By Ray Birch
ARVADA, Colo.—Providing banking services to cannabis businesses may be an answer to many credit unions’ bottom-line issues brought on by the pandemic, says Sundie Seefried.
Seefried, CEO of $449-million Partner Colorado CU and a cannabis banking expert, told CUToday.info not only can banking legal pot businesses provide CUs with a much-needed revenue boost as they’re sacrificing revenue to support struggling members, it can also provide a lifeline for marijuana businesses not currently eligible for any of the government bailout programs.
“This could be the growth opportunity credit unions need in a tough time,” said Seefried. “Credit unions will struggle from this pandemic—doing all they can to help their members—reducing and eliminating fees, deferring loan payments … Banking cannabis business is a way to keep them afloat and moving forward.”
Partner Colorado Credit Union has been a pioneer in marijuana banking for many years, with a well-known CUSO, Safe Harbor Private Banking, that provides banking services to the legalized cannabis industry.
Huge Market
Seefried said banking legitimate marijuana businesses is a huge market.
“Last year our credit union did $2.5 billion dollars in this business and we charge fees on that $2.5 billion,” she said. “That’s a lot of money.”
Serving legitimate marijuana businesses has been a huge growth opportunity for smaller CUs, two small shops have told CUToday.info. North Bay CU in Santa Rosa, Calif., projects it will grow from $50 million to $500 million over the next 10 years.
In Charleston, W.Va., Element FCU has a similar outlook, forecasting big growth for the $35-million organization.
Both credit unions said they charge heavy fees to bank this business, which pot organizations are more than willing to pay. The credit unions reminded the fees charged are commensurate with the risk they are taking, with marijuana businesses—both medicinal and recreational—while legal in numerous states still considered illegal on a federal level. As CUToday.info has extensively reported, that has prevented many financial institutions from serving the marijuana industry.
Changing Perceptions
But Seefried believes the pandemic may change many credit unions’ minds about providing banking services to pot businesses.
“I know we just suffered our first negative income quarter ($400,000 loss) since the Great Recession,” said Seefried, noting that downturn came from only a short exposure to economic conditions created by the COVID-19 crisis. Looking ahead, sSeefried said the credit union has decided to increase its pot business to drive more revenue.
Sundee Seefried
“Our management team sat down and said where are we going to get our income from now until the end of the year, and we decided we are going to ramp up our marijuana business,” she said.
Partner Colorado, like all other CUs across the nation, is racing to adjust its operations and balance sheet.
“We're hustling and we're trying to make the year work without having to address staffing levels or touch employee benefits,” said Seefried. “So, we will raise the number of our cannabis accounts.”
Also Seeking Relief
The CEO acknowledged that Partner Colorado’s pot accounts—like all businesses and consumers now—are asking the credit union for relief. She said they’re requesting a reduction in fees, which Seefried said the credit union is considering.
Marijuana-related businesses, acknowledged Seefried, need relief today as they are not eligible for Paycheck Protection Program loans.
“I think this is really going to hurt the small mom-and-pop marijuana businesses, but not the large organizations,” she said. “They are highly profitable and are backed by big investment dollars. They will survive this crisis.”
Seefried noted sales of alcohol and marijuana are generally not affected during economic downturns.
Some New Risks
But new risks have emerged in` serving marijuana businesses. These shops, many without access to strong digital payments services and banking relationships, deal largely in cash. As CUToday.info reported, a mission of many CUs serving the pot industry is to get money off the street—money that has often led to people losing their lives during robberies, and now many people are out of work and feeling new financial strains.
Moreover, all that cash-handling has also become a new concern, said Seefried, as cash can transmit the coronavirus.
“We are paying close attention to this now,” said Seefried, explaining Partner Colorado uses a courier service so staff doesn’t need to spend significant time touching the currency.
“But we're talking about a couple million dollars during a three- to four-day period, once a month” Seefried said. “We will just make sure social distancing is in place and staff are well protected and covered to handle that cash.”
‘Some Tough Months’
Seefried reiterated that serving marijuana businesses could be a lifeline for many credit unions if the pandemic and its effects on the economy persist.
“It's definitely going to help us manage through these difficult times ahead. And I am afraid there are going to be some tough months,” said Seefried.