Guest blog: Time to stop focusing on products and concentrate on user experience

Guest blog by Mark Gilliver, Business Development Director, Target Group

Guest blog by Mark Gilliver, Business Development Director, Target Group

Building societies are a cornerstone of the financial services landscape. They’ve been relied upon by millions for generations – for necessities such as housing, savings or insurance. In fact, some have witnessed the biggest events of the last couple of centuries, overseeing political and social change in the process.

But now, they face a new challenge – one which could theoretically define their place in the market more than ever.

Whilst the financial services market was undergoing a step-change even pre-pandemic, COVID-19 has certainly accelerated the key trends that were starting to be seen – namely around digitalisation and the role of branches. Building societies have been firmly caught in the crosshairs. They need to be able to provide slick services to customers, but their many years of stable and resilient operations are also holding them back, due to legacy technology which doesn’t integrate with newer additions to the stack. They had also been reliant on the tried and tested method of service delivery which new, digital rivals have steered away from – in branch. But with successive lockdowns taking this face-to-face option away, it’s been necessary to pivot to a more digital approach.

Whilst this shift has been managed well, building societies are now arguably at risk of an identity crisis. Change has been forced and new entrants are flooding the market, so the need to define one’s position in the new financial services ecosystem has never been more necessary. Not only to determine strategy, but to cater to ever-changing customer demands.

The truth is that the rise of platformification is blurring the lines between financial services and other sectors. In essence, it’s the ability to form an ecosystem where different companies come together to solve customer problems. As such, it’s no longer good enough to simply offer one suite of products – to retain customers and reduce acquisition costs diversification and collaboration are now the aims of the game. Consumers want everything in one place, and building societies need to start considering this trend if they are to remain relevant and drive additional revenue. Look at the likes of Apple, Google or Asos. They have all built out their offerings, based on their underlying platform. Asos has gone beyond simply selling clothes by adding other lines (such as beauty) to increase order volumes and increase customer “stickiness”. The major tech players have ventured into financial services by integrating payment systems onto smart phones. All of this has one aim in mind – make consumers’ lives easier by giving them what they want in one place, via a slick experience, and at scale. This drives loyalty and retained revenue.

It’s not just technology-focused brands which are doing this. Tesco, Marks & Spencer and Asda all have diverse product ranges (banking, mobile phones, insurance) which are continuously expanding. Building societies need to do the same, as the number of non-traditional rivals threatening market share is expanding. Consumer apathy also cannot be underestimated – those providers that can amalgamate their services into as few apps or platforms as possible will win the hearts and minds of today’s customer.

So, what can building societies do?

If you can’t beat them, join them – building societies should play their rivals at their own game. It’s time to shift to the one-to-many model, in order to create interconnected experiences and a sustainable community of members. This in turn will open up new revenue streams

But how?

The market forces in play means customers need to be at the heart of operations. Operations which are powered by technology. Agility, data-driven insight and Open Banking should be at the forefront, with an emphasis on speed and collaboration.

Previously, building societies have operated in silos, interacting with the likes of estate agents, mortgage brokerssurveyors etc but rarely integrating with them. Via platformification this could change. By choosing a new path whether that’s as a platform, a manufacturer, a utility or a distributor, different providers will be able to integrate and provide consumers with a one-stop-shop – the new ecosystem.

Manufacturers would earn more than operating independently, platforms provide volume of customers and revenue streams for all, and customers become loyal as they get the benefit of economies of scale and a great experience. Plus, it’s a virtuous circle. The more data, the better the analytics (via predictive modelling) and a more personalised service – enabling the recommendation of the right product at the right time – again enhancing the user experience.

The lines between provision and service are no longer firmly drawn in the sand, and as more market entrants threaten to steal customers, building societies will need to counter this threat. Platformification and the chance to become a one-stop-shop is vital to disrupt the market status quo. Products are not good enough, experience is king, so putting that the customer at the centre of operations will yield dividends in years to come.


The views, opinions and positions expressed within guest blogs are those of the authors and do not necessarily represent those of the BSA.