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

We're delighted to be a sponsor of a new report from Whitecap Consulting, produced in partnership with the Building Societies Association. The report focuses on the roles of strategy, mutuality, regionality and technology, also looking closely at the mortgage and savings markets. It highlights strong sources of differentiation for the building society sector across these areas.

The research involved a quantitative data analysis of all 43 building societies, interviews with 33 of the building society CEOs, and an online survey which received a total of 134 respondents. The report is now live which can be read here

The report identifies four key themes:

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

Theme one: Strategy and planning

Whilst building societies share in a common heritage and most occupy broadly a similar space in the wider financial services market, there is divergence in respect of purpose, strategic prioritisation and commercial focus. And unlike many shareholder-owned organisations, growth, as defined by asset base, profit or enterprise value, is generally not pursued as an end in its own right.

Click here to download the full report

Theme two: The role of mutuality

Mutuality is reflected in the internal governance, purpose-led strategies, operational decisions and the culture of societies, creating the potential for a genuine customer orientated approach. And whilst mutuality itself is not well understood externally by customers, its outcomes are well aligned with the increasing focus on social purpose in society in general.

Theme three: Regionality and community

Regionality is an important feature of the sector, and can be closely linked with mutuality. This is especially for small and
medium sized societies, where a strong commitment to supporting local communities is evident. This is more than CSR, and for many smaller and medium sized societies the strength of loyal savers through the branch network is a strong driver of
performance.

Theme four: Technology and digital transformation

As with all organisations today, building societies need to continually evolve digitally and remain relevant to current and potential customers. This is widely acknowledged across the sector and is being addressed as a near-medium term priority by many societies across both broker and savings markets.

Click here to download the full report

Opportunity knocks for building societies and Fintechs

The building society sector is served by a wide range of organisations, and is courted by many more, especially in terms of tech and FinTech providers. During the course of this project, we have identified a number of important considerations for organisations seeking to engage with the sector, and we have articulated these as a set of guiding principles:

1. Do not assume all societies are the same – take time to understand the nuances of a society’s strategy and business model.
2. Acknowledge the impact mutuality has on a building society’s decision making. Products and services that can achieve outcomes such as fast growth, create new revenue streams, or dramatically streamline operational processes can all represent significant changes which may carry significant risk – do not assume these outcomes are more attractive to building societies than stability and sustainability.
3. Do not assume that digital transformation is an urgent imperative. Building society CEOs have been hearing this for many years, and whilst they do not deny the importance of digital transformation, the sector does not have the burning platform that some might assume.
4. Provide wider context for technology solutions. The tech provider landscape is difficult for societies to navigate, and they are constantly approached by technology and FinTech providers. Helping societies understand where a product or service sits in the market is important to progressing meaningful conversations. Critical factors to consider include compatibility with existing technology and gaps where other solutions will be required.
5. Be clear on the requirements you have of a society’s resources. Many building societies are small organisations, with limited resources. If the successful implementation of a product or service requires specific skills or availability, be clear on this from the outset in order to set realistic expectations.