Credit unions in the competitive landscape

Credit unions, digital banks and nonbanks should be factored into a revamped measure of market competition when considering a bank merger, Federal Reserve Gov. Michelle Bowman told a September gathering held by the Conference of State Bank Supervisors.

The framework for evaluating mergers “is meant to promote a competitive marketplace for banking products and services,” Bowman said. “But if that framework does not account for the full range of competitors, we're only restricting banks from making strategic merger choices, while allowing those outside the framework to proliferate.”

A July 2021 executive order from President Joe Biden demanding “more robust scrutiny” of bank mergers by the Fed and other agencies gives regulators a “unique opportunity” to tweak the parameters of what constitutes adverse competition — a notion that hasn’t seen a significant update since 1995, Bowman said.

Guidelines from that era use the Herfindahl-Hirschman index (HHI) — a figure that increases as branches consolidate and markets concentrate — to gauge a financial institution’s deposit market share.

But risk analysis, not size, should steer the review of a merger application, Bowman asserted. 

Under 1995 screening criteria, proposed mergers that produce an HHI score of less than 1,800 for a banking market on a scale to 10,000, or increase the HHI by less than 200, likely won’t trigger in-depth review, Bowman said. But more than 60% of geographic banking markets in the U.S., as they’re defined now, surpass the 1,800 threshold, she said.

Using deposit share as a proxy for market power may have worked before the proliferation of the internet because banks are required to report branch deposits annually through a survey by the Federal Deposit Insurance Corp., Bowman noted.

But while deposits at brick-and-mortar branches grew by roughly 21% from 2019 to 2020, online deposits increased at nearly three times that rate, Bowman said. 

“Since we know that deposit relationships generally lead customers to develop other types of banking relationships, a comprehensive analysis of competition needs to account for the ubiquity of out-of-market banks with a strong national presence,” Bowman said. “In the absence of specific data about a digital bank's presence in a market, [online] deposits should be weighed in pro rata in each banking market at the percentage reported annually in the summary of deposits in any competitive analysis.”

Analysts “have to get creative” when measuring the competitive effect of nonbanks because they generally don’t have the same reporting requirements as banks, Bowman said.

To solve that, Bowman recommended relaxing the HHI thresholds in bank merger guidelines to reflect the influx of nonbank competition.

Looser restrictions also may benefit struggling rural community banks that may be forced to seek a merger with an out-of-market partner because combining with another local community bank would drive up HHI, Bowman said.

The Fed should also review how it defines banking markets to ensure they are updated consistently and reflect change, she added.

Credit unions, too, represent a burgeoning source of competition because many — since 1995, when they were left off competitive screening — have adopted geography-based membership criteria and now offer business loans, Bowman said. She pointed also to an uptick, in recent years, of bank acquisitions by credit unions.

“Credit unions whose field of membership includes all, or almost all, of the market populations, whose branches are easily accessible to the public, who engage in a significant amount of commercial lending and who have staff available for small business services, or who have acquired a community bank should be part of any initial competitive screen,” Bowman said. 

Bowman urged the National Credit Union Administration to collect “more granular deposit information” from credit unions to give a clearer picture of their local market power. 

“Similar activity should be subject to similar data collection and regulation,” she said.

The National Credit Union Administration in February unanimously approved a final rule requiring all credit unions to report cybersecurity attacks within 72 hours after they reasonably believe an incident has occurred.

The rule will be effective Sept. 1, but the agency will lay out additional guidance before then.

The rule remains largely unchanged from when it was proposed in July 2022, NCUA Chair Todd Harper said, emphasizing the importance of coordination between the NCUA and the Cybersecurity and Infrastructure Security Agency to avoid duplicate reporting.

“Each of us in the financial system has an obligation to protect our nation’s economic and financial infrastructure. And, credit unions must be included in conversations about critical infrastructure, as a whole,” Harper said in a statement.

Banks regulated by the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Federal Reserve face a tighter reporting window: 36 hours.

“Through these high-level early warning notifications, the NCUA will be able to work with other agencies and the private sector to respond to cyber threats before they become systemic and threaten the broader financial services sector,” Harper said.

