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Finessing FinTech

Can credit unions partner with tech co-ops to meet disruption head-on?

Canada’s credit unions are often leaders on the technology front.

The system was the first to make it possible to deposit cheques via smartphone and has been quick to introduce innovative payment alliances. Yet despite these advances, financial services disruptors pose a growing threat to traditional bricks-and-mortar providers.

As Monique Leroux noted at a recent meeting of the European Association of Cooperative Banks, new payments and money transfer players such as PayPal, Apple and others don’t just operate on the Internet. In many ways, they also built it into what it is today. Leroux, CEO of Desjardins Group (7 million members, $229 billion in assets), added that as younger consumers get comfortable transacting and storing money with these innovators, they will increasingly demand other services such as loans. That prospect exposes longstanding financial services organizations to risk.

“Banking services have always existed … but not necessarily banks,” Leroux said. In fact the field known as FinTech is growing at a remarkable rate, reflecting the revolution that software technology is bringing to all financial services providers. According to a recent report produced by the consulting firm Accenture, global investment in FinTech ventures trebled in 2014 to USD$12.21 billion, compared with USD$4.05 billion in 2013.

“Banking services have always existed … but not necessarily banks”
—Monique Leroux, CEO, Desjardins

The emergence of tech co-ops

This staggering expansion is giving credit unions a heightened and urgent interest in tracking developments on the technology front — and surprisingly, they have an advantage over banks. The key to meeting these new challenges may well in banding together with IT providers that share a like-minded culture. Cooperation is a major and often underestimated driver of software development, the Internet and more recently, digital payments: workers in these fields have long collaborated to advance projects. And when widespread layoffs hit the tech industry in 2008, the downturn significantly accelerated the growth of a new sub-sector: technology cooperatives.

Cooperation in technology is nothing new. In fact, it has deep historical roots says Peter Cameron, co-op development manager at the Ontario Co-operative Association. Cameron cites Gosfield North Communications Co-operative, which supplies telephone and Internet residential and business services to customers in Cottam, Ontario, as an example. The firm has been operating since 1907. And to this day, telecommunications firms comprise the Ontario Co-operative Association’s largest category of technology-related members.

But a new breed of tech co-op is springing up now. Reid van Melle of Brierwood Design Cooperative agrees that credit unions can counter disruptive threats through more effective collaboration with these emerging groups. “We’re strong believers in the [cooperative] model and its future,” says van Melle, senior iOS developer of the Ontario-based mobile app consulting organization.

“We’re strong believers in the [cooperative] model and its future”
—Reid van Melle, senior iOS developer, Brierwood Design

Founded six years ago, Brierwood provides userexperience design, engineering, quality assurance development programs and other services to small, medium and some large organizations. The company, which has developed several applications for Apple, has seen its revenues grow rapidly — by more than 80 per cent last year alone.

Van Melle, like many people who have a co-op mindset, is also a big believer in “inter-cooperation” — that is, in doing business with other cooperatives to advance the sector as a whole. In fact, Brierwood makes sure to deal with credit unions for its financial services and is hoping that the ball will come back in his court one day. “We’ve done assignments in the insurance industry, so doing work with credit unions would seem like a natural step,” he says.

Montreal is the site of Koumbit, another tech group with high ideals. The 12-member Koumbit cooperative, which provides webhosting, content management systems and crowdfunding services to clients across Canada and in Africa, makes its position clear on its website.

“We believe,” Koumbit’s values state, “that each individual should have equal weight in collective decision making. Every worker should have the most autonomy possible in the management of their work. An organization should evolve in a climate of mutual aid and respect for the integrity and dignity of its members.

“Above all,” the group adds, “our work is to assist those who are addressing the social and environmental issues of our time. Our organization must also be a place of learning and skill sharing.”

Read more: “5 tech co-op ventures worldwide”

Emmanuel Décarie is project manager of Koumbit. “We like to work with organizations that have similar missions,” says Décarie. “For example, our clients range from a community group that wants to reduce the sounds caused by trains running through neighbourhoods, to another that provides health services in poor areas, to unions and student groups.”

