“5 Lessons I Learned When I Created My App”, with Colin Walsh of Varo Money
An Interview With Mitch Russo
Have an idea with real conviction — and have some experience and pick a product category where you have credibility, because you need to find investors who share your belief
As part of my series about the “5 Lessons I Learned When I Created My App or SAAS”, I had the pleasure of interviewing Colin Walsh, CEO and co-founder of Varo Money, which is on track to become the first mobile-centric national bank in U.S. history. Colin founded Varo with a specific vision: to help millions of people improve their financial lives. Colin has more than 25 years of experience in consumer banking at large global financial institutions in the US and Europe, and previously led Europe’s largest credit and charge card business as an Executive Vice President at American Express, as well as the UK’s largest mortgage and savings businesses at Lloyds Banking Group. Colin’s team at Varo Money has recently launched No Fee Overdraft, the first-ever service of its kind to remove harmful fees on overdrafts — and he has called for the banking industry to do the same.
Thank you so much for joining us, Colin! Our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?
Given my experiences, and my role as the founder of Varo, it would be easy to imagine my first role out of college being with a bank or financial services company. In reality, though, I started out in a management training program at GE Capital. It was a unique opportunity that gave me a thorough understanding of the various facets that make a business tick, from process and operation through marketing and business development. I was given a lot of responsibility, and it helped me to better understand how to frame a problem and find a solution.
These skills served me well during my time with financial institutions like American Express and Wells Fargo. My role was often one of creating and managing new endeavours, which meant that I was essentially running new businesses within a bigger business. While I was able to lean on the skills I’d learned at GE Capital, my knowledge set grew exponentially with each project I worked on. At Lloyd’s Banking Group, for example, I managed their integration with the second largest bank in the UK. This gave me an up close look at the regulatory industry for finance, and improved my understanding of how governments take steps to ensure safe and sound business practices for everyday customers.
My experiences have taught me how to run a business and take commercial responsibility for all of my decisions, and how to think about things like operations and risk. These experiences have also given me an understanding of why and how banks make the decisions that impact customers the most.
I’ve had a lot of years to think about how banks could be doing things differently. That’s why I launched Varo.
What was the “Aha Moment” that led you to think of the idea for your current company? Can you share that story with us?
The financial and banking system in the US just isn’t wired to help customers — particularly those who need banks the most.
Over the course of my career, I have experienced countless moments that have helped me understand the flaws in the approaches of financial institutions. The default position is almost always that customers should be considered the first line of solution for covering costs.
For example: I first came to the UK just as the government began regulating default fees. As a result, my employer was positioned to take a £60 million loss in the department that I had just been tasked to lead. My team proposed a number of solutions, all of which were in some way harmful to the consumer.
After consulting with the higher-ups, I was able to buy us time to come up with a better solution that provided the customer with value. We needed to figure out what customers wanted that we weren’t delivering yet, so that we could cover our profit gap by catering to their needs. The solution? We partnered with Air Miles to offer the first dual American Express + Mastercard, which delivered five times as many points as any other Air Miles card in the UK. The gap was quickly closed.
Nearly every role I’ve held within the banking industry has served consumers and small businesses. As a result, my work has helped me gain a deeper level of empathy for the problems that customers need to solve. Experiences like this became the seed of Varo — a bank that moves the needle in a meaningful way for consumers.
Can you tell us a story about the hard times that you faced when you first started your journey? Did you ever consider giving up? Where did you get the drive to continue even though things were so hard?
My experiences building businesses inside of financial institutions helped me to understand the needs of customers, regulators and the industry — but it was a vastly different experience building something on my own.
Creating new opportunities for major institutions like Wells Fargo and American Express is a little like playing with house money. Unlike a startup, I had access to big budgets and the ability to draw on other company resources, like technology and personnel, often requiring little more than a well thought-out proposal to get the ball rolling. At Wells Fargo, I made a Powerpoint to pitch them on building their first online consumer credit business, and two years later it was a $2 billion business. Could you imagine a startup growing that quickly, in that short of time, starting with nothing but a slideshow?