The final rule will go into effect months after the Financial Crimes Enforcement Network said U.S. financial institutions reported $1.2 billion worth of ransomware-related filings in 2021.

The NCUA’s rule complies with a cybersecurity law President Joe Biden signed in March 2022, requiring companies to provide notification within 72 hours of learning of a cyberattack.

The 72-hour notification time frame is to provide an early alert and does not require credit unions to give a full assessment of the incident to the NCUA, the board said.

The rule is aimed at cyber incidents “that [lead] to a substantial loss of confidentiality, integrity, or availability of a network or member information system as a result of the exposure of sensitive data, disruption of vital member services, or that has a serious impact on the safety and resiliency of operational systems and processes,” the NCUA said.

"The sooner the agency is aware of an incident, the sooner it can determine whether it is isolated or widespread,” NCUA Vice Chair Kyle Hauptman said in a statement.

The rule is one of the many steps the NCUA has taken to improve cyber resiliency, including the Information Security Examination program launched this year, Harper said.

The NCUA does not supervise third-party vendors, and as such, around $2 trillion in assets are exposed to potential risks, Harper said.

“Unfortunately, cyber risk in the credit union system often lurks in the ether — beyond the NCUA’s purview — within credit union service organizations and third-party service providers that do not have the same level of oversight as bank vendors,” he said.

By restoring the NCUA’s authority over credit union service organizations and third-party vendors, the country’s economic security would receive a boost, Harper said.

“It will also give credit union members the same protection that bank customers currently enjoy,” Harper said, adding that the agency will continue to engage with Congress on the issue.

The National Association of Federally-Insured Credit Unions took a shot at legislation expected to impose new restrictions on credit card transaction processing before it’s even been introduced.

The trade group, which represents not-for-profit credit unions that provide services to 135 million consumers, told congressional leaders in a February letter that a bill requiring more networks to be available for the processing of credit card transactions would be counterproductive. In its view, the legislation would benefit retailers, not consumers.

“This bill is unwarranted and represents a heavy-handed government intrusion into the credit card payments market that would hurt credit unions and consumers alike, while allowing the largest retailers to pocket significant cost savings,” the letter said.

The letter takes aim at the Credit Card Competition Act authored last year by Sen. Dick Durbin, D-IL, which is expected to be reintroduced this year after it failed to pass in the most recent session of Congress. That bill mandated that merchants have access to card networks other than Visa and Mastercard for routing credit card transactions.

A spokesperson for Durbin’s office didn’t immediately comment on the letter from NAFCU.

In its letter, NAFCU warned that passage of a bill to put curbs on the processing of credit card transactions would reduce its credit union members’ revenue from swipe fees and thereby limit loyalty programs, fraud protection and other benefits, like free checking, for customers. Without a portion of those interchange fees, they wouldn’t be able to offer the same services, they contend.

“Credit unions are committed to serving their members and, as such, must be able to make a reasonable return on payment card programs in order to continue to provide important consumer financial services, such as free checking accounts and member help lines when data breaches occur,” the letter said.

Associations representing merchants and retailers, meanwhile, continue to back the Durbin legislation. They argue that credit unions will be helped, not hurt, by Durbin’s proposal because it exempts financial institutions with less than $100 billion in assets, presumably giving the smaller players a lift in competing against their larger rivals.

“Only one credit union in the entire nation meets that test and the rest are exempt,” Doug Kantor, general counsel fo the National Association of Convenience Stores, said in response to the letter. “And, the exempt institutions would be more attractive to Visa and Mastercard — helping those small credit unions overcome the disadvantage they have in the market today.” 

Trade groups representing those interests contend that the legislation would mainly affect the fee revenue streams flowing to Visa and Mastercard and the big-bank card issuers. They also note that the processing of credit transactions is more regulated in other countries, but the financial institutions are still able to offer sufficient services in those markets.

“Security would be improved by the bill because competition improves not just prices but services throughout the U.S. economy,” said Kantor, who is also an executive committee member of the Merchants Payments Coalition.