Décarie enthusiastically supports the use of open-source software, which is collaboratively developed and shared. The model has several advantages that may be of interest to credit unions from a security standpoint. Users can download open-source products such as Linux, Drupal and Apache, then modify and change the application to suit their needs. “It’s more secure,” says Décarie. “When code is open source there are better guarantees that there are no back doors, because there are a lot of eyes looking at your code.”

Advantages for techies

Tech co-ops can help members overcome one of the chief industry challenges: recruiting and retaining top talent. That’s the view of Jonathan Poirier, president of Montreal-based Caravan Web Worker Cooperative, a web design and development enterprise. He cites several advantages that the cooperative model afforded the developers and designers who first bonded together to form Caravan in 2012. Like Koumbit’s Décarie, he says autonomy, independence and a democratic working environment were among the appeals.

“Because everyone is working towards the same objectives, people help each other instead of competing,” says Poirier. “The results speak for themselves. Staff at the firm has more than doubled from four to 10 during the first three years, a trend we expect will continue.”

Endless tech co-op possibilities

While almost everyone that Enterprise spoke with says that the number of technology cooperatives is growing, no one can provide precise statistics. A reason for this is likely because the term technology co-op covers a wide range of possibilities.

Those in the field choose to collaborate in a number of ways. Some, such as the members of Vancouver’s Bitcoin Co-op, create multi-faceted organizations based on a common pursuit. Bitcoin Co-op bills itself as a “voluntary and inclusive association of individuals united by a shared interest in Bitcoin” and has an education and networking format.

According to Andrew Wagner, a director of the registered British Columbia cooperative, the group includes partners such as Bitcoin Marketers, CryptoBiz Magazine and Quadriga CX, a bitcoin exchange. Their goal: to work together to advance this relatively new digital currency with a payment technology that often bypasses financial institutions altogether. The relevance of groups such as these to the credit union sector remains to be seen. (See: “Coin of no realm,” Enterprise, May 2014.)

Sleeping with the enemy

For all the potential good work of technology co-ops, the threats facing Canada’s credit unions from new technology disruptors are so broad, vast and quickly emerging that they will likely need to adopt a range of strategies. For example, at Desjardins Group, Leroux has already expressed a willingness to consider working with new online payment competitors, particularly Apple. For its part, Apple claims that it has no interest in getting involved in traditional banking services. However credit unions would be wise to remember that Apple also once said that it had no interest in getting involved in the music business — which it then proceeded to dominate.

Perhaps that’s why Desjardins is seeking alternatives should Apple not come to the bargaining table. It has already formed Monetico, a technology partnership with France-based Crédit Mutuel. Together, they’ve developed a way to help local entrepreneurs and international businesses deliver payment services via in-store terminals, the Internet, mobile devices or other technological media. Transaction management, network stability, merchant and consumer privacy, security, end-to-end encryption and fraud protection are all part of the package.

Smaller credit unions might need smaller solutions, however  readily accessible and closer to home. Paul Maclean, a partner in Code Studio, a London Ontario-based web application co-op, has already worked with credit unions to set up e-commerce sites. He also believes that inter-cooperation is the way to go. “We all adhere to the same triplebottom line objectives — people, planet and profit,” says Maclean. “So the fit is great.” ◊


Sept2015_F3_Inset_Fintech_[716x942]Want to establish a tech co-op?

A few rules apply for setting up a technology cooperative. One guideline is to devise a business plan that accounts for the broader objectives of the cooperative movement.

Identify demand

Do an environmental scan to make sure that there is a legitimate market or social need for your product or service.

Select members carefully

Involve the right people in the right roles at the right time. The greater your co-op’s skill set, the greater your chances of success.


Make sure that all members are involved in defining the cooperative’s vision and provide guidance so that everyone is rowing in the same direction.

Set goals

If you don’t know where you are going, you’ll never get there. Establish concrete targets that are practical and achievable.

Organize the structure

Define the roles and responsibilities of all co-op members and ways to select and (if needed) change managers. Choose the right business model, whether it be a non-profit corporation, a registered cooperative or an informal partnership.

Keep accurate accounts

Many new cooperatives tend to keep records as an afterthought. Make it a priority instead. Good, timely information will provide members with clarity as to whether the organization is on track. ♦