In the age of contactless payments, online banking and digital disrupters, the pressure is mounting on credit unions to prove they can remain relevant and thrive in an era of fast finance.
It’s not an easy task, but the impending exits of Ulster Bank and KBC from the Irish market present a major opportunity.
Wellington IT, which employs 48 people, provides software to credit unions, such as a mobile app and online banking services.
The company would like to see these historic institutions vie for the same market share as the mainstream banks here.
“One of the reasons why I’m still working with credit unions 20 years later [is] I really respect their ethos,” Colfer says.
As the banking landscape changes in Ireland, Wellington IT is “already engaged with, not just the credit unions, but others”.
“We’ve got a meeting with the Department of Finance at the end of August, and I would like to create a strategic steering committee to see where credit unions need to be or want to be over the next number of years, and to essentially become [a] pillar bank.”
However, credit unions have smaller budgets for investing in technology than the likes of the traditional banks and fintechs.
Colfer is unfazed by the job at hand. “One of the things that I’m proud of, working with Wellington, is that we’re able to provide an app with all of the banking services that you’d expect, so everything from onboarding, the online loan application, transferring funds, checking your balance, whatever you would expect, we call it ‘credit union in your pocket’,” he says.
“The idea is that everything you need to do, from your financial services point of view, you can do it from your phone, 24/7.”
Wellington IT is, Colfer claims, able to develop an app for credit unions at a lower cost than others.
“One of the big differences between ourselves, Revolut, AIB, whoever you want, is that we’re able to, as a software company, provide this to credit unions at a fraction of the cost that the likes of Revolut or AIB, or Bank of Ireland would invest in their digital offering,” Colfer says.
“If you’re a big credit union you could provide an app to your members and it would be less than €20k, [or] €15k [investment]. We need to make sure that we can have the balance between providing the level of technology that is required, but at the same time, having it at a price point that is possible for credit unions.”
Colfer says the company wants to make sure the technology it provides is something that is possible “for all credit unions, small, medium, or large”.
The company has a pricing structure in place “that allows for that”.
As you might expect, the Dublin native says it is “so important” for credit unions to be able to provide a digital offering.
“I firmly believe that if a credit union does not have a digital strategy, they’re going to really be struggling to be sustainable in the future,” he says.
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However, he admits that credit unions have some way to go in educating the public on their digital offering.
The company has found, from research it has done, that “there’s still a perception out there that credit unions are just kind of for your granny, savings and loans, whatever it is”.
“The fact [is] that you could do all of your financial services, so your debit card, your current account, pay all your bills, you can do everything with the credit union, and we’re able to provide those services to the credit union. But the level of awareness that’s out there was pretty shocking. The perception still is that it’s kind of the old person’s bank,” Colfer says.
In order to counter this, Wellington IT is working with credit unions to change perceptions.
In addition, Colfer wants to involve all the other main stakeholders – politicians, academics and the central bank – to develop a strategic steering committee with the aim of making credit unions the third pillar bank here.
“Because if they don’t do it, there is a risk that [credit unions] could slip away,” he says.
“We don’t like to see ourselves as a customer-supplier relationship [with credit unions], we like to see it as a partnership.
“So where the credit unions are going to be, not just next year, in three years, five years, 10 years, that’s where this strategic steering committee that I’m trying to develop is going to be focused on. Because I actually do think the credit unions have an advantage over the banks, but they’re not capitalising on it,” Colfer adds.
The sheer volume of savings since the start of the Covid-19 pandemic has forced credit unions to put a limit on the deposits they will accept.
Weak demand for loans and the imposition of negative interest rates by banks on credit union deposits is driving this trend.
Credit unions “absolutely need to attract” customers to take out loans, according to Colfer.
The sector is also dealing with consolidation. In 2011 there were 406 credit unions in Ireland. This number had fallen to 241 in 2019, according to figures from the Central Bank.
Combined, credit unions have 3.6 million members here, with savings of €16.3bn.
Colfer expects further consolidation in the sector will take place.
“I think the amalgamation is going to continue,” he says.
The Covid-19 pandemic resulted in some projects being delayed.
“With everything going on in the credit unions, they understandably, focused on what the priorities were, which was day-to-day operations,” Colfer says.
Today these projects “are absolutely coming back. We’ve got major projects that are ongoing at the moment”.
Feedback from credit union mangers is that they are seeing a bounce back in people taking out loans, which in turn boost their business, he says.
It’s not just the credit unions that face competition. As a tech company Wellington IT finds itself in competition for talent against some of the biggest companies in the world. In order to attract staff, the company has to really sell itself.
“The three cities that we’re based in – Belfast, Dublin, and Cork – we’ve got all the big guys in there. We’ve got Facebook, Apple, Google, you know, and these are cool companies to work for, and add on all the offerings that they make. We’re absolutely competing with that,” Colfer says.
“And so we spend an awful lot of time focusing on when we recruit, we’re selling ourselves.”
As part of differentiating itself, Colfer says employees are given “an awful lot of opportunity” to bring forward their ideas and the culture of the firm “is hugely important”.
“So while we expect people to work hard, there’s a camaraderie that is really, really important in our company. Everybody helps each other out.”
The company views career progression as being a “hugely important” part of its ethos.
Colfer, who has worked for Wellington IT for over 20 years now, started out on the help desk.
“I’m managing director today, two years in the role now,” he says. “The culture of the company nurtured that process.”