The previously introduced Senate and House bills were both put forward last year by bipartisan sponsors, but each failed to gain traction. 

The bills would presumably have even dimmer chances of passage now that the House is under Republican control because Durbin, who is the Senate majority whip for Democrats, has been the lead backer of the bill.

Nonetheless, he has proven to be a determined and strategic sponsor of such efforts over the years, seeking to inject competition into a card network industry he argues is dominated by Visa and Mastercard. More than a decade ago, he helped win congressional passage of the Durbin amendment to the 2010 Dodd-Frank Act, which imposed new restrictions on the processing of debit transactions.

Tulsa Teachers Credit Union, a $2.5 billion-asset financial institution in Oklahoma, saw $13.6 million in loan growth in 2022, following the integration of SavvyMoney, an embedded credit solution, into its banking app.

SavvyMoney, based in Dublin, California, lets banks and credit unions offer comprehensive credit score analysis, full credit reporting, and monitoring to their customers free of charge, as well as personalized loan offers, straight from the bank’s own app.

Since adding SavvyMoney to the TTCU app, the credit union has seen 43% of its enrolled members boost their credit score by at least one credit tier, said Jeff Baenziger, TTCU’s vice president of digital strategies, calling it a win-win for members and the institution alike.

“This allows TTCU to create a deeper relationship with our members by offering products they would not have previously qualified for,” he said. “It also places the credit union in a better position to provide the personalized financial guidance our members are looking for as we seek to be their trusted source for financial solutions.”

The success of SavvyMoney for its customers is more than just a case of “knowledge is power,” Baenziger said, and it provides more than just a snapshot of one’s credit in time. Its credit score simulator tool, for example, allows members to simulate how their credit score might be impacted if they make a specific financial decision; and the personalized credit score action plan prioritizes what a member must do to get a bump in their score.

Based on the information it has access to — SavvyMoney pulls a customer’s credit profile from TransUnion and also uses VantageScore 3.0, a collaboration between the three major credit bureaus — the solution also connects users to loan offerings available to them through their financial institution.

The widget “put[s customers] in the driver’s seat when choosing to apply,” Baenziger said.

Years ago, JB Orecchia, SavvyMoney’s founder and CEO, was part of the original team at FreeCreditReport.com, the genesis of internet credit report offerings. Down the line, some of the nation’s largest banks began offering credit score products to customers, and Orecchia wanted to create a solution that bolstered the same capabilities at credit unions and community banks.

“If [a small bank] doesn’t have a credit product built into its digital banking, [customers are] going to go to a third-party website, or a big bank who offers credit score products to engage the user with their brand. What do they get out of it? New customers,” he said. “I felt this is table stakes for the credit union and community bank industry. For one, everyone needs to educate their consumers how to manage their credit because it’s better for the overall ecosystem, and a lot of time, [small FIs] have great financial products.”

SavvyMoney partners with 1,055 financial institutions across the country, and integrates with 40 digital banking platforms like Fiserv, helping increase the loan portfolio of smaller FIs and the credit health of their members.

Since Bank of Travelers Rest, a $709 million-asset community bank in South Carolina, integrated SavvyMoney into its banking app, it’s helped make “better customers, better customers” and added value to their relations with the bank, said Eric Wall, the bank’s senior vice president and marketing director.

“That way when the time comes that they do need to borrow money to fund a life event or, God forbid, an emergency, they have been savvy in how they have managed their money … but, more importantly, their credit report, which will provide them access to the funds they may need,” he said.

One thing Bank of Travelers Rest opted out of with SavvyMoney, however, was advertising loans through the SavvyMoney platform.

While Wall said the bank “certainly needs loans to function,” its strategy in integrating SavvyMoney was to provide the tools to customers.

“At the onset, we felt that trying to bring in additional loan business might work to bring in loans, but what is it doing to the customer who may be on the borderline? As a relationship-based bank, we want to provide SavvyMoney as a tool, not as a trigger to borrow more,” Wall said. “If it makes sense for the customer, then we want to have that talk with them so that we can understand their goals and how we can help get them there.”

