27 September 2021
It’s fair to say that building societies are having their full-circle moment.
Looking back at the financial crisis of 2008, we saw some building societies abandon their mutual ethos with goals to compete with larger banks. But as we now know, the goals of obtaining larger stakes in the market and the promise of future profits didn’t work out.
However, this birthed a boom in challenger banks that were readily embraced by millennials, with companies like Monzo and Revolut leading the way, offering personalisation and diversity in banking solutions, where larger banks have failed.
If the 2008 crisis was the catalyst, then COVID-19 was the tipping point. Studies from the Financial Conduct Authority show that the pandemic has had a disproportionate effect on adults aged 18-34 and the self-employed. Last year they found that “financial vulnerability” rose by at least 40% amongst this cohort. Consequentially, young people have had to become keenly aware of where and how they invest their money.
The pandemic also ushered in a more mindful and social change amongst what we now call Generation Z (those born in the late 90’s and mid 00’s). As many banks shut their doors to small-time entrepreneurs, we’ve seen a huge rise in the use of crowdfunding sites like Kickstarter or Indiegogo, and even a boom in ethical investment apps such as Betterment and Ellevest. Young people are not only looking to take back control of their finances from larger banks, but also are looking at ethical and socially responsible ways to invest their money.
In an age where “disruptors” and “innovators” dominate the tech landscape, where do building societies fit in?
Our CEO, Richard Wainwright argues that when “building societies first came into existence – to pool resources to enable members to buy their own property, I cannot imagine a more disruptive business model being developed in the face of the dominance of traditional banks at that time.
Surely this makes building societies the original pioneers, collaborators and visionaries of their time? When it comes to crowdfunding, building societies were pooling funds for mutual benefit 150+ years before internet based crowdfunding platforms such as Kickstarter and Crowdcube were even conceived!”
However, the challenge for building societies lies in technological innovation.
In the past, building societies have gained a reputation as being slower to catch on in regard to digitisation, but they are now well-positioned to appeal to a younger demographic due to their long-standing values and ethos.
Richard further highlights that “Generation Z’s are true digital natives and have never experienced a world without the internet or smartphones. They expect personalisation of relevant digital content from their experience of using technologies such as YouTube, Amazon and Spotify which provide personalised product recommendations as standard.
It is therefore critical that building societies implement comprehensive and responsive omni-channel strategies that embrace real-time social media engagement”.
Now is the time for building societies to tap into Gen Z’s burgeoning hunger for a different and more conscious way of managing money. At Mutual Vision we work closely with our customer base of UK building societies and challenger banks to deliver cutting edge technology that not only streamlines time-worn processes, but also provides the digital solutions needed in order to appeal to this new market of Gen Z customers.