Varo Neobank Appoints New CEO Amid Financial Challenges

Neobank Varo is undergoing a leadership transition, with founder Colin Walsh stepping down from his role as Chief Executive Officer. According to a report from FinTech Business Weekly (FBW) on Sunday, February 16, Walsh will continue to serve on Varo’s board but will be succeeded by Gavin Michael, the former CEO of cryptocurrency exchange Bakkt. Michael had previously announced his departure from Bakkt, stating that he would remain in an advisory role until March 2025.

The report highlighted that Michael would face significant challenges in his new position. While Varo reported a 22% increase in revenue, a 38% improvement in net income, and a 31% reduction in customer acquisition costs in 2024, the company remained unprofitable, recording a net loss of $65 million last year. Despite obtaining a banking charter in mid-2020, Varo still relied heavily on interchange fees, which accounted for 55.8% of its revenue in 2024.

PYMNTS reached out to Varo for a statement but had not received a response at the time of reporting.

FBW’s Jason Mikula analyzed the situation, suggesting that Michael would have limited flexibility in steering the company toward profitability. He noted that Varo had already made significant spending cuts, particularly in employee compensation and marketing. Given these reductions, he argued that achieving profitability through further cost-cutting seemed unlikely, emphasizing instead that the company would need to scale its asset base to align with its fixed costs.

Beyond Varo, the neobank sector has been gaining traction in lending to small and medium-sized businesses (SMBs), an area with substantial market potential. A recent PYMNTS report highlighted that the U.S. is home to over 33 million small businesses, which collectively employ approximately 46% of the workforce, according to estimates from the U.S. Chamber of Commerce. In the United Kingdom, government data indicated that 5.6 million small firms were in operation.

The report underscored that many of these businesses continue to face cash flow challenges, with around 60% struggling due to delayed payments. It suggested that loans and credit products—such as virtual cards and expense management solutions—could be instrumental in helping SMBs navigate financial difficulties.

However, a recent survey by the U.S. Federal Reserve on small business lending found disparities in loan approval speeds. The findings revealed that while just over half of large banks could approve a small and simple loan within one business day, only 29% of small banks were able to do the same. This discrepancy highlights ongoing challenges in smaller businesses’ access to financial support.

Have you read?
Highest-Paid Athletes in the World.
Largest stock exchanges in the world by market capitalization.
Countries with the largest air forces in the world.
Best European destinations to travel to as a student.
Largest Cities in Africa.