The availability of credit solutions in-app is also a matter of cybersecurity, Wall said.

“[W]ith so many fraudulent websites and attempts to gain private consumer information, giving customers access to their report through our secure online banking login means they are not going elsewhere where a connection isn’t safe or where the site/service isn’t totally bogus,” he said.

In 2021, the fintech closed a $45 million funding round led by growth equity firm Spectrum Equity. TransUnion also participated in the funding round. Orecchia told Banking Dive the funding was largely used for talent, with a focus on team growth, product development and security.

“Because we’re dealing with credit data and the consumers of banks and credit unions, we doubled down on that in a big way,” he said. “We are very thorough when it comes to security an compliance — we’re Tier 1 with TransUnion, meaning we have the highest level of compliance and security.”

Atlanta-based Greenlight is making its kid-focused banking services available to traditional financial institutions, the fintech announced in March.

The new partnership program, called Greenlight for Banks, allows banks and credit unions to offer the fintech’s suite of banking and education products to their customers through a co-branded landing page and app.

Over half a dozen firms, including Morgan Stanley, WaFd Bank and Community Financial Credit Union have partnered with Greenlight to offer the fintech’s services to their customers, said Matt Wolf, Greenlight’s senior vice president of business development.

Greenlight is actively involved in discussions with over 100 financial institutions, he added.

“In those conversations with financial institutions, we found that many don't have the expertise or resources to create a compelling digital banking experience for the next generation,” Wolf said. “We've designed something that really helps financial institutions, seamlessly integrate family banking into their own ecosystems.”

Greenlight, which was co-founded by Tim Sheehan and Johnson Cook, launched a debit card for kids in 2017.

The fintech has since expanded its offerings to include savings and investing for children, while allowing parents to automate allowances and supervise their dependents’ money management.  

In January, Greenlight launched a financial literacy game called Level Up, which banks and credit unions will also be able to make available to their own customers through Greenlight for Banks.

Lenders who partner with Greenlight have the option to hold the deposits gathered by the fintech, or allow them to be held by Greenlight’s partner bank, Community Federal Savings Bank, which issues the Greenlight debit card.

While financial institutions are eager to launch products that reach the next generation of customers, bank accounts geared toward children typically don’t have high balances, meaning, they won’t be large deposit generators for banks, Wolf said.

“A couple transactions a month is probably not going to really rise to the top of their technology roadmap and prioritization,” Wolf said.

But offering services targeted toward kids and their parents allows a bank or credit union to create deep and potentially long-lasting relationships, Wolf added.

“As it pertains to the child, they're getting exposed to the financial institution’s brand very early on. And for the parent, they're recognizing that this is a great service they're getting for free because they have that banking relationship with their credit union or bank,” he said.

The service is free for customers, Wolf said. Institutions that partner with Greenlight pay the fintech a monthly fee, based on the size of the firm, he added.

“Neobanks are coming after Gen Z really aggressively. This gives banks and credit unions of all sizes the ability to have relationships with that next generation before they start getting bombarded by neobanks and others that have a young adult banking relationship,” he said.

Greenlight’s effort to offer its youth and family tailored services to traditional firms follows a tie-up it launched with JPMorgan Chase in 2020. 

The New York City-based bank partnered with the fintech in October 2020 to offer an account designed for kids called Chase First Banking.

The account reached 1 million users by April 2022, the bank said during its investor day last May.

Amid Greenlight’s new business-to-business focus, it still plans to grow its direct-to-consumer model, where users pay the fintech a monthly subscription to use its services directly.

But the fintech recognizes the reach traditional banks have to offer, Wolf said. 

“We think that can really help us reach the most families,” said Wolf, on partnering with traditional institutions. “It's too big an opportunity to ignore.”

Greenlight, which is not yet profitable, has raised over $556 million in funding, according to Crunchbase. The fintech’s most recent investors include venture capital firms Andreessen Horowitz and Canapi Ventures.

The fintech said Greenlight for Banks is expected aid its efforts to reach profitability. 

