“How do we face into the challenges that UK building societies and credit unions will have to deal with in the coming weeks, months and years? In a sense it’s the ultimate stewardship question. We are clear that the responsibility of mutual boards and executive teams is to pass their businesses on to future generations in a better state than they inherited them.”
So wrote Robin Fieth, chief executive of the Building Societies’ Association, earlier this month in the winter edition of the trade body’s Society Matters magazine.
He also noted: “Mutuals are purpose driven businesses meeting the needs of their members and communities now and into the future.”
Robin’s words struck a chord with me when I read his recent blog online. Building societies are often disregarded as sleepy, branch-based niche financial services providers.
Want whizzy tech and online banking? Go for one of the new generation fluoro banks with an app and an advert on the side of a London bus.
If you want to put your savings into a safe place and be able to visit your local branch, then perhaps the local building society is more for you.
When it comes to running a lender, think millennial with a checked shirt and beard for app-based offerings and traditional branch manager with an office and navy blue suit.
That has been the perception for years and, honestly, it probably hasn’t been too far off for most regional societies in the past.
But we have been encouraged by how willing the mutual sector has been to embrace change – and specifically how clued up mutual leaders are when it comes to keeping their services fit for the future.
Investing in new technology is a big commitment and one that inevitably presents boards with the question of risk.
Historically, systems transformation has been cumbersome, expensive and the results less than perfect.
By the time the fancy new process management system is in place, the world has moved on and a whole load of its functionality is pointless.
That doesn’t have to be the way it is. We’re no longer in an era where IT is the preserve of the proverbial “crowd”, bespectacled and squirreled away in a windowless basement.
Technology is arguably the most essential element boards must consider in running a business today.
Data security, customer privacy, competitive resilience, service standards, speed and agility, adaptability, compliance, efficiency and ultimately survival – technology is the backbone of getting all these factors.
As was driven home with a shocking force in the aftermath of former Chancellor Kwasi Kwarteng’s failed mini-Budget last September, the ability to react with speed is now absolutely vital.
There is the question of product, appropriate pricing, customer servicing and all lenders need to be agile to stay competitive and lending.
But there is also, now, the flipside to competition which rears its head when markets dip.
As has been increasingly apparent over the past six months, first-time buyers are still hoping for a mortgage and homeowners need to remortgage, many with the aid of a further advance.
Repricing regularly becomes a necessity not just to protect market share but also to avoid inundation when another lender withdraws.
It’s still a huge problem for lenders wanting to maintain lending volumes at a steady flow and therefore pricing to sit in the top five or six best buy positions.
Not only does it cause chaos for underwriting and sales departments, it has a very negative impact on customer service standards and can be hugely damaging to lenders’ relationships with brokers.
It’s in no-one’s interests to waste time and money confused about what products are available and what criteria applies.
Enquiries from existing customers are also ramping up as the impact of higher bills and higher mortgage rates takes its toll.
That’s putting enormous pressure on servicing teams and the regulator has a close eye on how lenders are coping now, and arguably more importantly, how they are planning to support customers who cannot afford to repay each month.
New tech has always been the preserve of new lenders but increasingly the visionaries here are the building societies who are modernising and going beyond a lift and shift approach.
Instead, they are taking advantage of the scalability and robustness of new IT business models.
The astonishing investment in technology development we have seen since is evidence that momentum to deliver that change has not abated.
We see Societies looking at new tech and a few are starting to move and invest – but it is still early days and most are still weighing up the risk before finally biting the bullet and starting to move away from their legacy stronghold.
Jerry Mulle is UK managing director at Ohpen
