Independent Banker - July 2020 - 65

Trailblazer
The bank that's pioneering
banking as a service
With the help of a fintech partnership,
Coastal Community Bank has blazed a trail
by providing banking as a service (BaaS).
By Judith Sears
or the past five years, Coastal Community
Bank in Everett, Wash., has provided what it
calls banking as a service, or BaaS, to broker-dealers
and digital financial services companies.
The strategic vision, developed by the $1.1 billion-asset
community bank's board of directors
and Eric Sprink, its president and CEO, was first
seeded when a digital financial services company
approached Coastal Community Bank about
handling its backroom processing. " We said,
'That's interesting, but we don't really know what
it means,' " Sprink says.
Bank executives consulted with regulators
who said that providing BaaS might be a possibility
but that the community bank wasn't ready
yet. " Banking as a service is risky and complex, "
Sprink says. " The regulators advised us to first
build up our infrastructure. "
Building a new division from scratch
Sprink and the board were already mulling the
bank's future, well aware of the increasing number
of nonbank entrants in the financial services
sector. " When you start discussing 10 to 20 years
from now, you really open your eyes to how
financial services is changing, " Sprink says.
The board considered three strategies: sell to
another bank, stay independent and private, or
go public. Ultimately, the board decided to go allin
on pursuing BaaS and voted to go public to
raise the capital to do so.
" Our board put a flag in the ground and our
vision is based on a seven- to 10-year strategy, "
Sprink says. " They were spot on. Change is
Quick stat
25-30
The number
of full-time
equivalents
Coastal
Community Bank
hired to launch
its new CCBX
division
F
happening, only faster than we anticipated. "
The community bank first moved to boost
its in-house expertise, adding board members
Stephan Klee, who has a broad background in
the venture capital and fintech world, and Sadhana
Akella-Mishra,
an attorney focused on
fintech compliance and
global risk. " Their expertise
gave confidence
to the rest of the board
members, " Sprink says.
With the capital
raised from going pubName:
Coastal
Community Bank
Location: Everett,
Wash.
Assets: $1.1 billion
lic, Coastal Community Bank began building its
new division, dubbed CCBX, that enables broker-dealers
and digital financial services providers
to deliver seamless financial services, including
banking services, to clients. The community
bank added between 25 and 30 full-time equivalents
with specific skills in payments, operations,
audit, compliance and accounting.
In 2018, the bank landed its first BaaS client,
Aspiration, an SEC-registered broker-dealer offering
cash management accounts. Recognizing
that the community bank owns all of the privacy
with nonbroker-dealers, Bank Secrecy Act (BSA)
and compliance issues associated with providing
BaaS, Coastal Community Bank continually
worked to upgrade its capabilities as it sought
new BaaS clients.
" A lot of bad people try to open accounts online.
You've got to be three times as good opening accounts
online as through a traditional branch, "
Sprink says. " We have an obligation to continue to
expand and enhance BSA oversight procedures. "
To that end, the community bank began
reviewing potential fintech partners, looking
for a firm that could provide lower-cost data
independentbanker.org Q 65
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Independent Banker - July 2020

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