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Varo Gets A Banking License And Moves Operations To Temenos Transact Platform

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Varo Bank, which became the first U.S. fintech to earn a national banking license when the Office of the Comptroller of the Currency (OCC) awarded it a charter last month, will soon move operations to the Temenos cloud banking platform. It received its FDIC approval for deposit insurance in February.

Based in San Francisco, the all mobile bank will operate its innovative no-fee bank nationally. The bank charges no monthly maintenance fees, no foreign transaction fees and its customers pay no ATM fees at a network of more than 55,000 Allpoint ATMs worldwide. Like many challenger banking firms, including neighboring Chime in San Francisco, Varo had operated on a bankers’ bank platform — both companies chose Bancorp Bank — for its technology, banking charter and FDIC authorization.

By moving to Temenos, Varo Bank will get control of its technology and reduce its operating costs.

Deep Varma, CTO at Varo, said the bank chose Temenos because it was cloud native, has real time APIs and lower costs, about 20 to 30% of a traditional legacy banking platform, he said.

“This gives us control and scale and less reliance on a third party solution. Temenos is totally integrated with our tech stack and gives us the integration and scale we wanted to achieve. The challenge with the existing platform (Bancorp Bank) is we don’t have data ownership or the speed and latency we wanted. This is around controlling our own destiny, having data ownership and agility — how fast we can move in the marketplace. Colin Walsh, our CEO, felt that to provide true value to the customer you need to be a bank and you need to own your own technology stack with the core.”

The bank expects to go live on Temenos within four weeks, he added. Varo will begin by putting new customers onto the platform and then gradually move existing customers over. Running on its own platform means that Varo has had to develop its own compliance framework including policies and procedures around risk management, fraud prevention and cybersecurity. Fortunately the bank has a staff that came from large banks and understands regulation and how to work with the FDIC, OCC and the Federal Reserve.

Varma said the bank will work with Temenos to introduce some new features in the coming months. Temenos acts as a partner and brings the right subject matter experts as the two firms work together on more innovation he added.

Alexa Guenoun, President, Americas and Global Head of Partners at Temenos, said that as a de novo bank Varo didn’t have to untangle legacy systems, which is very different from an existing bank that might have 20 to 40 years of systems built up with complex combinations of vendor and proprietary technology. Temenos has several ways of migrating accounts, she added, and in Varo’s case it isn’t difficult because the new bank is using an out-of-the-box version of Temenos Transact, its core banking system.

A recent Forrester Wave Report named Temenos along with Finastra and EdgeVerve (Finacle) as leaders in digital banking processing platforms. The Temenos functionality covers retail, business and corporate banking, Forrester said.

“We are very pleased to be leaders in both retail and corporate,” Guenon said. Varo marks a turning point for Temenos in the U.S. and for American challenger banks, she added.

“I believe that it will pave the way and prove to be a turning point for the market. When you look at innovation and cloud, you want a partner who is in that space — you aren’t going to look at legacy systems.”

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