Varo Bank Raises $124M in Latest Funding Round

Neobank Varo Bank has secured $124 million in new funding to fuel growth and product development as it seeks a path to sustained profitability.

Digital-only Varo Bank has raised $124 million in a new equity funding round, providing crucial capital as the neobank continues its push toward sustainable profitability. The round was led by existing investors including Lone Pine Capital and Declaration Partners, with participation from several institutional funds. This infusion marks one of the largest single raises for a U.S. neobank in 2026 and signals continued investor confidence in Varo's hybrid model of banking-as-a-service and consumer deposits.

Varo, which became the first consumer fintech to receive a national bank charter in 2020, will use the capital to accelerate the development of new lending products, enhance its AI-driven financial tools, and expand its small business banking offerings. The company has been focused on reducing its burn rate and achieving positive net income after facing significant financial pressure in the competitive digital banking sector.

"We are building a next-generation bank that is both technologically advanced and fundamentally sound," said Varo Bank CEO Colin Walsh. "This funding allows us to invest in high-margin products while continuing to serve our core customer base with essential, low-cost banking as services." The raise comes as many neobanks profitability charges struggle to demonstrate a clear path to profitability amidst rising funding costs and intense competition from both traditional banks and larger fintech players.

Analysts note that Varo's national charter provides a structural advantage in gathering deposits and managing regulatory compliance, but the path to scale remains costly. The new capital provides a longer runway to prove its model can generate consistent returns. The neobank reported having added over 500,000 new accounts in the past year, bringing its total customer base to approximately 5 million.

The funding round is expected to close by the end of Q1 2026. Varo has not disclosed its post-money valuation, but sources indicate it represents a modest increase from its previous round, reflecting a tempered but supportive private market for proven fintech platforms.