After a period of mergers and acquisitions, the number of Building Societies in the UK seems to have stabilised. And these admirable institutions are working well in a regime of tough regulation and an environment of low interest rates. But can the Building Societies, especially the smaller ones, survive in a market of Challenger Banks, new and complex technologies and customers with highly different expectations?
The simple answer is Yes. And the even better answer is that they now have the opportunity to leapfrog the competition and excel. Why?……
Building Societies have several advantages that mean that they can tackle the newcomers head on. They are small and agile; their systems, although sometimes dated, are simple relative to larger banks; they understand money and how their members think; and most of all they have trust. A recent survey by Unisys showed that 74% of people would be interested in an intuitive digital account and 46% of respondents would be more likely to open such an account with a Building Society than with a bank (with 38%) or a digital bank (only 7%!).
And customers are changing. Gen Z customers, who according to recent research by McKinseys, are much more likely to make purchasing decisions based on the ethics of a company. This is clearly a position that fits well with the Building Society sector.
Apps, Open Banking and Artificial Intelligence all present fantastic opportunities to Building Societies. For example, loose change saving is becoming more common utilising Open Banking but would you give your Online Banking details to a startup or a Building Society that has been there for over a hundred years? Building Societies can use this technology now and leverage their advantages to increase their share of the savings market. The opportunity is huge.
Artificial Intelligence also presents many opportunities that I will cover in another session. And I haven’t mentioned mortgages yet!
But there is also a warning. Building Societies need to embrace this opportunity soon or their customer numbers will decline.
Fintechs
Fintechs that provide Banking Services are great at creating innovative financial solutions – but more often than not these solutions are for problems that customers don’t have. Building societies are in a very strong position to create real value utilising new technology because they understand what their members really need.
And working with other Fintechs that provide technology solutions at an affordable price can give Building Societies a real edge over the competition.
Creating an ecosystem of new technology solutions that connect into legacy systems to add value is an excellent way to leverage the strengths of the Sector.
Supporting Documents