For over 100 years, building societies have been a staple of our high streets and communities. During this time, they’ve built up a solid member base and garnered trust and loyalty. However, the tide is turning on this traditional model. Changing market dynamics, macro-economic pressures and the fact members now have more choice when it comes to where and how they manage their finances have raised new challenges for building societies. Not to mention the impact of Covid-19.
In the mortgage and savings markets, where building societies predominantly compete, there are an increasing number of rivals in the form of high street banks, challenger banks and, increasingly, fintech product providers offering new digital products and services. We’ve also seen an increasing shift from in-branch interactions to online and app-based transactions, with the need for more digital touchpoints from members growing during lockdown periods.
This means there’s now more pressure on building societies to modernize their traditional operating models. If they don’t move with the times, this will lead to a member experience that doesn’t meet expectations and, subsequently, a loss of market share. However, this isn’t the case of reinventing the wheel, rather it’s about building societies making incremental changes to their lending, savings and collections processes to put members at the heart of them.
To do this there are some simple steps building societies can undertake to create a true ‘member first’ strategy:
1. Increasing traditional and digital touchpoints with members
Customer expectations have changed in the wake of Covid-19. Like many other organizations, building societies are tasked with identifying new and innovative products and services to meet the changing needs of their existing and potential members who now expect a real-time 360-degree view of their finances, as well as access to services and products at any time via any device.
When accessing information, members want to know their best interests have been catered for and that this information is transparent and readily available for them to make informed choices.
To do this, building societies must embrace both digital and traditional channels, exploring ways to deliver personalized and targeted services and offers. Member engagement should also be built around the ‘moments that matter’ in their lives. Whilst digital, telephone and email might work for business as usual, many members take comfort in knowing their local building society is there to help them through major life events, or when they face financially vulnerable situations.
This availability of information and ease of access via a customer’s device will become a differentiator for those able to make it happen. Failure to make the necessary changes or an over-reliance on traditional systems to deliver a true ‘digital’ strategy could see a rise in member attrition rates and cause the business to stagnate. In a worst-case scenario, this could lead to an imbalance in member demographics, making building societies increasingly more vulnerable to local economic events.
2. The rise of connected services – opportunity or threat?
With the rise of connected services, such as open banking, customers are rapidly shifting towards aggregator sites for a cohesive overview of available deals suited to their needs. We’ve already witnessed the impact these sites have had on the savings, credit cards and loan markets, including the ability to open up access to otherwise inaccessible markets or customer groups.
As technology improves and provides members and potential members with the confidence to go directly to their chosen providers, mortgages and straight-through product/service processing will be the next focus of these sites. In the short to medium term building societies should also remember aggregator sites still provide an important route to market for their savings and loan products.
Although it may be a viable route to market, it’s not without its challenges. Many building societies are still heavily reliant on mortgage broker networks and don’t have the appropriate technology infrastructure to provide aggregator sites with real-time information and deals, potentially stopping them from competing via these channels. It’s time therefore, for building societies to prioritize building an infrastructure capable of delivering real-time data and availability of products/services on their latest offers to these sites, to ensure they are future ready.
Building an infrastructure capable of delivering real-time data and enhanced member experience, however, does not necessarily involve a large multi-year transformation project. There are many quick wins to building micro-services around existing infrastructure and establishing an orchestration engine which will allow almost immediate implementation of a digital strategy.
Once in place, this infrastructure will also provide the foundation many building societies will need to ensure they’re correctly set up for the exchange of customer data to comply with open banking regulations. This will not only ensure customer attrition rates don’t rise, but also level the playing field for building societies when it comes to PSD2, reducing their chances of potential non-compliance fines.
3. The power of member personalization in a data rich world
Building societies need to ramp up personalization efforts and keep pace with the advancing technology available to them. They’ve targeted sales and marketing campaigns aimed at specific segments, but still have much to learn when it comes to personalized offers and services. For example, when a member or potential customer interacts with them via digital channels many building societies still have a ‘one journey fits all’ approach to customer experience with no differentiation in the customer journey between different product sets.
In today’s data rich environment, customers expect to receive personalized experiences and to be offered products and services designed specifically to meet their needs. Using customer data at every customer touchpoint and continually refining the personalization approach is no longer an option – it’s a necessity. Even simple personalization efforts, such as an email with exclusive offers, can lead to strong conversions and better customer relationships.
However, building societies need to remain realistic when it comes to offering these personalized products and services. The offerings won’t be the same as an online retailer, such as Amazon or Netflix – both held in high regard due to the way it personalizes content and offers. This level of personalization is out of reach in the short term for building societies, but it doesn’t mean a similar level can’t be achieved in the future.
4. Remaining a core part of the community
Building societies have always been a key part of local communities. Whether it’s providing a couple with the mortgage to their first house, or setting up a child’s first account, this connection with customers has been built over many years. Therefore, it’s so important this is not lost due to a lack of personalization and/or digital channels. Communities are embracing digital, especially since the start of the pandemic which forced us to stay at home and closed local branches, and it is vital building societies provide these services alongside the traditional. Failure to do so will, over time, lead to severed customer relationships.
To survive and thrive in the future, building societies must focus on creating a member-first strategy that delivers personalized experiences, products and services to customers across both traditional and digital channels. It’s important to note that this does not require the overhauling of processes and strategies already in place. Instead, it’s about making incremental changes. And to drive success, these changes must be actioned now.
Rob McElroy, CEO, Sopra Steria Financial Services