Digital Disruption: The race for Building Societies to stay relevant

As digital-first neo banks and fintechs rapidly reshape the financial services market, many building societies, with their deep roots and community focus, but without the agility, , data or tech foundations to rapidly change, risk being left behind. Member loyalty and a broad product offering have provided them some insulation from member attrition in the past. However, as digital challengers expand their services and superior member experience and quick introduction of products and services become minimum member expectations, the risk of member attrition grows.

For building societies, the challenge is to balance prudence with progress, ensuring members’ interests are protected while embracing digitalisation and modernisation.
 

The digital sprint leaves legacy financial institutions behind

While digital and neo banks race ahead, to remain relevant, building societies must do more than tinker at the edges of their technology foundation. Incremental improvements are no longer sufficient. Modernisation requires a fundamental shift: rethinking technology, member experience, product innovation, and how data & AI is leveraged.

So, why don’t more customers abandon building societies in favor of nimble digital challengers?

One reason: inertia. Many consumers don’t rethink their financial institution frequently, even when better options arise. That weak switching behavior grants building societies some protection.

Second: building societies offer a diversity of product offerings and a personal service. Many digital challengers initially offer a narrow range of products (checking, savings, payments).

However, as neo banks and fintechs offer a wider range of products and customers expect a superior experience and product innovations as basic requirements, the ability for building societies to retain customers will progressively diminish.
 

Imperative for building societies - Staying relevant and retaining clients

If traditional building societies want to stay relevant, they can’t simply iterate. They must transform and offer a member experience and agility that are comparable with neo banks.

Legacy technology stacks make this transformation difficult and create fragmented customer experiences. Also, it is difficult to offer new and differentiated products and services in a timely manner.

Traditionally, it has been complex, expensive and time consuming to modernise legacy technology. However, the rapid adoption of Generative AI has started to change the game by offering swift code conversion. However, the quality is erratic, and code conversion alone is not a silver bullet.

Now, the rise of Generative AI offers new pathways: rapid code conversion and deeper understanding of business processes. While AI is not a cure-all, it can accelerate transformation when paired with human expertise. Of note is the use of GenAI to understand the business functionality, technical architecture and work & data flows. By adding a human in the loop, this approach allows a GenAI-augmented re-write of legacy systems in a new future-ready architecture. This reduces timelines, cost, and risk.
 

Crisis, opportunity and way forward

The risk of falling behind customer expectations and technology is both a warning sign and an opportunity. Without bold actions, building societies risk losing customers and market share. But with the right approach they can reclaim relevance in a shifting landscape.

For building societies to avoid obsolescence, they must:

1. Recognize that incremental improvements won’t suffice — fundamental modernisation models must evolve.
2. Use AI and advanced tooling not as miracle-cures but as foundational enablers.
3. Partner with organizations experienced in bridging mainframe, cloud, and legacy modernization and that can scale at ease.

Dismantling the restrictions of legacy systems and practices is hard. But it’s the only way for building societies to compete, not just survive.

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