July 18, 2015
Technology cooperatives move onto the radar
FinTech’s growing importance is forcing Canadian credit unions to take a harder look at collaborative technology-related innovation.
Canada’s credit unions have made huge strides on the technology front. Broadening account access via the Internet, ATM networks and innovative payment alliances are an increasing part of industry life. Yet despite these advances, financial services disintermediation players pose a growing threat to traditional brick and mortar providers. The good news is that one of the most promising paths to meeting these new challenges lies in better cooperation, both with new disrupters as well as with emerging technology cooperatives.
As Monique Leroux, CEO of Desjardins Group (7 million+ members, $229 billion in assets) 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. The threat is that as younger consumers get comfortable transacting and storing money with these innovators, that they will increasingly demand other services, such as loans. “Banking services have always existed… but not necessarily banks,” Leroux likes to say.
In fact an entirely new field known as FinTech is emerging which encompasses the huge threats and opportunities that technology is bringing to all financial services providers. According to a recent report titled The Future of Fintech and Banking: Digitally disrupted or re-imagined? that was produced by Accenture, global investment in FinTech ventures trebled in 2014 to USD $12.21 billion, compared to USD $4.05 billion in 2013.
Technology cooperatives move to the forefront
This staggering growth, which highlights the growing rapprochement between the financial and technology worlds, is giving credit unions a heightened and increasingly urgent interest in tracking developments on the technology front. Surprisingly, cooperation is a major and often under-estimated driver in software development, the Internet and, more recently, digital payments. Tekkies have long worked together to advance projects ranging from open-sourced software development to shareware. This trend, which was accelerated by widespread layoffs in the tech industry during the 2008-2009 recession and its aftermath, has also significantly accelerated the growth of a new sub-sector: technology cooperatives.
Vancouver-based The Bitcoin Co-op, which bills itself, as a “voluntary and inclusive association of individuals, united by a shared interest in Bitcoin, provides a great example. According to Andrew Wagner, a director of the British Columbia registered cooperative, the grouping includes partners such as Bitcoin Marketers, CryptoBiz Magazine and Quadriga CX, a Bitcoin exchange. These and other industry players, work together to advance this revolutionary digital currency and payment technology, which, in many ways, bypasses financial institutions altogether. The coop’s initiatives generally consist of education and networking events.
Mitchell Callahan, president of Bitcoin Marketers, which provides services to the Bitcoin community, and who is a Bitcoin Co-op member, describes the organization as “a loose, grass roots structure that has been getting a lot of attention recently and doing a lot to advance the cause.” Indeed it could be argued that The Bitcoin Foundation itself, which was modelled on the Linux Foundation (which was set up to advance this widespread, free and open operating system), is a non-profit collaborative initiative.
The Ontario Co-operative Association: tech co-ops are growing
Yet while almost all the partiesEnterprise Magazine spoke to for this article say that the number of technology cooperatives is growing, few can provide precise statistics. One reason for this surely relates to the wide variety of ways in which technology players choose to collaborate. Many, such as The Biocoin Co-op, do so by forming registered cooperatives. Others contribute by forming non-profit ventures, by cooperating in shareware, open-sourced software initiatives, or in the more widely known collaborative ventures such as the Wiki-“Fill-in-the-Blanks” sites.
Yet cooperation in technology 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 the Town of Kingsville, as an example. The firm has been operating since 1907. Indeed telecommunications firms comprise the Ontario Co-operative Association’s largest category of technology-related members.
Brian Van Slyke a spokesman for the Toolbox for Education and Social Action (TESA), a US-based cooperative developer of education products agrees that technology cooperation is growing, but agrees that there are few hard data that can confirm this. “The sector is on the rise,” says Van Slyke. “You see new players all the time, particularly in the San Francisco Bay area, but also in Michigan, Chicago, in fact right across the country. One indication of the growing interest in the sector is rising sales of Co-opoly, a teaching-game we designed, in which players collaborate to form a cooperative; that game was recently translated into its eight language.”
Caravan Web-Worker Co-operative: advantages for techworkers
Forming a technology cooperative also helps overcome one of the chief industry challenges: recruitment of top talent, says Jonathan Poirier, president of Caravan Web Worker Co-operative. Poirier cites several advantages that the developers and designers who first bonded together to form the firm in 2012 got from having adopted the model.
These include increased autonomy and independence, a democratic working environment, in which each worker has a right to be elected as an administrator and the chance to serve the local community. However one of the most surprising advantages comes on the education, training and career development front, which progresses far smoother at Caravan, than in competitor private sector firms.
“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.”
