The Government’s commitment to doubling the size of the mutual sector has been welcomed across financial services. Building societies continue to play a critical role in promoting competition and driving good customer outcomes for both borrowers and savers.
This is all against a backdrop of delivering genuine value to its members and the communities it serves, instead of shareholder returns.
The ambition was first outlined in 2024 as part of Labour’s election manifesto and has since been reinforced by recent policy signals.
All the above recognises that the sector doesn’t just bring a social value, but a significant economic value too. Translating that ambition into reality requires more than kind words of encouragement, but a clear strategy focused on operational transformation – one that gives mutuals the capabilities they need to not just make up the numbers, but to scale and actively compete with the mainstream institutions and tech-centred challenger banks.
CHANGING EXPECTATIONS
A recent year-long review into the sector revealed the barriers. Some mutuals struggled to scale up, invest in new technology and compete with the pace of change seen in private corporations.
For many, these won’t be revelations, but they are particularly profound – especially as customer expectations continue to change and members increasingly expect the digital convenience and tech-enabled experiences they see in other walks of life.
The opportunity is there and importantly; I believe the ambition among mutuals is too. They want to be delivering these experiences and growing customer relationships – but it often comes down to the baggage of legacy systems and a lack of expertise, resources or in-house capability to make that transformation happen.
OPERATIONAL EFFICIENCY
The opportunity lies in operational efficiency which will enable building societies to double down on what brings them to the dance: high-quality service, deep member relationships and the driving principle of mutuality.
That route should inevitably start by acquiring new members through digital saving propositions. Digital channels enable mutuals to expand beyond their typical geographical areas and attract a broader and younger group of savers to strengthen their funding base.
“Mutuals need to look at how to deliver this in a way that is scalable and sustainable.”
Rather than building this into a legacy infrastructure though, mutuals need to look at how to deliver this in a way that is scalable and sustainable.
Across the board, we must rethink how services are delivered and move away from complex and resource-heavy processes that have been ‘Frankensteined’ over many years and continue to plague societies and its staff.
This includes the digitising and streamlining of key administrative tasks and back-end duties to simplify both the colleague and customer journey. In doing so, we can release both capital and capacity.
SUPPORTING MEMBERS
Rather than reducing the personal service, we can divert it to where it delivers the most value – supporting members. As high street institutions continue to move away from the high street, the branch network of buildings societies becomes a competitive advantage.
While members want mutuals to be tech-savvy, they still value that face-to-face interaction – especially for important matters like mortgages or savings. Building societies can offer this hybrid model, so long as it’s delivered in an efficient and scalable way.
To remain competitive against established institutions and ever-advancing challengers, building societies must identify ways to speed up innovation and respond more rapidly to changing market demands.
The path taken by many firms – including building societies – is to outsource to an external partner to gain access to not just greater knowledge and capabilities, but the technology and operational scale that would be difficult or uneconomical to achieve on their own.
SCALE AT SPEED
Leveraging the deep domain expertise and capabilities of a specialist partner will enable firms to modernise more quickly and respond to both regulatory and consumer demand with greater confidence.
For mutuals looking to realise the government’s ambitions, this model offers the opportunity to really scale at speed and turn aspiration into achievement.
The role of building societies in today’s mortgage market cannot be understated – particularly when it comes to creating first-time buyers.
SUSTAINABLE GROWTH
This alone epitomises the very ethos of the mutual model. To expand this further and to achieve the Government’s pledge, we need to focus on practical transformation that enables sustainable growth.
With the right approach to operational efficiency, mutuals can scale confidently and at speed, prioritise innovation and extend their reach, all while staying true to the guiding principles of mutuality.
In the true spirit of mutuality, this too can be achieved through partnership – mutuals working with trusted outsourcers and delivery partners to access the capability, technology and operational scale to modernise and deliver lasting value to both current and future members.
