Building societies have a storied history, originating in 1775 when Richard Ketley, the landlord of the Golden Cross Inn in Birmingham, founded the UK’s first building society. These institutions were initially created to help working-class individuals save for homeownership. Over time, they became an integral part of the UK’s housing market. Despite their rich traditions and community-focused ethos, building societies now face increasing pressure to modernize and meet the growing demand for digital-first experiences. The challenge lies in updating their outdated legacy systems without sacrificing their core values, a balancing act that is crucial to their continued success.
The Legacy of Building Societies
Building societies have long stood as pillars of mutuality and community service. By 1900, over 2,200 such societies existed, thriving as mutual organizations dedicated to giving back to their members. However, regulatory changes and market pressures in subsequent decades led to a dramatic decline in their numbers. Many societies were forced to demutualize, merge, or convert into banks. Today, only 43 building societies remain, serving 26 million Britons while steadfastly holding to their principles of mutuality and community service.
Though their traditional models still offer significant value, these building societies are not immune to the rising tide of customer demands for seamless, digital-first experiences. The core issue hindering their ability to innovate and provide modern, customer-centric digital services lies in the outdated legacy systems these societies continue to rely on. These systems prevent institutions from offering digital onboarding processes, real-time financial data access, and personalized services that have become the norm for modern consumers. Without addressing these technological shortcomings, building societies risk falling behind more technologically advanced competitors.
The Digital Transformation Imperative
The necessity of digital transformation is clear as more customers now expect efficient digital onboarding processes, real-time access to their financial data, and personalized services tailored to their specific needs. Building societies might struggle to keep up with their more technologically advanced competitors if they do not embrace digital transformation. The overarching trend indicates a significant push for societies to blend their traditional community ethos with the convenience and accessibility of digital banking to better serve their members.
However, there is an ongoing debate about the extent to which fully digital experiences should replace human interaction. Digital-only platforms have faced criticism for eliminating human customer service entirely. Yet, technologies such as in-app messaging and video calling remain underutilized despite their potential to enhance personalized human interaction. The challenge building societies face is finding a balance that incorporates digital efficiency without compromising the personal touch that has long distinguished them.
Challenges of Modernization
Updating systems brings significant challenges for building societies, largely due to the perceived high costs and risks associated with large-scale technology overhauls. This concern is particularly acute for institutions that prioritize community service over profit, often operating with budgets far smaller than those of high-street banks. Moreover, deeply embedded outdated systems make the notion of complete rebuilds seem daunting and financially prohibitive.
This intersection of ambition and hesitancy places building societies at a critical juncture, knowing they must evolve to stay relevant while fearing the financial and operational implications of doing so. The challenge lies in adapting their operations to modern demands without compromising their core values and community focus. The task requires a strategic approach that balances innovation with the preservation of the principles upon which these societies were founded.
BPaaS: A Potent Solution
BPaaS technology emerges as a potent solution to the conundrum of modernization. Banking-Platform-as-a-Service offers an end-to-end solution that eliminates the complexities associated with large-scale integration projects or costly self-builds. These platforms are open, configurable, and cloud-ready, providing tools for digital onboarding, mobile apps, and core banking functions such as loan processing and ledger management. Essentially, BPaaS functions as a comprehensive operating system—a “building society in a box”—that allows societies to modernize their operations efficiently.
The implementation times for BPaaS typically span up to 12 months and come at an affordable cost, making it a feasible solution even for smaller players. One of the critical advantages of BPaaS is its ability to automate routine tasks, thereby freeing employees to focus on fostering personal relationships with customers. This approach not only maintains the human interaction that distinguishes building societies but also enhances it by improving operational efficiency. Furthermore, BPaaS platforms are designed to evolve in line with customer expectations, helping societies avoid falling back into the trap of outdated systems.
Enhancing Human Interaction with Technology
BPaaS does not aim to replace the personal interactions that are a hallmark of building societies but to enhance them. These platforms offer the flexibility required to adapt to changing customer expectations, thus preventing societies from reverting to outdated systems. The democratization of advanced banking technologies through BPaaS empowers building societies to compete more effectively with traditional high-street banks, creating a more level playing field.
This capability is not about abandoning their traditions but adapting them to meet the demands of a digital world. By adopting BPaaS, building societies can innovate rapidly, reduce operational costs, and meet their customers online, thus allowing them to reinvest in the personal relationships that have sustained them for centuries. In adhering to this approach, building societies can leverage technology to strengthen their community ethos rather than diminishing it.
The Future of Building Societies
Building societies have a rich history, dating back to 1775 when Richard Ketley, the landlord of the Golden Cross Inn in Birmingham, founded the UK’s first building society. These organizations were originally designed to help working-class people save money to buy homes. Over the years, building societies became a crucial part of the UK’s housing market, embodying a community-focused spirit and strong traditions. However, today, they face significant pressures to modernize and adapt to the rising demand for digital-first experiences. The primary challenge they confront is updating their aging legacy systems without compromising their fundamental values and commitment to their members. Balancing modernization with preserving core principles is vital for their sustained success in an ever-evolving financial landscape. By embracing technological advancements while retaining their traditional ethos, building societies can continue to serve their communities effectively, ensuring they remain relevant and competitive in the modern era.
