Zombie Fintech Varo Loses Another $25M In Third Quarter
Evolve Posts $5.3M Q3 Loss As CEO Criminally Charged, Crypto.com Applies for Trust Charter, bunq Gets Broker-Dealer License, 1033 Latest
Hey all, Jason here.
Happy Q3 call report release to those who celebrate! I clearly observe this quarterly holiday, as evidenced by this week’s missive.
That also means we’re in the home stretch of 2025. I have one last work trip to the US later this month to attend Alex Johnson’s Fintech Takes Builders Summit in Bozeman, the American Fintech Council’s Policy Summit in DC, and Simon Taylor’s Fintech Nerdcon in Miami.
After the sensory overload of Vegas, I’m looking forward to some smaller scale events. Quality > quantity and all that!
One more quick thought; so many of us in fintech talk about “financial health” or “financial wellness.” With the ongoing government shutdown, the current administration has chosen to unnecessarily (and, arguably, illegally) withhold SNAP benefits — literally taking food away from some of our country’s most vulnerable.
Data from Propel show that millions of households have already missed a payment, and Google searches for “food bank” and “food pantry” have spiked to what is forecast to be an all-time high — exceeding even April 2020 during the height of uncertainty around the COVID pandemic.
This is all to say, if you or your company work in a sector serving lower-income households — particularly if you’re a bank or lender — please, think about what you can do to help in this situation, rather than callously prioritizing optimizing whatever KPI or OKR you’re focused on or your annual bonus may depend on.
Join Fintech Biz Weekly at Fintech Nerdcon: Where Operators & Innovation Converge
Sponsored content: Jason here. I’m excited to speak at Fintech Nerdcon this year, a 2-day summit for fintech operators, by operators. Taking place in Miami (November 19-20), the room will be stacked with high potential founders and leaders working in the industry today. We’ll dig into what matters now, including sustainable unit economics, BaaS risk management, AI use cases, payments infrastructure, and the policy shifts shaping the future.
NO sales booths, NO fluff, and operators you won’t see speaking anywhere else. If you read FBW for signal over noise, this is your room.
Come say hi, and meet your fellow fintech nerds! And as a subscriber to FBW, use promo code: FBW20 for 20% off your ticket.
Zombie Fintech Varo Loses Another $25M In Third Quarter
While much of fintech world has moved on to the latest shiny objects — agentic AI and stablecoins — there are still thousands of private fintech startups in the US, founded and funded during earlier waves of optimism about specific sectors and business models, that struggle on.
Varo is one such zombie company.
And Varo, as a chartered bank, has the unfortunate distinction of its slow bleed playing out across the pages of the reports of condition and income, commonly known as call reports, that the bank must file each quarter.
Varo’s high point was arguably in 2021, when it raised a $510 million Series E, against the frothy backdrop of massive COVID-era stimulus combined with then-conventional wisdom that the pandemic had fast-forwarded existing trends of everything being online, remote, and digital.
But Varo has long since spent that $510 million.
Indeed, since then, Varo raised $50 million in early 2023 and another $55 million earlier this year. But the additional capital did little more than keep the fledgling bank on life support.
The company changed CEOs, with founder Colin Walsh stepping down earlier this year, replaced by the CEO of crypto custody and trading firm Bakkt. But any changes to the company’s strategy and execution aren’t showing up in its financial performance.
Although the number of deposit accounts Varo indicates on its call report has marginally increased, hitting just shy of 6.2 million, the bank’s aggregate deposits and revenue have failed to keep pace, suggesting a material proportion of those accounts are either not users’ primary banking relationship or are dormant altogether.
Average deposits, measured by dividing the bank’s total deposit base by number of reported accounts, has continued to slide, dropping to just $25 as of the end of the third quarter.
Revenue per account in the third quarter was a paltry $5.94. meaning Varo realizes only about $24 in revenue per account per year.
Varo reports two categories of “lending,” though its Varo Believe card is secured by users prefunding the account and revenue for the product is derived from interchange, not interest.
