Adam Oldfield, chief revenue officer, Phoebus

One of the most important parts of the financial services industry is the building society sector. Their mutual model is to be applauded for serving the interests of members and local communities – in most cases for well over a hundred years.

Building societies have carved out a niche in their local and regional communities in recent years and have demonstrated innovation with both mortgage and savings products. But, given the pace of technology, change can be difficult to keep up with. So in order to stay relevant and competitive, contemporary systems are key to addressing their members’ growing expectations and efficiently servicing their assets.

Financial services are at a crossroads as digital transformation continues to speed up, and challenger banks and specialist lenders grow their customer base and market share. Many young people are finding the fintechs a more alluring option, using apps for their banking, savings and increasingly, their mortgage journeys. So how can building societies appeal to a younger market?

Legacy systems

One of the ways to appeal to new and existing members, especially a more youthful, tech-savvy demographic, is to have great technology and channels of choice. Today’s TikTok generation buy goods and self-serve in a couple of clicks, and they expect to be able to do the same from their bank or building society.

Financial providers want to make the customer experience smooth and efficient, but many building societies are still working on legacy systems. Adding new layers of technology onto these older systems can be fine for a while but it’s not a viable long-term solution. It is still dependent on manual interventions and slows down processes which are cumbersome, time consuming and ultimately not cost-effective.

There are so many barriers with legacy systems such as not being able to facilitate API integration, which restricts capacity for data sharing and ease of collaboration with other technologies. This is vital in today’s financial world and is a must for those building societies wanting to innovate and compete.

To get ahead, it can be useful to engage in partnerships that can provide an array of additional services which enhance the value proposition, and many building societies are pursuing this route.

Digital transformation

Investing in technology for digital transformation is the only way to go to keep up with competitors, particularly challenger banks – sometimes referred to as neobanks – that are now regularly competing for market share in the building society space.

However, many societies are now actively embracing the concept of transitioning into a ‘modern mutual’ business, seamlessly combining traditional branch-based member services with the integration of new digital channels and all delivered via the cloud. Previously perceived barriers around the risks and costs involved are increasingly much better understood by building society boards, whilst the transformation journey itself is now far more mature, efficient and robust.

Specialisation

Looking at building societies’ core business of mortgages and savings, many still use one technology provider to cover the whole customer journey from start to finish, from application to completion to closure. But one service provider for everything is no longer the norm and finding ‘best of breed’ providers in the different areas can be a much better approach.  Done right, it can still be a seamless end-to-end process, whether that’s for mortgages, savings or banking. Some technology firms are good at providing origination software, others excel at servicing, and a lender/deposit taker can use two firms for these quite separate parts of the mortgage and savings process.

For example, Phoebus is a servicing firm which looks after the back office, servicing mortgages and savings using the latest technology, but this can integrate seamlessly with the origination of a mortgage. So, once a mortgage application has been completed on origination software, a platform such as Phoebus can take over the ongoing servicing of the mortgage or savings account.

Costs

While technology is a crucial investment for the future of any business, the costs involved can be seen as prohibitive, particularly for some smaller building societies.

One way around this is a strategic approach where a small group of building societies come together as a collective consortium. They can then share the cost of maintaining and upgrading the software, which will reduce individual costs whilst allowing each society to continue to operate separately.

Migration

Many lenders worry about the migration of mortgages or savings books to a new servicer. It is a complex process which is why good planning, collaboration and working with a reliable and experienced software provider will result in a smooth transition.

It is a critical time for the building society sector and it’s never been more important to select the right strategic partners to move forward. What is crucial, is to have technology partners who understand the market and the challenges. But whichever technology firms you use, navigating through your journey also means having the right people, with the right experience, who can ensure the right outcomes.

There are so many disciplines and nuances in today’s complex financial market that using the right firm for the different elements of your business is vital and a one stop shop is not necessarily the optimum choice.

ENDS