One of the most important parts of the financial services industry is the community building sector. Their mutual model of serving the interests of members and communities – for over a hundred years in most cases – must be commended.
Building societies have carved out a niche in their local and regional communities in recent years and demonstrated innovation in mortgage and savings products. However, given the pace of technology, it can be difficult to keep up with change. Therefore, in order to remain relevant and competitive, contemporary systems are key to meeting the growing expectations of their members and servicing their assets efficiently.
Financial services are at a crossroads as digital transformation continues to accelerate, and challenger banks and specialty lenders work to grow their customer base and market share. Many young people are finding fintech a more attractive option, using apps in their banking, savings and, increasingly, in their mortgage journeys. So, how can building societies appeal to the younger market?
Heritage systems
One way to attract new and existing members, especially the younger, more tech-savvy demographic, is to have great technology and channels of choice. Today's TikTok generation buys goods and self-services with a few clicks, and they expect to be able to do the same through their bank or community building.
Financial services providers want to make the customer experience seamless and efficient, but many building societies are still running on legacy systems. Adding new layers of technology to these legacy systems may be good for a while, but it's not a viable long-term solution. It still relies on manual interventions and slows down cumbersome, time-consuming, and ultimately not cost-effective processes.
There are many barriers facing legacy systems such as the inability to facilitate application programming interface (API) integration, which limits the ability to share data and ease of collaboration with other technologies. This is vital in today's financial world, and is a must for those who build communities and want to innovate and compete.
Going forward, it may be beneficial to enter into partnerships that can provide a range of additional services that enhance the value proposition, and many building societies are following this route.
Digital transformation
Investing in technology for digital transformation is the only way to keep up with competitors, especially challenger banks – sometimes referred to as neobanks – that now regularly compete for market share in the community building space.
However, many communities are now actively embracing the concept of becoming a “modern mutual” business, seamlessly combining traditional branch-based member services with the integration of new digital channels all delivered via the cloud. Previously perceived barriers around the risks and costs involved are now better understood through the building of community boards, while the transformation journey itself is now more mature, efficient and robust.
specialty
Given the building communities' core business of mortgages and savings, many still use a single technology provider to cover the entire customer journey from start to finish, from application to completion to close. But one provider for everything is no longer the norm, and finding the “best providers” in different regions can be a much better approach. If done correctly, it can still be a smooth and comprehensive process, whether it's for mortgages, savings or banking. Some technology companies are good at providing origination software, others excel at servicing, and a lender/deposit taker can use two companies for these completely separate parts of the mortgage and savings process.
For example, Phoebus is a service company that takes care of the back office, servicing mortgages and savings using the latest technology, but this can integrate seamlessly with mortgage origination. So, once a mortgage application is completed on origination software, a platform like Phoebus can take over the ongoing servicing of your mortgage or savings account.
Costs
While technology is a critical investment for the future of any business, the costs involved can be seen as prohibitive, especially for some small building communities.
One way around this is to take a strategic approach where a small group of building associations come together in a collective federation. They can then share the cost of maintaining and updating the software, which will reduce individual costs while allowing each community to continue operating separately.
Immigration
Many lenders are concerned about migrating mortgages or savings books to a new service. It's a complex process and that's 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 community building sector and choosing the right strategic partners moving forward has never been more important. What is crucial is to have technology partners who understand the market and challenges. But whatever technology companies you use, navigating your journey also means having the right people, with the right experience, who can ensure the right results.
There are so many specialties and nuances in today's complex financial market that using the right company for the various elements of your business is vital, and having a one-stop shop is not necessarily the ideal choice.
Adam Oldfield is Chief Revenue Officer at Phoebus
