Reinforcing Community Banking for the Future: Strategies for UK Building Societies
In the ever-evolving world of finance, building societies stand as a beacon of tradition and customer-focused service. For 250 years, these institutions have been guided by a 'members first' ethos, a testament to their commitment to putting their customers' interests at heart.
The first building society was established in Birmingham, UK in 1775, and since then, they have reinvested their profits into better rates, local initiatives, and long-term stability. This approach has earned them a reputation as businesses that truly care for their members. In a recent study, building societies were ranked as the businesses most likely to act with customers' interests at heart.
However, the digital age poses new challenges for building societies. Legacy technology is slowing the speed to market for these institutions. To overcome this hurdle, core transformation is crucial. This transformation can empower employees to deliver enhanced customer experiences, whether in-branch, over the phone, or online.
Core transformation is not just about accelerating product development and cutting costs, but also about strengthening resilience against cybersecurity threats and service outages. It can speed up product development cycles, enabling mutuals to proactively launch offerings that reflect the economic realities of their members.
Building societies also face the challenge of attracting the younger generation of savers. With a market share of only 24% among the 18-34-year-olds, it is clear that they need to adapt to connect with this demographic to avoid stagnation.
New approaches to core banking, such as the meta core, can enable building societies to overcome the challenges of legacy cores and avoid the complex set-up and scale challenges of neo cores. Collaborative models, such as shared digital platforms or joint ventures, could democratise access to innovation for smaller building societies.
The Labour government aims to double the size of the building society sector, introducing greater scale as a necessity. This ambition signals growing recognition that building societies, with their commitment to financial inclusion, are vital to a fairer economy. The Labour government's manifesto pledge also signalled a growing recognition that building societies are key to a fairer economy.
However, building societies have aging member bases, and attracting younger savers is a significant challenge. To preserve their values while adapting to thrive in a digital society, building societies must find ways to appeal to the younger generation without compromising their traditional values.
Building societies have a pivotal moment in preserving their values while adapting to thrive in a digital society. They must navigate this moment with care, ensuring they continue to serve their members with the same dedication they have for the past 250 years.
