By Jerry Young, CEO, ieDigital, a portfolio company of Parabellum Investments which is led by Founder and CEO, Rami Cassis.
In the constantly evolving landscape of financial services, building societies play a unique role.
Unlike banks, which are often highlighted for closing branches, building societies remain steadfastly open along the high street, providing vital personal finance services for an often incredibly loyal customer-base and the wider community at large.
However, many building societies are smaller organisations with traditional legacy systems that can potentially limit their ability to innovate and improve the customer experience. However, this pattern is gradually shifting, thanks to a powerful combination resulting from the traditional, reliable services offered by building societies on one hand, and the cutting-edge systems offered by the cloud on the other.
Indeed, the cloud is offering some incredible opportunities to building societies. Not only does it make it easier than ever to embrace the latest customer service technology, it also enables them to enhance their true speciality even further – that of engaging with their communities.
The Impact of Bank Closures on the Financial Landscape
During the month of June alone, nearly 70 banking branches closed across the UK. As major banks shift their focus to an online and mobile-first operating model, such closures are becoming all too common. However, the true scale of the impact becomes clear when we look at the wider data.
A 2022 report from the House of Commons Library showed that, over a 30 year period, the number of bank branches fell sharply. From 1986 to 2014, branch numbers of bank and building societies in the UK fell by 51%, from 21,643 to 10,565. More recent data from the last ten years shows a further decline of 40%, with total branch numbers falling to just 5,285 in a country of over 67 million people.
For the people that rely on them, branch closures are deeply unpopular, and the effect on small communities, vulnerable people and the elderly is devastating. Yet, they present an opportunity to building societies in the UK. As large bank branches retreat from towns countrywide, building societies have the chance to step in and fill the gap – offering a more personalised, community-focused alternative to the impersonal services of larger banks. By embracing digital transformation like cloud technologies and other solutions, building societies can generate savings and identify a pathway to improved customer experience at the same time.
Legacy Systems and Cloud Technology in Banking
Legacy systems are fast becoming a burden rather than an asset to financial services organisations. Part of the reason why younger, more agile FinTech companies have grown so popular in recent years is because of their ability to iterate and develop customer-centric features with ease using cloud technologies. By contrast, legacy systems are often expensive to maintain, difficult to scale and reliant on outdated licences or niche technical skills that few employees can provide. As a result, building societies face additional barriers to innovation.
However, building societies cannot follow in the footsteps of other financial services organisations and force digital technologies wholesale onto customers. Rather, they must find a balance to deliver on modern customer expectations for seamless interactions without losing the human touch so many look for.
When looking for cloud technology in banking, leaders must focus on solutions to improve core elements of the customer experience. This includes software that provides straight-through processing of customer product applications. Doing so ensures there are minimal delays in collecting new revenues and helps customers reach their financial goals more effectively – a core tenet of the FCA’s new Consumer Duty.
Similarly, cloud technology in banking should enable seamless account access. Cases of identity fraud have reached an all-time high, and the banking sector is a particular target, with losses reaching over £1.2 billion in 2022. So, building societies must be particularly wary of their long-term security posture.
Finally, any cloud solution should also deliver strong customer support. For example, building societies can deploy conversational chatbots that help customers self-service and route them to the most appropriate staff member for follow-up support. This allows customers to find solutions to their problems quickly without losing access to support from a real person if they prefer.
Cloud Technology as an Enabler
Embedding cloud infrastructure across your organisation opens the doors to SaaS solutions that can soothe pain points both internally and customer-facing. On core IT costs, analysis shows that cloud technologies are up to 56% cheaper than on-premises setups. What’s more, similar savings are available by migrating to new cloud-enabled software.
So, by enhancing their online and mobile banking capabilities, building societies can remain competitive against larger financial institutions and develop new services. For instance, you can use in-app data to track how customers navigate your app and identify barriers to effective financial management, onboarding, and product discovery.
Further, by using the savings generated from cloud technologies and harnessing new operational strategies, building societies can maintain their physical branches. As a result, the cloud is a critical enabler to improve their customer experience and expand on what they do best; operating at a local level and delivering community support.
Of course, this opportunity is a direct result of larger chains closing local branches up and down the country. Given this, speed is key – both in adopting cloud technology in banking to improve your core customer service offering and iterating on your customer service quality. Delivering both while still balancing customer needs for human-centred support is essential to maintaining customer satisfaction and, in turn, loyalty.
What does the future hold for building societies?
The future is bright for building societies as there is a unique opportunity to respond to branch closures by offering a local, personal customer experience – something that building societies are known for providing. By combining this strong service with the technological advantages offered by the cloud, an incredibly powerful proposition is the result. Indeed, building societies that harness the best elements of digital transformation through cloud technologies will not only be more able to compete with their counterparts, but also maintain a strong local presence that will create value in the long term.
