Saccos have been urged to see the mobile phone as a focal point in their immediate planning following its growing use as a gadget to perform many tasks including access to banking.
World Council of Credit Unions (WOCCU) President and CEO Brian Branch said the key to Saccos growth is the introduction of “higher dimensions of consciousness into our awareness,” by appreciating the positive disruptive power of technology and the digital future.
“People have become accustomed to getting their information, getting their news, doing their social networking with their mobile phones and, of course, their payment services and commerce with their mobile phones. And therefore, it’s only natural they’re going to expect to access their financial services via their mobile phones,” said Branch.
He explained that is why World Council’s goal for 2025 is the global digitization of the credit union system—and why cooperatives provide the perfect model for accomplishing that goal. He spoke during the just ended WOCCU conference.
“It’s difficult for small financial institutions to be able to afford this technology. And so that’s one of the advantages we see across the globe in cooperative systems. The ability of cooperatives to share the cost of investing in and providing that technology, and those high-skilled human technical resources to provide credit unions across the country with that digital technology,” said Branch.
Earlier this year, Sacco Societies Regulatory Authority (Sasra) Head of Digital, Financial Channels, and ICT Compliance Stephen Michubu Saccos in Kenya are not taking technology seriously and lagged behind other financial institutions.
Sasra’s most recent supervision report for 2017 cautions Saccos to digitize or perish. “The Sacco sector, especially the deposit-taking segment must, however, brace itself for stiff competition from other financial service providers; particularly with the growth in popularity of the digital credit services that principally specializes in unsecured micro-credit loans, a forte hitherto associated with Saccos.”
Sasra says Saccos have no option, but to heavily invest in their uptake of digital financial services. This it says will improve convenience and ease of accessibility of their financial services in order to remain relevant and competitive, besides growing their non-funded income in a very fast evolving competitive financial sector.
“Core deposit-taking services such as application for memberships, opening of accounts, application for and approval of loans, loan repayments, deposits and withdrawals, transfer funds, payment of bills and account’s statements, must at the minimum be available online and through the mobile platforms; otherwise members will simply move to other financial institutions that offer convenience and ease of accessibility of services.”
According to the 2019 Financial Access Survey to establish how adult population Kenya use different institutions providing financial services, it was found that at 79.4 percent and 8.3 percent, mobile money services providers and digital loans apps recorded the highest increase in usage by Kenyans between 2016 and 2019.
Business futurist Patrick Schwerdtfeger, the founder of Trend Mastery, also attending the Woccu conference, told Sacco leaders that they can capitalize on disruptive innovations such as digitization and data analytics.
“My message, without a doubt, is that we need to stay on offense. We need to aggressively go after the change and implement it as fast as possible within our organizations,” said Schwerdtfeger.
He said if Sacco leaders don’t have that mindset, large tech companies will look to fill much of the space credit unions currently occupy in the financial services industry.
Schwerdtfeger also warned the future of credit union payments and transactions will look radically different as blockchain becomes more prevalent.
“I think there’s a huge opportunity in the financial services industry to use a blockchain-based system for title insurance,” said Schwerdtfeger, providing a list of examples where it could be used. “I understand a lot of credit unions are making big in-roads with refugees—which is a perfect fit for credit unions to begin with—and blockchain can help in that space. There are all sorts of possible KYC (know your customer) applications.”
Blockchain is the record-keeping technology behind cryptocurrencies, such as Bitcoin. “Blocks” are comprised of digital information—like the date, time and amount of your last digital purchase.
Each block has a unique code called a “hash” that allows us to tell it apart from every other block. That allows digital financial information to be stored in an open, distributed ledger that can record transactions between two parties in a verifiable and permanent way.