After a three-year saga, Varo Money finally has its bank charter. The Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Federal Reserve all signed off on Varo Bank N.A., the bank announced today.

“This is a thrilling milestone for Varo, as the bank charter has been a core part of Varo’s disruptive vision from the very beginning,” said Colin Walsh, founder and CEO of Varo Bank, in a statement. “The ability to operate as a full-service national bank gives Varo more freedom to deliver the kind of innovation and allyship that many Americans have never had from their bank before.”

Varo is the first fintech to gain a national bank charter without acquiring a bank, as Green Dot did with Bonneville Bank in 2011, and LendingClub is currently trying to do with Radius Bank. The news could signal an openness from regulators to chartering more fintechs as full-fledged banks.

Julie Hill, a professor at the University of Alabama School of Law who focuses on banking and commercial law, said Varo’s bank charter could mean the OCC wants more fintechs under its oversight. “It is harder to say whether fintechs will take the OCC up on its offer to regulate them,” she said. “A banking charter comes with capital requirements and regulatory oversight that will not be appealing to all fintechs.” However, for fintechs like Varo, designed to mimic traditional banks, a bank charter could help their business lines.

San Francisco-based Varo, which was founded in 2015 and launched in 2017, received conditional approval for its charter from the OCC in 2018. It received FDIC approval in February and raised a $241 million series D in June, which Walsh said would help the company meet the final requirements to become a bank. Varo offers banking and savings accounts, as well as amenities common with other banking startups, like early direct deposit, fee-free ATMs and debit cards. Its banking partner until now had been the Wilmington, Del.-based Bancorp Bank.

More fintechs will look to gain bank charters as their businesses mature, according to Robert Savoie, an attorney at McGlinchey. He added that a national bank charter helps fintechs avoid state by state regulations “even though the overall level of regulatory scrutiny is much greater on chartered depository institutions.” 

See also: Varo’s bank charter process a test for consumer banking startups

“Given the increasing encouragement of innovation at the federal level, I do think you will see more de novo charters and acquisitions involving the fintech industry,” Savoie said.

Varo’s Walsh previously told Bank Innovation that becoming a bank would allow the fintech to offer more financial products, like credit cards and loans. A company spokesperson said that while the bank can’t give specifics now, new services “will be launching in the coming months.”

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