Coastal Financial Acquires Challenger Bank GreenFi
Coastal Financial, a community bank based in Everett, Washington, renowned for its banking-as-a-service strategies, has recently announced its acquisition of GreenFi, a fintech firm specializing in climate-friendly banking and investment products. This move is a strategic stopgap measure by Coastal Financial aimed at designing a sustainable long-term strategy for the struggling GreenFi. The acquisition could potentially provide a blueprint for other banks specializing in banking-as-a-service to adopt when their fintech partners encounter financial difficulties.
Background on the Acquisition
The $4.6 billion-asset Coastal Financial announced its acquisition of GreenFi, its long-time fintech partner, on Friday. The purchase price, however, was not disclosed. The relationship between the two companies dates back to 2015 when GreenFi became one of Coastal’s earliest fintech partners. GreenFi was initially a part of Aspiration, a once high-flying challenger bank which later collapsed under a mountain of debt. GreenFi managed to avoid this fate by spinning off in April 2024, transforming Aspiration’s consumer financial services operation into a standalone company.
GreenFi’s Struggles and Decision to Sell
Despite raising $17 million in a seed investment last year, GreenFi could not sustain its operations independently in the long run. Led by Tim Newell, former director of financial service products for Tesla, GreenFi was unable to avoid a cash crunch. To escape this predicament, GreenFi decided to sell itself to Coastal Financial, its long-time banking partner. This decision was seen as a pragmatic move to ensure the continuity of GreenFi’s operations and services.
Implications of the Acquisition
Coastal Financial’s decision to acquire GreenFi prevents any disruption to the latter’s customer services. The acquisition allows GreenFi to continue its operations under its current management. This move also buys time for a thorough evaluation of the best possible future course for GreenFi. Options under consideration include keeping GreenFi under Coastal indefinitely or a potential sale to another buyer. GreenFi’s current offerings include checking and savings accounts, along with sustainable investment options that resonate with Coastal’s Pacific Northwest footprint.
Future Plans and Evaluation
Coastal Financial CEO, Eric Sprink, highlighted the importance of evaluating how well the bank could perform in direct-to-consumer digital banking. “Options are value,” Sprink said. “We want to make sure we explore all of the options and we understand the total value. … In our history, we have wound down about 10 other [partner banking] programs, but this one was intriguing enough for us to say, ‘Maybe this one we keep long-term.'”
This is not the first time a bank has purchased a fintech which was previously its partner. Notably, First Carolina Bank paid $66 million to acquire the digital banking fintech BM Technologies about a year ago. A similar move by other banks could potentially reshape the banking landscape, bringing more fintech firms under the umbrella of traditional banks.
This acquisition highlights the increasing interdependence and integration of traditional banking institutions and fintech firms. It also underscores the need for strategic decisions in the face of financial difficulties, offering a potential strategy for other banks and fintech firms to consider.
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