Warburg Pincus is leading a round of investment in mobile-only banking startup Varo that will total more than $27 million, according to a statement from Varo.
This is Warburg Pincus's first significant foray into fintech, an increasingly popular sector with private equity and venture capital firms. Earlier this week, Vertafore announced that Bain Capital Private Equity and Vista Equity Partners have agreed to purchase the insurance technology company from TPG Capital.
The new app from Varo aims to provide tools for customers to develop positive spending, borrowing and savings habits with a digital financial coach, in addition to debit card, deposit and lending products. The app will also provide access and integration with popular finance apps through an in-app marketplace, according to the statement.
Varo plans to rely on a banking partner at first to back the accounts, but differs from other banking apps, with the eventual goal to seek a bank charter in order to offer its own deposits, according to a report from the Wall Street Journal.
“Varo is an excellent fit within our industry thesis focused on the bank of the future,” said Michael Martin, managing director and head of the financial services group at Warburg. “We are at a tipping point in retail banking, and there is a real opportunity to build a new and differentiated bank model based on a mobile platform serving the needs of many people.”
Colin Walsh, chief executive officer of San Francisco-based Varo, co-founded the company in October 2015. Walsh, an industry veteran who began his career at Wells Fargo in 1997, where he built and launched the first online home equity lending business, said that the US banking market is undergoing a huge transformation. “We are excited to partner with the Warburg Pincus team given their deep experience in both financial services and technology, and look forward to the value they will bring to Varo,” he added.
Walsh was previously CEO of American Express in the UK and executive vice president of European Cards, where he led the digital transformation of the UK business, and has also held senior roles at Lloyds Banking Group.
David Coulter, a special limited partner of Warburg, whose experience includes senior leadership positions at JP Morgan and as chairman and CEO of BankAmerica Corporation, will be a member of Varo's board of directors.
Warburg Pincus is investing out of Warburg Pincus Private Equity Fund XII. The fund held a close of $13.4 billion last November, six months after its initial launch.
New York-based Warburg Pincus has $40 billion in assets under management. Since inception, the firm has invested in 750 companies in 40 countries. The firm's investment strategies include growth capital, venture capital, special situations, and buyouts, specialising in banking, consumer goods, energy, healthcare, industrials, media, support services, technology and telecommunications.