The retail banking landscape is changing. No longer do customers interact with their local bank branch for their daily banking needs, and they certainly don’t use the same provider for all their banking services.
With more competition than ever, customers are willing to shop around, and with the advent of digital natives there is an expectation that all products and services on offer should be available at their fingertips. To address this, banks have a clear task ahead of them: increase digital adoption, innovate in the types of products and services on offer, and upskill the entire organisation to offer customers an experience rather than simply a product. According to a Smart Money People study published in February1 66% of customers aged 65+ now prefer digital channels, with 13% of them preferring banking apps (up from 7% in 2017). The overall switch to mobile for all age groups was up by 9% in 2018, whereas the use of branches was down by 1.2%.
However, when it comes to building societies the statistics show a slightly different picture. With customer satisfaction across building societies savings customers being 7% higher than banking customers (95% vs 88%), it is no surprise that these customers say they value the face to face transactions and knowledgeable staff that building societies are well known for.
But is this the same when it comes to mortgages? Here, banks have an advantage. They can offer much simpler - and less costly - mortgages, contributing to increased preference rates from customers due to price and ease of doing business. However, the winning factor for building societies is their customer service; the skill and knowledge that mortgage advisors have and the ability to service niche cases score high to customer sentiment, resulting in a 13% satisfaction rate compared to banks. Moreover, the ability to have face to face contact directly with the underwriter or case handler offers an unparalleled competitive advantage for building societies versus the incumbent banks.
So, in a world where customers have associated building societies with face to face interactions and exceptional customer service, is there room for digitalisation, and if so, what are the customer benefits?
The answer is to keep the best of both worlds. If customers identify differences in their experience between banks and building societies, then building societies should harness that differentiating factor and invest in it. Face to face service and high-quality, skilled agents are essential elements which need to remain core to the building society business. However, digital remains important for varying demographics and for allowing accessibility when circumstances and lifestyle do not allow for face to face interaction, or when it comes to managing accounts and simpler transactions. Investing in the availability of digital channels and gathering the rich customer data available through these channels to offer tailored customer experiences and products will put building societies on the path to successful digitalisation. By keeping the best of both, building societies won’t compete with the ‘digital first’ challenger banks, but will respond to changing trends and demands whilst maintaining the human element that sits at the core of the building society business.
BearingPoint will be speaking at the BSA's Digital Mutual Conference on 10 October.