Neobank Dave has lined up Coastal Community Bank as a partner financial institution, and customer onboarding to that bank will begin as early as the second quarter, the companies said Monday.

The Los Angeles-based fintech’s partnership with Coastal Community Bank and CCBX, the lender’s banking-as-a-service unit, will fuel Dave’s business growth and expansion while offering competitive products in the market, the fintech said.

“This partnership marks a milestone moment for Dave,” Jason Wilk, the fintech’s CEO and founder, said in a statement. “Coastal Community Bank is the right partner for our company because of their customer-first mission, deep knowledge across credit and banking products, strong risk management, and our shared ambition to make a difference in the communities that need it most.” 

The partnership marks a pivot away from Evolve Bank & Trust. That bank has been the fintech’s only bank partner for its ExtraCash and other deposit accounts, debit card services and other transaction services, Dave said Tuesday in its annual filing with the Securities and Exchange Commission. 

The fintech eventually plans to drop Evolve as its partner bank, Bloomberg reported. 

Dave underscored some risks when relying on one bank partner, including difficulties transitioning between bank partners that involve operational errors, data breaches and service disruptions; potential business differences with new partners and challenges operating with multiple bank partners during transitions.

“We currently rely on a single bank partner, and if our present or any future key banking relationships are terminated and we are not able to secure or successfully migrate client portfolios to a new bank partner or partners, or our bank partner becomes subject to regulatory restrictions or other operational disruptions, our business would be adversely affected,” Dave noted in the filing.

The fintech also highlighted challenges Evolve has been grappling with for some time. The Federal Reserve issued an enforcement action against the lender last June, citing shortcomings in anti-money laundering, risk management and consumer compliance. The central bank alleged Evolve “fail[ed] to have in place an effective risk management framework” for its fintech partnerships.

Evolve was the partner bank of the bankrupt middleware firm Synapse. Though the Fed said Synapse’s bankruptcy had nothing to do with the enforcement action issued against Evolve, Dave said Synapse’s bankruptcy “affected the ability of customers of financial technology companies that used Synapse as a service provider to access funds placed at Synapse’s partner banks, including Evolve, for a number of months.”

To add to Evolve’s woes, the lender faced a data breach in which customer information was released to the dark web, two weeks after the Fed enforcement action. 

Dave, for its part, has had its share of challenges, as well. The Federal Trade Commission sued the fintech in November, alleging it misled consumers about its cash advance application. The FTC further alleged Dave charged consumers who needed financial assistance with undisclosed fees and “tips” without their consent.

Wilk said at the time that the lawsuit followed months of “good-faith negotiations” and was “another example of regulatory overreach by the FTC.”

However, the FTC referred the case to the Justice Department, which filed an amended complaint against the firm and Wilk in December.

Dave slammed the DOJ for its amended complaint and noted that it updated its mandatory fee structure to eliminate optional tips and express fees for the company’s ExtraCash product. 

In its annual filing, the firm said its optimal fee revenue model, including tips and instant transfer fees for its ExtraCash product, was completed last month. 

The optional fee model was replaced with a “simplified” 5% overdraft service fee structure including a minimum fee of $5 and a maximum of $15, starting with new customers in December 2024; existing customers were transitioned to that structure as of Feb. 19, according to the filing. 

Dave did not immediately respond to questions regarding its recent partnership. 

In November, Wilk hinted at diversifying Dave’s key commercial relationships given the scale it’s reached and the continued membership growth it’s experienced. 

“From our first discussions with their team, it was clear that we are aligned in bringing accessible, transparent financial services to traditionally underbanked populations,” Brian Hamilton, president of CCBX, said in a statement Monday.