I’ve always been passionate about making projects succeed, but the personal risk involved when I was working for the banks was comparatively low. Building a business from scratch forces you to be entirely self-sufficient. You have to be much more resourceful to get things off the ground.
So, how are things going today? How did your grit and resilience lead to your eventual success?
It’s been four years since Varo began, and just two since we opened our doors to the public. The response has been nothing short of incredible. We’ve grown to more than 200 employees, and this year we’re on track to save our customers $2[1] 4 million in fees. We’ve also seen $50 million put into savings accounts to date, helping consumers break the paycheck-to-paycheck cycle in whatever way we can.
In terms of larger company milestones, it probably helps to have a little more context about banking industry regulations. Challenger banks, like Varo, are typically partnered with existing institutions because the road to securing a full bank charter is fraught with regulatory challenges. These regulations not only help to ensure the efficacy of a new generation of digital-only financial services, they also protect the American public by enforcing the lessons learned from the financial crisis. In fact, since that time, only two banks have been issued new charters. Varo is on track to become the third.
Varo received preliminary approval for a full bank charter from the Office of the Comptroller of the Currency in 2018, and next year we’re on track to become the first technology company to ever become a fully chartered national bank in the United States. This is a huge milestone for the company, and puts us ahead of every other bank in the digital-only space.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lessons or ‘take aways’ you learned from that?
In early 2016, when I was just getting Varo started, I also had a slight obsession with building a chatbot named Val. Unfortunately for me, Val wasn’t as clever as it needed to be. I was chasing a fad at the time.
People were really excited about a bot-AI experience, but to do well with a bot, you need to have sophisticated technology. Our customers were telling us they wanted other things, so we threw in the towel.
Before we did, though, I showed Val off to my 8-year-old nephew at Christmas, and he said it looked like Cindy Lou Who from the Grinch Who Stole Christmas.
What do you think makes your company stand out? Can you share a story?
A recent study by the Financial Health Network revealed that 72% of Americans are facing financial uncertainty. More than half don’t have $500 in ready cash to deal with an emergency — and that number is even higher for millennials. Traditional banks, rather than helping Americans, are only making this situation worse by limiting access to funds and charging exorbitant fees. What’s more, they’ve begun to abandon a sizable portion of the American population by closing branches without adequately providing customers alternative options. According to a recent study by S&P Global, U.S. bank branch closures reached a record high in 2018, with 1,947 local branches nationwide closing their doors to customers in the calendar year.
Americans deserve a credible alternative to traditional banks in order to make progress — that’s Varo.
As a frictionless, mobile-first banking solution, Varo is a zero-fee banking platform that really means zero fees. Unlike traditional banks, Varo customers do not pay fees for monthly maintenance, minimum balance, debit card replacements, foreign transactions, ATM use (at 55,000+ Allpoint ATM locations), or for any other services offered.
At Varo, we’re committed to putting more money in the pockets of our customers when they need it the most. In addition to providing immediate savings through our no-fees approach, Varo offers early direct deposit, giving customers access to their payroll funds up to two days early. To help customers build their savings, Varo also offers two auto savings programs (Save Your Pay and Save Your Change) as well one of the highest APRs on savings accounts; 2.80% APY.
We could share a specific story to help illustrate what makes us stand out, but it’s a story that you’ll already know. If it’s not happening to you, it’s happening to a friend or family member. Americans are being taken advantage of by the traditional banking system. Varo sets itself apart by working for our customers, rather than against them.
The most recent addition to the portfolio of solutions we offer our clients is an industry-first, no-fee overdraft solution, which gives our customers the flexibility to overdraw their account up to $50 on any transaction without incurring any fees or interest charges.
Which tips would you recommend to your colleagues in your industry to help them to thrive and not “burn out”?
We have realized that our customer segment is much bigger than we originally imagined.
It’s important to be really connected to the purpose of what you’re doing and have an authentic true north. We have never steered from that at Varo. For us, it has always been about impact. You have to feel viscerally that you’re doing important work. But you also have to give yourself permission to say no, or to take time off. Even go to the beach. Sometimes on a Saturday, I have to give myself permission to do nothing and just play with my dog. Being a Founder/CEO is intense, so you have to allow yourself to shut down, turn all that noise off, and just rest at times.