While the company had seen steady increases in aggregate balances in the Believe product, balances peaked in Q1 2025 and have since declined about $9.3 million, suggesting either Varo customers aren’t using the card as much as they were previously or, more likely, that users churned from Varo altogether.
Varo has seen steadily increasing outstanding receivables for its Varo Advance short-term small-dollar loan product, functionally a payday loan, which lets users borrow up to $500 with a flat-fee structure rather an interest rate.
It’s not possible to parse the financials for the Advance product solely from the data available in Varo’s call report. Charge offs as a percent of outstanding book were around 10% in Q3, or nearly 40% on an annualized basis.
The upshot is that Varo posted a loss of $25 million in the third quarter — an increase of more than 25% vs. its losses in Q2 and a jump of almost 50% vs. what it lost in Q3 2024.
Varo ended the third quarter with just shy of $54 million in equity capital, its lowest dollar amount of equity capital since becoming a bank. With a leverage ratio above 16%, the bank remains more than well capitalized.
Despite its best efforts, Varo hasn’t succeeded in cutting its way to profitability. And with declining deposits and assets, the bank is in something of a death spiral, kept alive only with the persistent infusion of outside capital.
Asked if the company planned to raise additional capital or is considering strategic options, Varo didn’t respond.
Evolve Posts $5.3M Q3 Loss As Now-Former CEO Charged With Soliciting Sex With 15-Year-Old
The complaint against now-former Evolve Bank & Trust CEO Bob Hartheimer were unsealed last week, revealing that Hartheimer is being charged with two counts stemming from soliciting sex with what he believed to be a 15 year-old boy on the dating app Grindr.
While the case is unrelated to the embattled bank and its wider troubles, Hartheimer, also a veteran of regulatory consulting shop Klaros Group, payments firm CardWorks, and the FDIC, was suppose to be something of a fresh start for the bank.
In an Arkansas Business story that appears to have been largely written prior to Hartheimer’s arrest on Thursday, October 23rd, Hartheimer pitched a turnaround narrative, including doubling down on Evolve’s banking as a service business. According to that reporting:
[T]he bank is maintaining its focus on BaaS. In an interview shortly after he was announced as CEO this summer, Hartheimer referred to his plan for the bank as “Evolve 2.0” to build “the most technology-forward banking-as-a-service business that we can build and also to expand the other businesses that are doing very well.”
But now, less than three months into the role, Evolve has terminated Hartheimer as CEO. Evolve President and CFO Mark Mosteller and EVP and General Counsel Joelle Weltzin will oversee operations at the bank, according to a statement from the bank.
Mosteller and Weltzin face what can charitably be described as a challenging situation.
Evolve’s latest call report, which covers the third quarter and was made publicly available on Friday, shows growing losses at the bank.
Evolve posted net income of -$5,336,000 in Q3, a sharp reversal from the approximately $1.9 million it earned in Q3 2024.
Revenue from deposit and referral fees and card issuance, both of which are driven by the bank’s BaaS business, continue to atrophy as fintech programs look for new bank partners.
In Q3 2024, Evolve drove about $12.3 million in revenue from such fees; by Q3 2025, revenue from them had dropped to about $7 million.
Meanwhile, expenses to deal with the fallout of the collapse of Evolve’s third-party service provider Synapse remain elevated. Consulting/advisory and legal fees totaled about $12.3 million in Q3 2025 vs. about $5.5 million the year prior.
With over $150 million in total bank equity capital, a leverage ratio of over 10%, and a tier 1 capital ratio of nearly 15%, Evolve remains more than well capitalized by standard regulatory measures. However, Evolve’s balance sheet likely does not fully capture contingent liabilities it faces, whether related to the Synapse disaster or other legal issues facing the bank.
Everything Else: Crypto.com Applies for Trust Charter, bunq Gets Broker-Dealer License, 1033 Latest
Everyone wants to be a bank all of a sudden it seems.
Crypto.com, a crypto exchange which ran a Super Bowl commercial amid the crypto mania of early 2022, is the latest to submit an application to form an OCC-chartered national trust bank.
Per the public portion of the application, released on Thursday, October 30th, Crypto.com is seeking to charter Foris DAX National Trust Bank (FDNTB).