“Our multiple paths to market, across our direct-to-consumer and partner programs, represent a distinct advantage and allow us to meet the evolving needs of our families where they are through a combination of new products and diverse distribution channels,” Greenlight said in a statement.

Apex Fintech Solutions is partnering with Unifimoney to offer digital investment solutions for community banks and credit unions, the companies announced in December.

The collaboration aims to provide account holders with easy access to Unifimoney’s turnkey digital wealth management platform and Apex’s digital and custody engine.

The services include robo advisory and self-directed trading for stocks and exchange-traded funds, with expanded offerings expected in the future.

“Apex and Unifi are committed to innovation and tech-enabled solutions. We are actively exploring opportunities to expand our offerings and deepen our partnership,” Connor Coughlin, Apex’s general manager of fintech, said in an email response to Banking Dive.

Apex Clearing Corp., a subsidiary of Apex Fintech Solutions, will offer the digital clearing and custody services for banks and credit unions.

Unifimoney, a San Francisco-based startup, is already integrated into several online banking platforms, including Jack Henry, Banno and Q2i. The company said it will add Alkami to that lineup.

The startup said its clients can deploy Unifimoney in less than three days on their online banking portal without using any code.

Oklahoma-based First Fidelity Bank is the first customer to go live with the services offered by the partnership.

The $2.6 billion-asset community bank recently launched a digital wealth management service with Unifimoney in which customers can choose to invest in traditional or alternative assets and access financial planning software through Unifimoney’s existing online banking platform.

“Community banks and credit unions are the backbone(s) of the US economy,” Coughlin said in the press release. Demand from community banks pushed Unifimoney and Apex to partner and come up with solutions that would “empower” consumers to manage their wealth in the long run, Coughlin said.

Community banks have “to offer better value propositions than their competitors, not just parity,” Ben Soppitt, Unifimoney’s co-founder and CEO, said in an email.

“Community banks and credit unions are facing competition from mega banks, investment apps and neobanks, especially for younger, more digitally engaged consumers,” he said. “These competitors are already bundling banking and digital wealth management services.”

New York City-based Apex, which has a global footprint with offices in the U.S. and Northern Ireland, performs thorough due diligence on the clients and partners involved to protect the assets of the end investors, Coughlin noted.

The fintech is an IRS-approved nonbank custodian of more than $100 billion in client assets serving more than 20 million investors through 250 clients using a diverse range of business models for their services.

Earlier, Unifimoney added investment options to its existing suite of products through DriveWealth’s application programming interface-enabled technology.

“We took great care and time in choosing the brokerage platform needed to support what are some of the most heavily regulated financial companies in the world,” Soppitt said. “Apex stood out with its deep market experience, broad product mix, and robust compliance procedures as well as their understanding of and passion for credit unions and community banks.”

Traverse City, Michigan-based 4Front Credit Union will acquire the assets of Sault Sainte Marie-based Old Mission Bank and assume its liabilities, the credit union said in January. 

Financial terms of the transaction — the first instance in 2023 of a credit union purchasing a bank — were not disclosed. The deal is expected to close late this year, the credit union said.

Old Mission’s Sault Sainte Marie and Pickford locations will expand 4Front’s footprint to 20 branches and boost its asset total by roughly $130.2 million, giving it about $1.2 billion altogether.

Once the transaction is complete, the two Old Mission locations will operate as “Old Mission, a division of 4Front Credit Union,” 4Front CEO Andy Kempf said in a statement.

"We believe in making banking smart and simple," Kempf said. "We look forward to expanding our services in the Upper Peninsula to even more people through exceptional experiences, wherever they are on their financial journey."

Gary Sharp, Old Mission’s CEO, said the bank is “excited” to “bring expanded opportunities to our customers, employees and communities while keeping the hometown feel.”

4Front said it would retain Old Mission's employees but did not detail what role Sharp is expected to play in the future.

The acquisition marks an early start to deals at the intersection of banks and credit unions. It follows a December that saw five proposed transactions. That spurt pushed 2022 to tie 2019 for the highest number of proposed purchases of banks by credit unions, with 16.

