Open Banking is an area of opportunity

65% of all stakeholders we surveyed in our research believe Open Banking to be an opportunity for the building society sector.

Respondents said the largest opportunity from Open Banking lies with enhancing customer experience/ engagement (60%) and data connectivity (51%).

Interestingly, only 13% of building society respondents considered Open Banking to be an opportunity for product distribution compared to 57% of non-building society respondents.

This perhaps reflects the fact that building societies’ established distribution channels perform strongly across mortgages and savings.

FinTech firms we engaged with during the research considered the use of Open Banking by building societies to be at a very basic level, highlighting opportunities for societies to adopt it to help streamline key processes such as ID and verification, dynamic data capture, and the evaluation of mortgage eligibility.

Open Banking will be the dedicated topic of a future blog in this series.

There is distinct FinTech activity around mortgages and savings

Mortgages and savings are the two primary markets for building societies and there are separate streams of FinTech related activity in each of these areas.

Within mortgages, the focus of building societies is to enhance their intermediary mortgage proposition, and many of the FinTech examples in the report focus on engagement with this distribution channel:

• 75% of CEOs interviewed stated that they are seeking to use digitisation to improve their broker journey
• 67% of all survey respondents strongly agreed that technology can drive efficiencies within the mortgage process whilst also supporting the human decision making that is critical to manual underwriting.

In savings, we found building societies are enjoying strong savings performance, which means to date they have needed limited engagement with some of the aggregator / platform tools emerging in the market.

But there is recognition that the saving market could potentially be disrupted and commoditised depending on the combined impact of FinTech and evolving consumer preferences. There are numerous FinTech developments that provide an insight into the direction that the savings market is heading towards.

For example, automated savings goals, round ups, goals, and the ability to have multiple pots within one main account all represent enhanced functionality for consumers. In the short term, the focus of most building societies is to establish an effective online savings capability that enables online account opening and the transfer of funds between savings accounts and bank accounts, but they have more than a passing interest in the direction of travel of the FinTechs in this space.

In summary, the building societies sector is acutely aware that financial services is moving towards a more digital model and that building societies will need to align their ways of working to fit with the way their members and key partners (such as mortgage intermediaries) expect to be able to deal with them.

Deciding which FinTech developments are the most appropriate ones to engage with is a consideration which needs to be aligned to the business strategies and propositions that individual societies decide to pursue.

The related topics of strategy, mutuality and technology are covered in more detail in the report, which you can download the report via the link below.

Building Society Sector Analysis 2021

A review of the strategic landscape for building societies

The research underpinning this report was conducted by Whitecap Consulting in partnership with the BSA, and 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.

This analysis and report was funded through sponsorship from a number of industry stakeholders including: Credera, DPR, Equiniti, Mambu, Mutual Vision, Moneyhub, Nivo, Phoebus Software, Sandstone Technology, Shoosmiths and Sopra Banking Software.

The eight blogs in this series will focus on key topics addressed in the research: FinTech, Strategy, Mutuality, Regionality, Technology, Mortgages, Savings, and Open Banking.

Download report