Ketley’s Building Society, founded in Birmingham, England, in 1775, was the first ever recorded building society. Ketley’s members would meet in a pub where each would pay a monthly subscription that was used to fund the construction of houses for society members. These houses were then used as collateral to acquire further finance for the society. This idea caught on and there are currently 43 building societies in the UK, offering a variety of banking services, including mortgages.
Nowadays, the average person is unlikely to know the difference between a bank and a building society. Yet, the distinction remains clear enough that building societies face unique challenges and opportunities that traditional banks do not.
The changing landscape for building societies
Banks are owned by shareholders, whose priority for the bank is to maximise profits and growth. Building societies are in a different position. Of course, they still need to be profitable, and to grow in order to stay competitive in the market. However, their primary goal is always to serve the needs of the members who act as de facto shareholders of the institution. This brings about unique benefits and challenges.
Every company wants to put its customers first, but building societies can do so without worrying about shareholder preferences. However, diverting funds away from member services for special projects like digital transformation can be difficult, which is a problem as digital services are necessary for attracting new members.
As Millennials and Gen Z become the more-prominent customers in the market, it becomes harder to attract new membership without the digital services that these generations prefer to use. Without digital transformation, building societies could lose considerable market share.
The unforeseen future ahead
With the particular hit that the UK economy and especially interest rates have taken in recent months, consumers are rightly worried. As such, building societies that put members’ needs above financial growth are an attractive prospect.
Communicating that to younger consumers, however, requires showing them that you are catering to their needs. While Millennials and Gen Z may love the idea of a banking service that doesn’t put shareholders first and can help them get on the property ladder as well, they will likely be put off switching from a traditional bank by a lack of digital services like mobile apps and 24-hour banking.
If building societies can offer modern, digital services, while also prioritising customers, then far from going extinct, building societies could thrive in this difficult environment by helping their customers do the same.
The digital transformation opportunity for building societies
To take advantage of this opportunity, building societies need a cost-effective way to offer innovative digital products. They need to find fintech partners to help them digitise their product offering and launch quickly to the market. Moreover, through the right partner, the products can be customised to consumer preferences and connected and embedded in third-party services.
With the right partner, there’s a great opportunity for building societies to come back into relevance and appeal directly to the modern consumer in difficult times. Alone, building societies risk joining Ketley’s as a note in the history books at a time when modern customers need them the most.
