Digitising mutuals: how building societies can use next-generation tech to transform the member experience

When Richard Ketley, landlord of the Golden Cross Inn in Birmingham, established the UK’s first building society in 1775, few might have imagined that the phenomenon would endure for more than a quarter of a millennium.

BPaaS technology can help building societies digitise while maintaining and even strengthening their core values

Initially designed to help working-class people save for homeownership, building societies soon became central to the UK’s housing market. By the turn of the 20th century, they were thriving as mutual organisations, with numbers peaking in 1900 to over 2,200 societies – always giving back to their members.

However, with each passing decade, fewer building societies survived and driven by a raft of regulatory changes and market pressures, the 1990s saw many of those that remained demutualise, merge, or convert into banks.

Today, though far fewer in number, the UK’s 43 building societies continue to serve an astonishing 26 million Britons. Their founding principles of mutuality and community service remain strong, but like all sectors, they face the rising tide of customer demand for digital-first experiences.

The question is no longer whether these long-standing institutions should adopt next-generation technology, but how they can do so while maintaining and even strengthening their core values.

The need for change

As this customer demand for seamless, digital-first experiences increases at a near exponential rate, building societies face the very real risk of being left behind. Although their core values of mutuality, community service, and face-to-face relationships are still valued by many, these values alone are unlikely to be enough to withstand the headwinds of the digital age.

The root of the problem lies in the fact that many building societies are stuck with legacy systems that impede their ability to innovate. Any ambitions to provide the customer-centric digital services that modern consumers crave are curtailed by creaking infrastructures.

Yet building societies can (and indeed, should) believe that they are equally capable of delivering effortless digital onboarding processes, real-time access to financial data, and personalised services both online and in person. Indeed, such a powerful blend of traditional community ethos and the convenience and accessibility of digital banking is already achievable.

Nonetheless, the viability of blending face-to-face and digital has been questioned in recent years following criticisms levelled at some digital challengers for abandoning human customer service altogether. This practice of taking the human out of the customer service loop has meant that certain technologies, such as in-app messaging and video-calling, have been neglected despite what they can achieve – an enhanced availability of human interaction.

The obstacle: high-risk, high-cost transformation

Despite the obvious need for what is universally referred to as ‘digital transformation’, many building societies are still hesitant, believing their outdated technology to be too insurmountable a roadblock to progress.

It is known that large-scale system overhauls can be prohibitively expensive and risky, especially for institutions that prioritise community service over profit. Without the enormous budgets available to high-street banks, and with outdated systems deeply embedded in their operations, complete rebuilds can seem simply too big to handle.

This cocktail of ambition and hesitancy puts today’s building societies at a crossroads. They know they need to change but worries around the cost, complexity, and risk of making this change inhibits action.

The solution: Banking-Platform-as-a-Service

A new technology category, Banking-Platform-as-a-Service (BPaaS), has emerged as a compelling solution to this conundrum. As well as bringing all the benefits of the latest technologies, BPaaS is delivered as an end-to-end solution, free of the complexities associated with large integration projects or self-builds. These open, configurable, and cloud-ready platforms deliver everything from digital onboarding and mobile apps to core banking functions like loan processing and ledger management.

Essentially acting as a complete Operating System, or “building society in a box”, they enable societies to access all the tools necessary for operations to be modernised and with a typical implementation time of up to 12 months. And all at an affordable cost for even the smaller players.

So, whether it’s automating back-office tasks or offering new digital services to attract younger, more tech-savvy customers, the platforms allow building societies to expand their digital reach without sacrificing their deep-rooted community values.

In short, building societies can finally break free from the constraints of their legacy systems. Able to automate routine tasks, employees are freed to focus on developing personal relationships with customers – a service that has always set building societies apart. Rather than replacing the human interaction that distinguishes building societies from other financial institutions, the platforms enhance it.

Today’s BPaaS solutions aren’t just about improving building society propositions for today’s members either. Created with the flexibility to evolve in line with customer expectations, services can be shaped accordingly, ensuring that societies can continue to innovate without slipping back into the legacy trap of outdated systems.

Empowering tradition in a digital world

By democratising access to advanced banking technologies, BPaaS can empower building societies of all sizes to stand shoulder to shoulder with traditional high-street banks, levelling the playing field in a way that was previously unthinkable.

Yet, it’s vital that building society leaders recognise that this is not about abandoning their tradition; it’s about adapting that tradition so it can meet the vagaries of an era that is evermore steeped in the digital. With the ability to innovate at speed, reduce operational costs, and meet customers where they are – online – building societies can leverage the freedom to invest more in the personal relationships that have seen them persist for 250 years.

Ultimately, the real question isn’t just whether building societies can afford to embrace BPaaS technology, but what future they risk missing out on if they don’t. The opportunity for them to offer seamless digital experiences, attract a broader customer base, and compete in a tech-powered financial sector is within reach. But it requires action. Adopting the right technology today will allow building societies to move to a place where their community-focused values are more deeply entrenched and their status as serious, high-innovation players in the financial ecosystem is secured.