Digital Transformation for SACCOs after Covid-19

“SACCOs have to embrace digitization to provide services to their members through digital channels, during the ongoing global Coronavirus pandemic”. It has never been this obvious to us, how important digitization is….”

Dr. Brian Branch

President of World Council of Credit Unions (WOCCU)

With the current cessation of movement to curb the spread of COVID-19, the adoption of technology to address the changing customer circumstances is crucial. In these volatile times, it is critical for the SACCOs to understand their members’ changing needs and provide innovative services that suit them. This means that SACCOs should focus on members’ touch points; digitized customer experiences including cross-channel coherence and self-service portals.

Operational efficiency

SACCOs should focus on improving operational efficiency by adopting new operational procedures and re-engineering processes, to ensure continued service delivery. The SACCO leadership can no longer wait for physical board meetings and supervisory committee meetings in order to ratify decisions or to physically sign documents. In terms of communication and collaboration embracing virtual meetings via various online platforms such as Microsoft Teams, Zoom and adopting  digital documents signing will enhance productivity and ensure SACCO operations do not grind to a halt. Operational processes should also focus on enhanced staff enablement during these times. This would mean SACCOs equip employees to adopt working remotely, while maintaining a sharp eye on performance management. Most probably, after the Covid-19 era, some SACCOs will revert to working at the  office. However, this pandemic has shown us that working remotely is doable and if applied well, may even enhance the elusive work-life-balance for many.

Enhanced Business models

Could this pandemic have presented an opportunity for SACCOs to re-engineer their business models? The majority of SACCOs in Kenya are yet to fully leverage technology offering digital channels, that are becoming the key means of transaction. From a Credit business point of view, SACCOs will need to focus more on online lending and as a result, will have to review credit policies while efficiently managing credit risk and remaining compliant with the regulator. There is no doubt that in the post Covid-19 era, SACCOs will find themselves in the deep end of the digital sea and will have to adopt online lending for both short term (mobile loans) and long term (development loans). In support of government intervention measures to cushion Kenyans from the effect of the pandemic, financial institutions are required to restructure existing loans on a-need-basis and waive late repayment penalties. It will be necessary to expose these and other credit services, such as top-ups through digital platforms, given that members will not visit a branch to negotiate or discuss a loan restructuring plan.

The brick-and-mortar model needs to be revisited with SACCOs having to consider converting some branches into marketing satellite centres or training centres and member support.

Trends in digital transformation

Embracing new technological advancements too quick could result into pitfalls and it is critical to have well-articulated strategies to avoid them.

Software as a Service (SaaS): SaaS technology is a global trend and enterprises as well governments have started using cloud services. The SACCO sector needs to adopt SaaS technology as it provides important benefits, including saving on CAPEX required for software licenses, implementation, IT infrastructure and maintenance, while giving the same experience as a system deployed on-premise. This means SACCOs can outsource the entire banking technology, enabling them to focus on their core business. This is the spirit in which SASRA has been advocating for shared services model about SACCOs and can be extended to include agency banking and E-Wallet. This has extensive benefits that can allow interoperability, where SACCO “A” can access services from a branch or an Agent of SACCO “B”.

Robust core banking systems (CBS): A solid CBS is critical in delivering good experience to its members.  Most SACCOs remain hindered because their existing systems lack a framework of open architecture, which supports integration of digital channels as well as other third-party systems. A robust CBS allows quick and scalable channel integration, while allowing flexibility in introduction of new digital products. It also removes the headache of manual loan management for key loan processes such as interest posting, loan repayment and recovery. Such manual processes inhibit digital strategies, such as enhanced focus on digital loans and automated recovery of due and overdue amounts. A strong CBS provides the SACCOs not only the ability to perform instant eligibility per member but also the ability to incorporate various validations, ensuring digital loan products are only issued to eligible and credit worthy members.

Security: Information security and cyber security are topical issues in the financial services sector. SACCOs should implement network, data and system security and security assurance solutions.  For a long time, the sector has not put investing in security as a top priority, and many have been suffering  from system intrusions, internal attacks as well as loss of data. By investing in extra security technology layers, SACCOs can protect their members while transacting from their mobile devices. This type of technology, commonly known as sim swap portability ensures that the sim card serial number as well as the IMEA number of the device are securely tied to the member account and in case the member loses/swaps their sim card or their mobile devices, the transaction requests are blocked from accessing their accounts. With the latest trend in crime, where social engineering crime is on the rise, criminals are targeting the vulnerable by getting their PIN numbers and thus stealing their funds.

Big Data and Internet of Things (IoT):  Just like SaaS and Cloud, "Big Data", “Analytics’’ and "IoT" are some of the IT trends nowadays. The problem of having massive and unstructured data located in different systems can be resolved by Big Data. SACCOs can leverage Big Data and Analytics technology to get business insights from descriptive, diagnostic, predictive and prescriptive analytics. Big Data analysis can be supported using IoT technology. Today, most customers own a laptop, a tablet, a smartphone or a smart watch which they also use to make payments or perform banking transactions. The use of IoT technology allows financial institutions to collect more data from these inter-connected devices about their customers’ preferences, behaviour and needs. By making use of IoT technologies, collection and analysis of large amounts of financial information is achieved efficiently. SACCOs can leverage use of IoT technology to learn more about their members, to better understand them and thus develop more targeted and relevant products and services.

Author: Rosemary Muturi Karachi