Building societies poised to grab banking share in the UK

Building societies poised to grab banking share

KPMG in the UK building societies must adapt their models for consumers seeking non-bank alternatives.

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Shifting Consumer Demand

By Michael Atack, Tom Brady and Jon Measures, KPMG in the UK.

Polarize their customer propositions, use social media to increase member loyalty, and build multi-channel offerings. Those are suggestions offered by management consultants from KPMG’s Financial Services practice in the paper Personal Perspectives, Opportunities for the building society sector.

The report authors note that, post UK banking crisis, British consumers have shown increased interest in building societies, financial institutions set up as mutual organizations that receive deposits and lend to members .

According to Tom Brady, building societies may need to polarize or perish, due to shifting consumer preferences and agile new competitors. Brady acknowledges that building societies avoided the public wrath inflicted on high street banks by the global financial crisis. However, building societies may also have failed to seize ripe opportunities resulting from the crisis. By sticking to their traditional approach, building societies missed out on the chance to woo disgruntled bank customers.

Brady observes that building societies may need to adapt their offerings to the next generation of consumers who are turning their backs on branches and borrowing. He suggests that, in a competitive market, building societies should more clearly define their customer propositions, possibly choosing among the polarized options of low price or premium service. “Taking the middle ground and trying to retain one’s traditional customer base, may be a difficult space to operate and sustain a business,” sums up Brady.

Jon Measures expands on building societies’ competitive advantage, derived from their uncomplicated business model, ethical focus and democratic management style.  However, Measures notes that, by failing to communicate their distinctive benefits and effectively engage with customers, they may lose market share to new marketing-savvy competitors.

While social media could encourage unintended activism by new members, Measures predicts that first mover societies that market themselves as ‘social bankers,’ and engage their members real-time through technology, can build highly profitable consumer relationships.

Michael Atack shares the view that building societies are well-positioned to attract disenchanted bank clients. The caveat: they must fundamentally reshape their sales and service models for today’s demanding consumer, especially in terms of digital offerings that complement building societies’ branch network.

Atack cautions that building societies must find ways to provide integrated channel choices for customers. To do so, they should set out strategies to provide long term value, based on a sophisticated understanding of channel profitability and performance, to ensure both return on investment and to preserve customer satisfaction.

A bright future awaits those building societies that can build upon their natural advantages, while weaving in innovative branding, customer segmentation and digital technology.

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