"2023 is starting quickly," Michael Bell, an attorney at Honigman, told Banking Dive. "If the economic factors can calm sooner rather than later, I absolutely expect a record year."

Bell has hailed the Midwest as a "a very active region for these deals." Indeed, the last credit union-bank tie-up of 2022 — Illinois-based Lincoln Credit Union’s proposed purchase of Colchester State Bank — has Midwest ties.

Two of last year’s deals, meanwhile, had Michigan roots. Grand Blanc-based Dort Financial Credit Union agreed in December to acquire West Palm Beach, Florida-based Flagler Bank. And Dearborn-based DFCU Financial said in May it would buy another Florida bank, Tampa-based First Citrus.

Credit union purchases of banks historically have served as a sore point in the eyes of trade groups like the Independent Community Bankers of America, which argues that credit unions' tax-exemption privilege allows them to purchase banks for higher prices and lets them grow more freely.

However, Patty Corkery, CEO of the Michigan Credit Union League, characterized those transactions as a “win-win.”

"Bank customers become credit union member-owners and continue to thrive,” Corkery told American Banker. “Credit unions grow and enhance their products and offerings to all their members, and bank employees keep their jobs."

Bank and credit union trade groups are pushing back against language in President Joe Biden’s State of the Union address, accusing the president of mischaracterizing some of the fees financial institutions charge consumers. 

During his February speech, Biden highlighted his administration’s efforts to crack down on “junk fees” and “hidden surcharges” across several industries, including banking, hospitality and travel.

“We’ve reduced exorbitant bank overdraft fees, saving consumers more than $1 billion a year,” he said, adding his administration’s Junk Fee Prevention Act would further block companies from “ripping us off.”

In statements released in response to the president’s address, trade groups said the administration is conflating bank fees, which lenders use to extend credit, with charges other industries levy on consumers, such as internet and resort fees.

"Junk fees may not matter to the very wealthy, but they matter to most folks in homes like the one I grew up in," Biden said. "They add up to hundreds of dollars a month. They make it harder for you to pay the bills or afford that family trip. I know how unfair it feels when a company overcharges you and gets away with it."

Some trade groups argue, however, that overdraft fees shouldn’t fall into the junk fee bucket, since customers opt in to the service, and some rely on it to pay their bills.

The term “junk fee” is overly broad and ignores the needs of low-income and middle-income consumers, said Credit Union National Association President and CEO Jim Nussle, who warned against eliminating a service some people depend on.

“Consumers use overdraft protection as a safety net — protecting them from life’s challenges,” he said in a statement. “Without the option of overdraft protection — people are more likely to turn to predatory lenders, hurting the same people the administration seeks to help.” 

The Consumer Bankers Association pushed back against the president’s assertion that overdraft fees are hidden. 

“[B]anks operate in the most competitive, well-regulated industry in the world and are required by law to provide clear disclosures aimed at empowering consumers to make informed financial decisions,” CBA CEO Lindsey Johnson said in a statement.

Biden’s statements fail to recognize that some Americans rely on bank products like overdraft to pay their bills, she argued.

“Instead of mischaracterizing an entire industry, policymakers across the ideological spectrum should work in tandem with banks to find durable solutions to the economic challenges we face as a nation, including expanding consumers’ access to the financial tools they demand and deserve,” she said.

The Independent Community Bankers of America said Biden’s language misrepresents bank services that are “clearly disclosed” to consumers, and contracts that many customers voluntarily enter into.

“Given these realities, current community bank practices are appropriate and do not constitute surprise ‘junk fees,’ despite the misrepresentation of the community bank business model by President Biden and the Consumer Financial Protection Bureau,” ICBA CEO Rebeca Romero Rainey said in a statement. “ICBA and the nation’s nearly 5,000 community bankers intend to continue working with the administration to mitigate the negative impact of CFPB rulemakings and to avoid further mischaracterizations.”

During the address, Biden also highlighted the CFPB’s proposed rule to reduce credit card late fees to $8 from roughly north of $30.

The CFPB estimates the proposed rule could reduce late fees by as much as $9 billion a year.

