Guest blog by Sandeep Kumar Mishra, Director - Building Society Business Segment, Tata Consultancy Services

Our Society has faced numerous challenges in the last couple of years since the onset of the pandemic. Current inflation rate stands at 9.9% and could cross 18%. Cost of living has skyrocketed, and energy bills are becoming unaffordable. This has impacted every section of society, particularly the financially weaker section, elderly, and more vulnerable people.  

Post ease of COVID lockdown measures, housing and mortgage sector has witnessed an increase in demand. Measures taken by government for fiscal stimulus, stamp duty holiday and the prevailing low interest rates prompted many people to invest in new properties. This demand has also been spurred by COVID induced lockdowns and other restrictions which played significant role in reshaping customer priorities, thus providing impetus to the housing and mortgage market. Due to these reasons, property prices have increased by almost 15% during the past two years and interest rates are at an all-time high. Faced with this new challenge, home buyers are looking for support from the financial institutions on whom they have been dependent historically.

Building societies have been serving local communities for over 200 years, primarily targeting unserved or underserved segments of the home-buying population, and their strength lies in strong community relations and a solid capital foundation. These societies are now caught in a tricky conundrum - some of their strengths have also become their Achilles' heel. Their focus on local communities, specifically targeting the mortgage industry, has resulted in undiversified business models and low profit margins. In the current situation, they need to further optimise their product offerings for financial well-being of their members.  In addition, we observe that building societies are constrained by limited pricing power and increasing investment spends. These challenges have had a direct negative impact on their core products of mortgages and savings.

In recent years new challenges have emerged e.g., increasing competition from traditional banks, entry of new-age digital firms targeting the same niche markets, undiversified business models, limited pricing power, expectations from Gen ‘Z’ and tightening profit margins.

Building societies have come to realise that leveraging digital technologies is the solution to overcome the roadblocks that they face. They are taking action to solve immediate challenges as well as future proofing their business. Recent digital adoption trends in building societies includes the introduction of new digital channels, enabling cloud platforms, and the transformation of mortgage and saving services. Societies have also enabled scalable and agile platforms leveraging microservices and application programming interfaces (APIs).

The core strength of building societies lies in their community connections and financial well-being of members. Now is the time for building societies to not only offer niche products to the communities they serve, but also look at tailoring products to meet the members’ demand in the current market situation. For example, borrowers are struggling to repay their mortgages because of financial challenges. Coincidentally, first-time buyers are also looking for affordable mortgage products during the ongoing inflation. This offers building societies opportunities to craft lending products with flexible pricing options for both sets of members. With the advent of cutting-edge digital technologies, these institutions also stand to benefit from the roll-out of hyper-contextualised and personalised savings products, helping them provide a superior customer experience to their members and maintain a human touch.

Find out more:

Watch how leaders from leading building societies discuss the role of technology in enabling seamless customer experience - https://www.linkedin.com/video/event/urn:li:ugcPost:6950477078316130304/

Or Contact: Sandeep Kumar Mishra, Director Building Society Business Segment, Tata Consultancy Services

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