The other thing I always recommend is simply getting exercise and eating well. A lot of founders damage their health and stop exercising. You need to be as disciplined about maintaining your health as you are about building your company. I exercise five to six days a week. Building a company is a long journey, and not a sprint. You have to put yourself in marathon mode.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story?
There have been many individuals who have proved instrumental across my career, but I believe in the power of the collective. Some of the greatest achievements have come as a result of group efforts to achieve a shared goal.
For example, about six years ago, as the world was recovering from the recession, American Express launched the Small Business Saturday campaign. Taking place the day after Black Friday, its purpose was to encourage consumers to shop at local businesses and help to support their local economies in the process.
After a successful launch in the United States, I helped bring Small Business Saturday to the U.K. in 2013, and everyone from local shopkeepers to the Prime Minister got involved. The reason it worked — and the lesson I learned — is that Small Business Saturday wasn’t a marketing strategy designed to improve American Express’s bottom line. It was something with a purpose — something that was capable of doing true social good. It required group support, and because of that, it became a resounding success.
Ok thank you for all that. Now let’s shift to the main focus of this interview. Approximately how many users or subscribers does your app or software currently have? Can you share with our readers three of the main steps you’ve taken to build such a large community?
We have more than one million bank account customers. The three main steps we’ve taken to build our large audience is:
1) Crowdsourcing feedback and co-creation with our customers. We are constantly engaging with our customers through research and listening posts, such as NPS User Voice, to identify opportunities to solve real problems and innovating to find solutions.
2) Delivering things that surprise and delight. From notifications to emojis, there are plenty of little touches to Varo’s user experience that make it feel like a warm and welcoming experience.
3) Building a brand that’s exciting and interactive. We did a sentiment analysis, and the number one word is “love”.
What is your monetization model? How do you monetize your community of users? Have you considered other monetization options? Why did you not use those?
This is a question that’s at the very heart of our business. Before we can address it though, it’s important to understand the model that has come before. Traditional banks are established institutions with well-entrenched practices, even if some of those practices don’t make sense in the twenty-first century. Operating thousands of branches across the country comes with a high price tag, from property costs to staffing — and the primary way they cover those costs is by asking their customers to pay more.
As a digital-only banking solution, Varo doesn’t need to charge exorbitant fees to support the kind of infrastructure that a legacy bank does. This gives us the freedom to offer a no-fees banking solution while finding ways to monetize that still treat our customers the way we would want to be treated. Our profits primarily come from the interchange fees paid by merchants and the interest we charge on personal loans (which remain competitive with industry standards).
Our solution was designed from the beginning to truly help people, and it is this goal that helped to shape Varo Money’s unique approach to the banking industry.
Based on your experience and success, what are the four most important things one should know before one wants to start an app or a SAAS? Please share a story or an example for each.
1) Have an idea with real conviction — and have some experience and pick a product category where you have credibility, because you need to find investors who share your belief
2) Find the right people who want to be on the journey with you — people have to feel like this is meaningful in their lives
3) Have an intense focus on delivery and execution — you can build a reputation on how well you execute. For so young a company, we have built a reputation and brand identity that is far beyond our years in business
4) Have these three rules for hiring — leave your ego at the door, everyone has to do real work (for some people who had been in big companies, this can be hard), and everyday matters — it’s a race against time
You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)
I would want to start a movement that fosters empathy around the real problems that people are facing. People who are not affected by financial problems have a hard time understanding; they haven’t walked a mile in our customers’ shoes. Varo is about creating a financial system that has equal access, rather than a world of haves and have nots. We need to stop excluding people on the basis of wealth, and develop greater empathy so that the system is inclusive of everyone.
How can our readers follow you on social media?
Anyone can sign up for a Varo account by going to varomoney.com. To learn more about how Varo Money can help with your personal finances, find us on Facebook and Twitter (@varomoney) or follow me personally @colinwalshSF.
This was very inspiring. Thank you so much for joining us!