Brierwood Design Co-operative: Financial services opportunities
One of the best ways that credit unions can counter disintermediation threats could be through more effective collaboration with technology cooperatives, suggests Reid Van Melle, at Brierwood Design Co-operative. “We are strong believers in the model and its future,” says the senior iOS developer. This Ontario-based mobile app consulting cooperative, founded six years ago, provides a range of definition, UX design, engineering, and QA development services to small, medium and some large organizations.
Brierwood’s milestones include the development of several applications that were selected by Apple, for inclusion in its programs. Not surprisingly, revenues have grown rapidly, including by more than 80 percent last year alone. Van Melle, like many cooperative sector players, is also a big believer in “inter-cooperation,” – that is cooperatives doing business with each other to advance the sector as a whole.
In fact Brierwood Design Co-operative makes sure to deal with credit unions for all of its financial services when possible, and is hoping that the ball will come back in his court one day. “We have done assignments in the insurance industry, so doing work with credit unions would seem like a natural step,” he says.
Koumbit works with organizations with similar missions
Emmanuel Décarie, a project manager at the 12 member Koumbit cooperative, which provides web-hosting, content management systems and crowd funding services, to clients across Canada and in Africa agrees. “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 is also a big believer in the use of open source software, which is software that was collaboratively developed and shared. The model has several advantages. Users can download open sourced products such as Linux, Drupal and Apache and then modify and change the application to suit their needs. “It’s more secure,” says Décarie. “When code is open sourced there are better guaranties that there are no back doors (security holes), because there are a lot of eyes looking at your code.”
That said, 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 openness to cooperating with the new major online payment competitors, particularly those such as Apple, which has said that it has no interest in getting involved in traditional banking services. However credit unions would be best to remember that Apple also once said that it had no interest in getting involved in the record business, which it then proceeded to destroy.
Perhaps for that reason, one of Desjardins Group’s first technology cooperation bids was the formation of Monetico, a partnership with France-based Crédit Mutuel to help local entrepreneurs and international businesses deliver payment services via in-store terminals, the Internet, mobile devices or other technological media. The unit’s offerings include transaction management, network stability, merchant and consumer privacy, security, end-to-end encryption and help in the fight against fraud.
Paul Maclean, a partner in Code Studio, a London Ontario-based web application development agency, which has already done some work with credit unions, in helping clients connect up e-commerce sites, also believes that inter-cooperation, between cooperatives is the way to go. “We all adhere to the same “triple bottom line” objectives (people, profit and planet),” says Maclean. “So the fit would be great.”
Sidebar A: How to establish a tech-cooperative
There are few set rules to setting up a technology cooperative. However one good guideline is to follow the steps that businesses use when starting up, and adapting the methodology to account for cooperatives’ broader objectives.
· Identify demand. Conduct a survey to make sure that there is a legitimate market or social need for your product or service.
· Set goals. If you don’t know where you are going, you’ll never get there. Set concrete goals, with legitimate, achievable targets.
· Organizing: Define the roles and responsibilities of all coop members and ways to select and (if needed) change managers. Also make sure that you choose the right business model, whether it be a non-profit corporation, a registered cooperative or an informal partnership.
· Staffing. Businesses’ main assets these days walk into the building in the morning and walk out at night. Make sure you get the right people, in the right roles at the right time.
· Leadership. Make sure that everyone is involved in defining the cooperative’s vision, and provide guidance so that everyone is rowing in the same direction.
· Controlling. Like new businesses, many new cooperatives tend to do accounting and record keeping as an after-thought. Make it a priority instead. Good timely information will provide members with an advanced look as to whether the organization is on track.
Sidebar B: Technology cooperation ventures around the world
Cooperation in technology has a long background, but became increasingly popular in the early 1980s, when developers started to pool their efforts to counter the growing monopoly tendencies being adopted by Microsoft at the time. Major initiatives include:
· The Tech Co-op Network describes itself as a grouping of North American tech worker co-ops that provide media, communications, and computer technology goods and services.
· The Linux Foundation is a non-profit consortium dedicated to advancing the use of Linux, one of the world’s most widely-used free operating system software packages.
· Open-source software collaborations. Open-sourced software refers to software that is made available to the public for free to use and adapt as needed. Some of the more common applications are the Mozilla Firefox web-browser, the Thunderbird email package and the Apache server program.
· The Wikipedia Foundation, which raises money, develops and deploys software, controls servers, and supports the English Wikipedia, provides a perfect example of a cooperative venture, that leverages technology, to benefit the wider community. The wiki model has been since widely replicated in a variety of fields.
· The Bitcoin Foundation’s mission is to "standardize, protect and promote the use of Bitcoin cryptographic money for the benefit of users worldwide.
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