New report highlights strong sources of differentiation for the building society sector

A new report published by Whitecap Consulting in partnership with the Building Societies Association (BSA) and sponsored by major UK law firm Shoosmiths, finds societies continue to leverage mutuality, regionality and technology to create customer value and differentiation in the UK Financial Services market; however the degree to which societies utilise (and choose to utilise) each of these assets varies across the sector.

The research for the report involved a quantitative data analysis of all 43 building societies, interviews with 33 building society CEOs, and an online survey which received a total of 134 respondents.

The report identifies four key themes:

• There are different strategies and areas of commercial focus available to societies, and selection and focus are critical to success.
• Mutuality can become a point of difference with greater relevance to customers, possibly with a modernised focus on social purpose.
• Meaningful community engagement is core to regional success, customer engagement and branch-based savings.
• Societies will need to continue to invest for a digitally enabled future, to support customer engagement, distribution and operating efficiency.

The implications of each of these key areas are highlighted in the report, together with the potential opportunities for societies to consider.

Richard Coates, Managing Director of Whitecap Consulting, says:

“Change has been a familiar and constant challenge for building societies, and the sector has successfully navigated many dramatic economic and social events, most recently the global pandemic. The sector has performed strongly through Covid, but building societies today face new competitive challenges fuelled by a combination of changes in consumer behaviour and the advances of technology in the Financial Services sector. We are delighted to publish this report, which highlights the strategic opportunities available to building societies, and how they can capitalise on them.”

Robin Fieth, Chief Executive of the Building Societies Association, says:

“Society is rapidly transitioning from an era of big hard-wired mainframes and decades of different programmes to one of cloud-based services connected via APIs, data science and intelligent automation. Building societies are already making use of robotics, chatbots, cloud-based solutions, API connectivity, mobile apps, digital IDs and Open Banking.  At the same time they are remaining present in their communities reimagining the purpose of the branch using design and technology to turn them into spaces for engagement and support within their communities. Where building societies go next, as this report makes abundantly clear, will give a range of answers based on individual strategies, but will be fundamentally driven by mutuality or social purpose as it is more commonly called today.”

Stephen Dawson, Head of Financial Services at Shoosmiths, added: “It has been a pleasure for Shoosmiths to have been involved in this report – not only to bring forward sponsorship but to have been given the opportunity to contribute knowledge and ideas from the very beginning.

“What the report does is highlight give very good insight into how the sector operates and how Societies can build on their successes with the recognition of themes, such as the adoption of increased digital investment, increased community engagement and further consideration as to commercial focus. This is very similar to much of what we are looking at as a business.”

“Our leading financial services team works with Building Societies every day; and we hope to share this with our clients who may find this information useful as they enter their respective post-Covid journeys.”

Some of the findings highlighted in the research include:

• 93% of building societies who responded say mutuality affects their decision making.
• 66% of building societies who responded consider mutuality is about culture, values and social purpose.
• 71% of building societies who responded consider the branch network to be a critical part of regionality.
• 90% of building societies who responded believe community involvement is a commitment to regionality.
• 67% of building societies who responded identify digital transformation as the primary challenge over the next five years.
• 65% of all stakeholders surveyed believe Open Banking to be an opportunity for the sector.

The report can be downloaded here.