In the online survey conducted during the research, we asked respondents about Open Banking, finding it to be perceived as an opportunity for building societies by 65% of survey respondents. We also found the largest opportunity from Open Banking is considered to lie with enhancing customer experience/ engagement (60%) and data connectivity (51%).

There is no doubt that building societies are acutely aware of the development of the increasingly prominent role APIs are playing in modernising the financial sector, fuelled by the continued and growing success of FinTech and Open Banking. At the same time, we found that while Open Banking is an area of strong interest for societies, it does not currently feature in their immediate priorities, with most CEOs adopting a ‘watch and see’ approach.

This may be a reflection of the fact that only 10% of building society survey respondents consider Open Banking to be a threat for the sector.  We also found building society respondents were twice as likely to suggest that they had not fully assessed Open Banking’s potential (35%) over non-building society respondents (14%).

The potential of Open Banking and Open Finance

Moneyhub, a FinTech that provides secure, Open Banking (bank account and credit cards) and Open Finance (pensions, loans, mortgages, investments, property values) integrations and applications to businesses and individuals, has found wide ranging use cases for building societies, including:

  • Digital wallet solutions (for example the Moneyhub platform) can provide a society with a payments facility without the need for the significant costs associated with setting up and running a current account
  • Open Finance presents the full picture of an individual’s financial situation, it allows building societies to provide content, tips and tools to help customers with day-to-day finances
  • This holistic view allows building societies to identify those who may begin to struggle with mortgage payments before it actually occurs. Through a defined set of algorithms, risk factors can be flagged and help and advice offered proactively
  • Using a customer’s current and historical Open Banking data for credit checking, affordability and income verification allows fast, efficient and cost-effective underwriting
  • Open Finance allows customers to share their data – other savings accounts and mortgages for example – to receive personalised offers and switch accounts

FinTech firms interviewed during the research consider the use of Open Banking by building societies to be at a very basic level, citing opportunities for societies to adopt it to help streamline key processes such as ID and verification, dynamic data capture, and the evaluation of mortgage eligibility and automated regulatory reporting.

We reported on a number of current examples of the use of Open Banking within the building society sector, many of which are listed below. This year we can expect to see an ever increasing number of deployments of Open Banking within the building society sector as it gains further traction and as the financial services sector continues to move towards an Open Finance model.

Perhaps the greatest prize will be found in improved engagement – by being useful, relevant and personalised. Building societies appear to have a unique opportunity to use Open Finance as 21st Century financial wellbeing providers.

Examples of Open Banking deployments in the building society sector mentioned in the report include:
  • Newbury Building Society has developed ‘NBS Money’ in partnership with Moneyhub. NBS Money is an app that accesses Newbury products alongside a ‘virtual’ current account banking feature using account aggregation services
  • Newcastle Building Society has partnered with Paylink Solutions to assist customers in financial difficulty by launching a digital debt help service, with integrated Open Banking technology.
  • Phoebus, a core banking platform provider, has developed a self service customer portal which can be deployed as a standalone component to plug into any core banking platform to access mortgage data for balances, statements, and emails, as well as Open Banking functionality.
  • Sandstone has developed API gateways and Open Banking onboarding as part of its digital and mobile banking proposition across current account, savings and mortgages.
  • Mambu’s partnership with Tandem provides an example of a financial institution updating their technology to keep up with consumer demand. Tandem wanted to quickly introduce new financial services by building a new innovative product within their existing product and embracing open banking.
  • In 2018, Skipton was one of the first societies to trial the use of Open Banking, offering its direct mortgage customers the choice to use it in the mortgage affordability process rather than manually providing bank statements. It is possible that competition could be the key driver in taking API adoption to the next level. This is particularly pertinent at the front-end of the mortgage process, where it has been found that 83% of brokers surveyed primarily sought to understand eligibility when assessing the market for options for their clients.
The related topics of strategy, mutuality and technology are covered in more detail in the report, which you can download the report via the link below.

Background to report:
Building Society Sector Analysis 2021 – A review of the strategic landscape for building societies

The research underpinning the report was conducted by Whitecap Consulting in partnership with the BSA, and involved a quantitative data analysis of all 43 building societies, interviews with 33 of the building society CEOs, and an online survey which received a total of 134 respondents.

This analysis and report was funded through sponsorship from a number of industry stakeholders including: CrederaDPR, EQ Credit ServicesMambuMoneyhubMutual VisionNivoSandstone Technology, Sopra Banking SoftwareShoosmiths, and Phoebus Software.

The eight blogs in this series will focus on key topics addressed in the research: FinTech, Strategy, Mutuality, Regionality, Technology, Mortgages, Savings, and Open Banking.

Useful links:

Building Society Sector Analysis 2021

Watch the report launch webinar