Closing the digital divide: the key to building society growth

Balancing tradition with modern demands

For over a century, building societies have been integral to the UK’s financial ecosystem. Their commitment to reinvesting profits for the benefit of members has established them as pioneers in customer experience. However, while the ethos remains strong, legacy technology, shifting member expectations, and increasing competition threaten their ability to grow. 

The question is no longer if building societies should modernize, but how quickly they can adapt while preserving their identity.

Six key challenges holding building societies back

Building societies face mounting challenges that threaten their ability to maintain relevance in a rapidly evolving financial landscape. Many of these  factors are creating significant barriers to growth and innovation.

• Modernization vs heritage: Despite building society's reputation for trust and stability, heritage can also create resistance to change. Many societies still rely on outdated legacy systems that are costly to maintain, and lack the ability to launch new products quickly or scale services nationally. Historically, many societies built proprietary in-house systems. But maintaining and innovating on these systems is costly, especially for mid-sized institutions.
• Outdated systems and legacy limitations: Many societies rely on aging technology and traditional vendors that cannot support the agility and innovation needed for future growth. This limits their ability to launch new products quickly or scale services nationally.
• Low-frequency products and cross-sell limitations: Savings and mortgage products are high-value but low-frequency transactions, making continuous engagement with members challenging. Societies need to create more touchpoints to maintain relevance and deepen member relationships without straying from their core mission.
• Balancing digital and physical touchpoints: Many societies remain committed to branch networks but recognize the need to integrate digital solutions. This hybrid experience should be as much a benefit for members as for employees. Finding the right balance of digital enhancing, rather than replacing, human interaction is key to reducing friction without losing the personal touch.
• Increased competition: Competition has increased due to fintechs and challenger banks with larger budgets, national reach, and the ability to launch new features and services faster. Building societies risk losing their market share if they fail to adapt to the changing times, which can be hard with legacy technology holding them back.

• Changing regulatory landscape: Frequent changes in mortgage and savings regulations require societies to have agile and adaptable banking systems. Without a strong digital foundation, compliance efforts become a costly and time-consuming challenge.

   

Turning challenges into opportunities

While these challenges are significant, they also present a unique opportunity for building societies to reassert their position in the market. 

The same factors that constrain societies today—legacy systems, changing expectations, and heightened competition—can also be catalysts for innovation and growth if addressed with the right strategies.

Modernization allows building societies to not only meet the demands of a changing market but to surpass them by recreating the unique member experiences that set them apart 100 years ago. Digital transformation doesn’t mean abandoning their values; instead, it’s an opportunity to reinforce and amplify them through scalable, member-focused solutions. 

Here’s how:

• Empowering employees and enhancing member experiences: By adopting AI-driven technologies, societies can provide hyper-personalized financial recommendations and streamline repetitive tasks, freeing employees to focus on high-value member interactions. This not only improves service quality but also reinforces the personalized touch that members value. According to industry insights, banks leveraging AI have seen significant improvements in customer satisfaction and operational efficiency.
• Reducing costs and increasing agility: Implementing composable, modular architectures allows societies to reduce technical debt, improve operational efficiency, and launch new services faster. This approach has proven to reduce time to market by up to 80%. By modernizing their tech stack progressively, societies can adapt quickly to market changes without massive upfront investments.
• Scaling with digital branches: Mobile apps can function as always-open, region-free digital branches, extending societies' reach beyond regional confines to attract and retain members across the UK. This national presence doesn't dilute their community focus but rather brings their personalized service to a broader audience.
• Differentiating through personalization: Leveraging data-driven insights, societies can create tailored experiences, improving member engagement and loyalty. Banks with strong personalization capabilities have achieved up to 30% higher revenue growth than competitors​. Personalization helps societies stand out in a crowded market by offering services that resonate with individual member needs.

• Future-proofing through strategic partnerships: Working with innovative vendors rather than traditional providers ensures access to cutting-edge tools and the ability to scale offerings in line with member needs and market trends. Strategic partnerships allow societies with lean development teams to own more of the front-end experience through a "buy and build" approach. This method combines out-of-the-box solutions with custom-built components, giving societies control over their digital interfaces without the need for extensive in-house development resources.

   

Why the right partnerships matter

Historically, self-building digital solutions hasn’t been feasible for building societies due to limited resources and expertise. Instead, they've relied on legacy vendors that now struggle to keep pace with future needs.

A growing number of societies are shifting from “build” to “buy” to accelerate modernization. A plug-and-play engagement banking platform allows them to deploy best-in-class solutions without the burden of ongoing maintenance. However, a “buy plus build” approach  is even better.

 To thrive, societies must seek partnerships with forward-thinking technology providers that prioritize flexibility, scalability, and member-centric design.

• Leveraging the "buy and build" approach: This strategy allows societies to rapidly deploy standard capabilities through purchased solutions while customizing key aspects of the member experience. By owning more of the front-end, societies can ensure that their digital channels reflect their unique brand values and meet specific member expectations.  Read more about this hybrid approach in our buy plus build guide.
• Maximizing limited resources: For societies with lean development teams, strategic partnerships provide access to advanced technologies and expertise without the overhead of building everything in-house. This collaboration enables them to innovate quickly and efficiently.
• Staying competitive: Partnering with the right technology provider helps societies keep pace with industry trends, regulatory changes, and emerging threats from competitors. It positions them to offer modern digital experiences while maintaining the personalized service that sets them apart.

This strategy ensures building societies retain the flexibility to innovate at their own pace while meeting the expectations of modern members.

Its time to modernize

Modernization is not about abandoning the principles that make building societies unique—it's about preserving and amplifying them. By embracing digital tools that complement their traditional values, societies can ensure they remain trusted and relevant in an increasingly competitive market.

The time to act is now. Building societies must recognize that digital transformation is essential to meeting member expectations and securing their future. By turning challenges into opportunities and choosing the right partnerships, they can navigate the digital landscape confidently and continue to serve their communities effectively.

Ready to explore how modernization can empower your society to meet future challenges while staying true to your mission? Learn more about our digital platform capabilities for Building Societies