The National Association of Federally-Insured Credit Unions, however, said the Biden administration and the CFPB “are not giving Americans the full picture.”

“Consumers rely on safe, reliable short-term credit to afford daily life,” NAFCU CEO Dan Berger said in a statement. “This rule will severely restrict the market for credit cards, making those products harder to qualify for and increasing the cost of all other financial products and services. For Americans with low credit scores or lower incomes, this rule would cripple their ability to achieve any sense of financial security.”

In an earlier statement, the American Bankers Association said the CFPB’s proposal would harm consumers by reducing competition and increasing the cost of credit.

“[A]ny reduction in the late fee safe harbor would have a significant adverse impact on a substantial number of community banks and credit unions with assets below $850 million, many of which would be forced to exit the credit card market altogether,” ABA CEO Rob Nichols said in a statement.

Safe Harbor Financial completed its special-purpose acquisition corporation (SPAC) deal with Northern Lights Acquisition Corp. in September — a development its CEO said will position the cannabis financial services provider to tap executive-level talent and pursue strategic acquisitions.

“What we really want to accomplish is to be a one-stop financial service provider to the cannabis industry that is as reliable as the Safe Harbor reputation has become over the last eight years,” Safe Harbor CEO Sundie Seefried said.

Safe Harbor was spun off from Partner Colorado Credit Union in 2021. 

Seefried launched the division in 2015 and left her role as CEO of the Arvada, Colorado-based credit union to focus solely on growing the cannabis banking venture.

“A lot of my attention, strategically, has been distracted by the cannabis banking program,” Seefried said ahead of Safe Harbor’s spinoff.

Since its inception, the cannabis banking services provider, which has operations in 20 states, says it has assisted in onboarding more than $12 billion in deposit transactions for customers.

Seefried said one of her goals following the SPAC is to grow the company’s leadership.

“We want to have a dedicated set of officers to do nothing but help grow the entity at this time. We didn't have that when we were under Partner Colorado Credit Union,” she said. “We had just me guiding it, but now we're actually being able to hire in some national talent.”

The company tapped Tyler Beuerlein as its chief strategic business development officer in April 2022.

Beuerlein previously served as chief business development officer for Hypur, a payment processing and compliance technology firm for cannabis businesses and other high-risk industries.

While at Hypur, Beuerlein was responsible for more than 1,000 direct cannabis bank account referrals and helped facilitate more than $500 million worth of cannabis-related transactions and loans to the state-legal cannabis system, according to Safe Harbor.

Seefried said the firm has also hired a CFO with public accounting experience.

“We think that between the talent brought on and the ability to acquire other single-service providers with this access to capital markets now, we really serve the cannabis industry with reliable services that they need,” Seefried said.

Safe Harbor has a staff of 35 — a number that will grow as the company executes on its acquisition strategy, Seefried said.

Like the specialized banking services Safe Harbor provides for cannabis firms, the company is eyeing another area in which the industry struggles to secure reliable services: insurance.

Marijuana’s federal designation as a Schedule 1 drug means banks and credit unions face significant legal, operational and regulatory risks​ — and the aforementioned compliance demands — if they choose to extend services to cannabis-related businesses. As a result, many financial institutions, as well as insurance providers, are reluctant to enter the space. 

“They lose insurance because people don't want to actually insure anything cannabis-related. They get kicked out of their broker-dealer account, they get payment processing issues,” Seefried said.

The company, which hopes to add the service through future acquisition deals, is also on the hunt to secure a second sponsor bank, Seefried said.

“Strategically, the best thing for us to do is to have two sponsor banks. Never put all your eggs in one basket,” she said.

While Safe Harbor still works with Partner Colorado Credit Union, securing a second bank partnership will help it keep pace with future growth, Seefried said.

“We want to have a main sponsor bank that has a large enough balance sheet to handle the consolidation of all activities under Safe Harbor,” Seefried said.

The firm is also aware of the benefits that come with linking up with an international lender, she added.

“Down the road, as companies go international, they’re going to need international access to banking. It’s going to be necessary,” she said.