Guest blog by Steve Marsland, Senior Sales Executive at Finastra. First published in Society Matters magazine.

The need for change

The UK building society sector is in an enviable position. It is known for a quality service, a reputation for good conduct and superior financial stability1. But finance is evolving rapidly. New technologies are making game-changing financial services possible. As a result, members are expecting more. They want the exemplary service that building societies provide delivered in a modern, digital way.

Today, many building societies rely on legacy tech infrastructure, with software installed and managed locally by the Society’s in-house IT team, that is often decades old. These systems are complex, expensive to maintain and difficult to change. If you combine that with a dwindling pool of people who know how to look after them, then the operational risks are plain to see.

Four drivers of opportunity

The bigger issue with these legacy systems is that they make it much harder for building societies to transform and capitalise on market opportunities. Modern technology is the key enabler to unlocking the opportunities in an agile, cost-efficient and effective way.  Several areas stand out:

1. Open technology

Next-generation banking technology solutions are open and surrounded by hundreds of modern APIs, making it much easier to add new functionalities such as digital identity schemes, ergonomic channel capabilities and reg tech consumption. Integration is much easier, enabling more “plug-and-play” capabilities.

2. Software-as-a-Service (SaaS)

A building society’s core system no longer depends on time-consuming and expensive maintenance and upgrade cycles that are managed in-house. Instead, a vendor managed service can deliver CI/CD (continuous integration and continuous delivery). This removes the need for the society to manage expensive and time-consuming upgrades down the line.More than that, the services include DR (Disaster Recovery) and HA (High Availability), with SLAs (service level agreements) geared to HA. And cloud providers such as Microsoft Azure, which underpins many SaaS services, now offer the levels of security and scalability that financial firms require.

3. Digital banking

Whether it’s via their phone or a tablet in the branch, members – especially younger groups such as millennials – increasingly expect a digital experience. To attract new members and retain others, the digital experience needs to be “magnetic”.And if you have a digital layer directly linked to a next-generation core, it creates a seamless, automated end-to-end process from onboarding to servicing. This drives high levels of STP (straight through processing) for the society and delivers a superior customer service to their members.

4. Smart data and Open Finance

Accessing and using an organisation’s data is critical to delivering more personalised offerings and better targeted campaigns. By harnessing the power of AI (artificial intelligence) and ML (machine learning), societies can access members’ financial data and use it in a more meaningful way. Data can be extracted and analysed in a way that is difficult with traditional core platforms. Open Finance takes things a step further, enabling building societies to integrate directly with other services, for example, wealth management platforms, with minimal effort.

Platform for the future

Finastra can help building societies take full advantage of these innovations. Using Microsoft Azure. Finastra’s SaaS-based core banking solution is a platform that the building society of the future can be built on. Once implemented, it will enable building societies to grow their mortgages and savings portfolios and build their member base by offering a superior digital experience which has been tailored specifically to the UK building society market.