Founder and CEO Colin Walsh

Driven by purpose and guided by empathy for the underbanked, Colin describes the realities of paycheck-to-paycheck living in America, lessons from European banking, and keys to succeeding as a fintech-turned-bank. His perspectives shed light on how Varo is bringing financial inclusion, opportunity, and “raving fans” to an underserved majority.

Banking for the “Backbone of the Country”

Describing Varo’s customers as “the backbone of the country” and pointing to income inequality in America, Colin shares how he’s troubled that the system was built predominantly to serve the “haves” not the “have-nots.” After working for years in big banks, his perspective is that increasing banks’ profits sometimes comes at the expense of the most vulnerable consumers.

At Varo, Colin’s vision is to create “smarter, faster, safer platforms” tailored to the 60% of Americans living paycheck to paycheck. “Ultimately, we’re transforming their daily relationship with money,” he says. Empowering financial confidence, Varo now serves customers’ daily financial needs through integrated offerings like high-yield savings, credit-building tools, instant money transfers, and early paychecks.

Podcast trailer 1

Cultivating “Fanatical” Customers

Varo wants customers to fully “live their lives” on its integrated platform. He emphasizes Varo’s (off-the-charts) +80 Net Promoter Score, which signals the remarkable fan affinity the bank has generated. He attributes this to understanding “jobs-to-be-done” and friction points, and then leveraging technology and compliance to solve them. The result is more empowered customers getting ahead financially each day.

Varo’s Focus on Driving Lifetime Value

Colin explains Varo’s focus on driving lifetime value. The “stickiness of those relationships” is crucial, he says.

With a lot of the other neo-banks, you see a “pocketing behavior” where customers will use the neo-bank as a way to pocket extra money for spending or paying certain types of bills. Varo, on the other hand, is getting customers to use the bank as their primary relationship. “They’re paying their bills with Varo, putting all their paycheck into Varo, borrowing and using the full suite of services.”

Varo’s introduction of innovative features, such as “borrow to anyone,” is demonstrating their commitment to creating value and building customer engagement, he tells me. These features differentiate Varo and facilitate organic growth.

Podcast trailer 2

Adapting Through the Storm

Like most firms, Varo faced harsh headwinds when the pandemic hit, forcing sharp cuts in marketing. Yet Colin took it as a chance to get smarter on acquisition and build predictive algorithms identifying profitable target customers. This allowed Varo to rescale customer growth: “We’ve more than doubled our acquisition just in the last six months at a fraction of the cost.”

Varo also discovered the network effect of new money transfer features, leading to an influx of referrals. Now, when you send someone money, they receive a text inviting them to deposit it into a Varo account. Many become intrigued and open a new account. “It takes two minutes,” he says.

Watch the full podcast here

The Road Ahead

Looking ahead, Colin foresees a technology-driven evolution in retail banking.. Colin says: “I think the evolution of AI and machine learning capabilities are going to create much more highly personalized experiences.”

While there remain challenges to efficiently scale, it’s impressive to see how Varo has adapted its business model and internal competencies while remaining true to its pursuit of better banking the underserved.  By continuing to deliver highly valued solutions coupled with outstanding customer NPS, there will surely be a growing chorus of consumers cheering for Varo’s success.

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Connect with podcast host Jody Bhagat on LinkedIn: https://www.linkedin.com/in/digitalbusinessgrower