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Walsh began his career at GE Capital and eventually worked his way up to Wells Fargo and American Express, where he oversaw the European consumer market. That experience in traditional banking gave him an understanding of the industry and the multiple cultures within it, including access to several extensive networks of contacts and experience through a series of business cycles. Walsh said that gave him the necessary background to alter the space. He began looking for ways to help younger consumers achieve financial stability and make banking more accessible.

“Although I was doing a number of interesting and exciting things, it was becoming very clear to me that the system was quite broken for people who had no wealth and no income, and it really was a system of rich and poor.” Walsh said.

After advising other companies, Walsh began raising funds to launch the Varo online banking platform. Initial funding came from his family and friends. Many institutional investors were wary of funding new banking ventures because of a series of new hurdles that federal regulators have put in place since after the 2008 financial crisis, Walsh said.

Walsh said he spoke to several venture capitalists but found only limited support and skepticism about a process, the creation of a new bank, that had been stalled since the last financial crisis. He realized that he would take more money and time.

“So I picked up the phone and called my friends in Warburg [Pincus], and said: ‘Hey, I want to create this bank of the future.’ And they said, ‘Well, the timing is good, because right now we have a complete thesis in the company that we’re looking to invest in the bank of the future.’ And that was the start of what turned out to be a relatively quick time from concept to term sheet,” Walsh said.

The private equity giant was able to provide Varo with the resources, experience, and credibility that would be crucial to the startup’s success.

“It’s about credibility,” Walsh said. “Regulators have clearly taken a very cautious stance in terms of who they are allowing into the system.”

“I quickly learned that you get pattern recognition pretty quickly, when a certain type of investor tells you the same thing over and over again that you probably have to start fishing in a different pond,” Walsh said.

Varo started out by using a partner bank, relying on its charter and technology to test its product, build a consumer base and outsource regulatory risk. But Walsh insisted that Varo become a fully chartered de novo bank.

“We are the only fintech that really made it through that very difficult journey,” he added.

The process is expensive and time-consuming, but Walsh said it benefits both Varo and his consumers. Varo no longer has to share the economy with its partner bank and can adapt its technology to the needs of its users.

“For us, it was really about intentionally designing a platform that would help people lower their costs,” he said. “Like giving them early paychecks, giving them access to faster payment capabilities, being able to start building savings habits, and having the tools and incentives to start saving to help build credit so you can access credit.”

Walsh said there is a growing demand for platforms that can help younger consumers gain more agency in their financial journey. As Generation Z ages and begins to take finances seriously, Walsh said many people are looking for an alternative to traditional banking methods, one that can be managed through their phones.

“Now you have this very, very large group of consumers who have no loyalty to traditional banks,” he said. “They don’t want to get in a car and drive to a parking lot and go out and sit behind a desk and spend an hour filling out an application.”

Office Hours host and dot.LA co-founder Spencer Rascoff is an investor in Varo.

Do you want to listen to more episodes? Subscribe to Office Hours at stapler, Apple Podcasts, Spotify, Radio iHeart or wherever you get your podcasts.

Kristin Snyder, editorial intern at dot.LA, contributed to this post.

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