In today’s rapidly evolving digital landscape, building societies are at a pivotal juncture. Renowned for their community-focused ethos and dedication to member-centricity, building societies have generally been slow to embrace digital and data-led propositions.
In our latest whitepaper, bolstered by industry leader interviews and a survey of 2,000 UK adults, we examine the threats now facing building societies who are struggling to meet the digital needs of the customers of now, and will definitely fail to meet those of the future unless they take action.
The Digital Imperative
Our insights reveal that digital experience is among the top priorities for the majority of financial service consumers, and increasingly among the younger generation:
80% of consumers believe that a good online platform is important when choosing a new financial provider
66% of 18-34 year olds would like more convenient access to products and services without the need to visit physical bank branches
73% of 18-34 year olds said they look for an easy-to-use app when choosing financial products
Almost half (47%) of building society customers reported difficulties engaging with their services, with digital experience a frequent pain point for many.
Today, speed, convenience, and flexibility aren’t just desired; they are the bare minimum expected. Consumers are now accustomed to the immediacy and ease of online services, and this shift represents a significant challenge for building societies whose strengths have traditionally been in areas outside of digital innovation.
“We’re at tipping point”
While the digital challenge is nothing new, the pace of change in the consumer context means that time is running out. An important challenge has become an urgent imperative, and building societies themselves recognise this..
“Future sustainability, relevance to members, that's the technological challenge that's there in the sector. I think we've fallen behind over the years. We haven't moved forward quickly enough. But I think now we're at a tipping point where we have to move.”
“We need to digitise or die. I would be that strong about it.”
Quotes from senior stakeholders
As building societies look to the future, two specific challenges are apparent. First, the introduction of Open Banking and Open Finance means that consumers have become better able to share their financial data and move their money quickly and seamlessly between providers. In turn, the relevance of the traditional, locally-focused, deposit-short-lend-long building society model is beginning to diminish.
Second, there is a risk that without modernisation building societies will struggle to appeal to the younger generations that represent the sector’s future. This demographic shows a marked preference for the digital offerings enabled by Open Banking and Open Finance and the stark contrast in preferences between younger consumers and the broader population underscores a pivotal trend: to secure a future, building societies must align their offerings with the digital expectations of emerging generations.
“You’ll see building societies over the next 20 years just go because they’re going to lose the people. Unfortunately, we only live so long and I don’t think they’ll get the funds on the other side.”
“We’re losing the relationship with the customer…we’re reviewing all of our processes and procedures to make them more digitised, to remove hurdles and friction in that journey - because that’s what customers want, right? Nobody really wants to go into the branch.” - Quotes from senior stakeholders
Building societies must undertake a bold digital transformation to remain relevant. This involves not only upgrading technological infrastructure but also adopting a culture that embraces digital innovation. Collaboration within the sector and partnerships with fintech companies can accelerate this transformation, providing access to advanced technologies and expertise without the prohibitive costs.
Conclusion: A Call to Action
The digital era is not just a challenge but an opportunity for building societies to enhance their member relationships and service offerings through strategic use of data and Open Finance.
As they navigate this complex digital landscape, societies must be proactive in adopting Open Finance technologies that meet contemporary consumer demands, ensuring they remain competitive and relevant in the digital age.