Why real banks reign supreme over money apps

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The landscape of personal finance management has evolved with the emergence of money apps (also known as banking apps), often blurring the lines between traditional banking products and modern financial technology. While many money apps partner with third-party banks to provide FDIC insurance and banking services, there's a significant distinction in what real banks can offer to Americans compared to money apps (i.e. fintechs without their banking charters). 

Following the bankruptcy of Synapse— a fintech company who acted as a middleman between money apps and FDIC-insured banks— in Spring 2024, more than 100,000 Americans had the unpleasant surprise of learning that their money was frozen in accounts they didn’t have access to. Since Synapse did not have their banking charter, customers’ money was only insured through the FDIC-insured banks that money apps partnered with. This led to consumers wrongly assuming their money was protected; when in fact, according to the FDIC, money kept with non-chartered fintechs and money apps is not insured. This means that those customers looking to recover their funds often need to go through a lengthy court process to do so.

When you choose to instead trust your cash with a real bank, you're not just selecting a place to store your money; you're prioritizing transparency, security, and the knowledge of where your funds are at all times (with the full benefits of FDIC insurance and protection). Here’s a closer look at why, despite third-party partnerships with FDIC-insured institutions, real banks continue to hold a distinct advantage over “banking apps” and “money apps”.

Comprehensive Services Under One Roof

Unlike money apps or banking apps, which may offer a selection of banking services through external partnerships, real chartered banks deliver a full suite of financial service products—from savings and checking accounts to loans and other credit building opportunities—all under one roof. This comprehensive approach ensures that customers have access to a broader range of financial tools, without their money being passed between multiple institutions.

FDIC Insurance

One of the most significant advantages of banking with real banks like Varo is the protection of your funds through the Federal Deposit Insurance Corporation (FDIC). This insurance means that even in the unlikely event of the bank failing, your money is protected up to $250,000 per depositor, per FDIC-insured bank, per ownership category. Money apps often have to partner with real banks to offer this protection, adding a middleman between you and your funds, and often requiring court action to get your money back if the money app/fintech goes under.

Direct Regulatory Oversight and Reliability

While it's commendable that many money apps secure FDIC insurance through partnerships with third-party banks, the importance of direct oversight is crucial. Real chartered banks, such as digital-first pioneers like Varo Bank, adhere to strict regulatory requirements and uphold a consistent discipline in their operations to guarantee honesty and openness in managing consumer funds. This steadfast commitment to compliance and ethical business practices ensures customers are fully informed about the handling and protection of their money.

Being a real chartered bank means Varo Bank's accounts are continuously monitored and audited by regulatory authorities, adhering to a comprehensive array of financial and operational standards. This commitment to upholding high standards of safety and security is fundamental to building and sustaining customer trust. 

Unlike banking apps that might lack such stringent regulation, Varo Bank demonstrates an unwavering dedication to ensuring your money is precisely where it should be, often diminishing the risks often associated with less regulated financial money apps. This rigorous oversight and adherence to strict compliance standards underline the credibility of real banks like Varo, distinguishing them in an era where transparency and reliability are primary consumer focuses.

Integrated Customer Support

Real chartered banks offer integrated, multi-channel customer support, spanning across streamlined services like call centers and digital platforms. This comprehensive support system is often more robust than what's available through money apps, where assistance might be limited to online channels only or indirectly through their partner banks. The direct and personalized customer service that a real bank offers can be incredibly valuable, especially when addressing complex issues or financial services needing attention and personalized support.

Easy Accessibility and Monitoring

Real banks provide robust online and mobile banking tools that allow you to monitor your money and see exactly where it is at any time. Whether it's checking your account balance, reviewing transactions, or transferring money, you have direct and transparent access to your funds without worrying about how it’s used or which institution it’s being held at.

Varo Bank: Merging Innovation with Stability

At Varo Bank, we understand the allure of money apps; that’s why we’ve designed our products to offer the best of both worlds. As a real bank with a national bank charter, Varo brings together the innovations of a fintech with the comprehensive, reliable services and regulatory oversight of traditional banking. Our mission is to empower our customers to manage their finances easily, securely, and effectively, providing them with a wide range of financial tools and services designed to meet their evolving needs.

While money apps and banking apps have made significant strides in offering convenient banking solutions, real banks remain the cornerstone of comprehensive financial services. The distinction lies in their breadth of services, direct regulatory oversight, consumers’ direct access to their money, and the ability to support customers' financial progress through a suite of practical product offerings. We aren't just about transactions; we want to build a secure, empowering financial future for everybody.

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