Centuries old and member-driven, building societies are a unique - and ever-resilient - part of the UK’s Financial Services (FS) sector. Currently, 42 UK building societies and seven of the largest credit unions collectively serve over 26 million customers with assets totalling more than £507bn. In short, these financial institutions are still as relevant now as they ever were.

However, they must do more to compete for the hearts and minds of the communities and members they serve - particularly given the rise of tech-enabled challenger banks which are continually evolving their offering and heightening customer experiences.

Nowhere was this point felt more than at the Building Societies Annual Conference 2024 which took place in Manchester last week. Listening to delegates, speakers and exhibitors there was a palpable sense that the sector has its work cut out whilst operating in a period of (likely) political, economic, and societal change - one which it must navigate with innovative thinking, approaches and tools.

Meeting Members Where They Are

For centuries building societies have been at the heart of the communities they serve, evolving their offerings to support the needs of various types of members all with specific needs. First-time buyers are just one demographic that the industry has served - FCA sales data stating that they made up over half (53%) of the mortgages provided by the sector in 2023 alone.

At a time of high inflation, and as a result, high interest rates, building societies need to pull all the levers available to them to ensure they can support this group through challenging economic times. This was a topic discussed at the conference by Jennifer Lloyd, Head of Product and Propositions at Skipton Building Society and Tom Wrigglesworth, External Affairs Manager at Leeds Building Society.

The breakout session entitled: Strategies to support UK first-time buyers, looked at the role the whole ecosystem can play in better supporting this demographic - from lenders, government, and even the media.

One of the key takeaways from the session suggested that amplifying financial education among young people is vital in helping them make better decisions that suit their individual needs when it comes to buying their first property.

In this regard, tech in the form of AI, Open Banking and the more holistic use of data it can unlock, were all seen as the key to providing better resources, tools - and ultimately - products and services for this demographic.

In fact, recent research from Moneyhub found that building societies could be missing out on attracting a new generation of customers and failing to accelerate their digital propositions and experiences. Almost half (47%) of building society customers reported difficulties engaging with their services, with digital experience a frequent pain point for many.

As both speakers suggested, empowering building societies through digital transformation could allow organisations to offer tailored financial products and services based on a case-by-case analysis of an applicant’s spending habits, credit history and attitudes to risk.

In short, tech could be the key to better joining up the entire buying chain for financial services organisations and their members - particularly first-time buyers.

Redefining Member Engagement via Apps

Sticking with the theme of transformative tech, delegates were invited to a session looking at how building societies can deliver smoother member experiences ‘beyond the branch’ via mobile apps. This is something that xDesign has led the way in as part of its work with Yorkshire Building Society (YBS) - working with it to develop its product strategy and deliver a flagship savings app among other things.

According to data produced by YouGov, those using mobile to check financial accounts will do so 10-12 times more frequently - something the session’s speakers saw as a net positive when it comes to heightening consumer experience and financial education.

However, even though mobile was seen as an important way forward for the sector, contributors did express the need for organisations to offer cohesive omnichannel experiences that are inclusive for all members. Surprisingly, one contributor even suggested that the trusty passbook was still a firm favourite with a large segment of building society members.

One important aspect of this session suggested how the sector needs to come together to take the collective learnings from digital transformation projects - conducted among organisations often working to update legacy tech and recruit/upskill the individuals to deliver ambitious tech roadmaps.

Operational Resilience in a Digital Age

Digital transformation was very much front and centre of the conference - particularly in discussions about serving members better. However, another interesting session held by consultancy firm Protiviti, legal firm TLT, and Skipton, looked at the FCA’s Operational Resilience framework and the impacts for the digital ambitions and existing tech stacks of the sector’s organisations.

The standards set out by the FCA cover every aspect of what organisations need to have in place to guard against member and reputational risks. In short, organisations are required to be able to identify critical services and set impact tolerances for disruptions. Firms must also be able to map, test, and document their service delivery mechanisms, conduct scenario testing, and establish robust communication and governance frameworks to ensure they can sustain operations and protect consumers during crises. TSB’s outage in 2018 as the result of a digital transformation programme going wrong was provided as a cautionary tale.

In light of the FCA’s framework and standards which building societies must comply with by March 2025, the session contributors were clear - operational resilience can no longer be a ‘tickbox exercise’ performed by financial institutions, it needs to be engrained within whole cultures, one that takes ownership of the associated risks and threats.

Striking a Balance

In her keynote speech to delegates, Emily Shepperd, the FCA’s Chief Operating Officer closed on this point:

“Building societies must embrace technology as a means of enhancing - not supplanting their community-centred credentials. Their very humane response to the local and global challenges of the last three years have shown us that they are on course to do just that.”

Having attended the Building Societies Annual Conference it’s clear that the sector is on the right track to heightening customer experiences and ensuring resilience in a period of great transition. However, if there’s one overriding point we can take from the event it’s that the needs of members should be put at the very heart of every transformation building societies undertake, digital or otherwise. Those that can strike the right balance by evolving their offering with the right mix of tech will ultimately win out.

To see how we’ve supported YBS to navigate some of the challenges talked about in this blog, visit our case study here.

Andy Franks