First published in Society Matter magazine, by Alpa Shah, Associate Director, Financial Services, Ipsos MORI

The customer base for building societies is concentrated among those aged over 45, as younger customers drift away from their building society relationships because their lives and financial needs become more complex, or perhaps they don’t consider building societies at all, if their first ever savings account was set up at a bank. Research available from Ipsos MORI conducted for the BSA reveals opportunities for the sector - drawing an ambitious roadmap for long term growth through the acquisition and retention of younger customers.

Source: Ipsos MORI Financial Research Survey (FRS). 35,129 adults with cash savings accounts aged 16+ in Great Britain, interviewed July 2020 to June 2021.

Leverage the building society ethos

Adults aged under 35 tend to view both the banking and building society sectors similarly in terms of expertise, but building societies have the advantage of being viewed as more personable, more community focussed and more ethical than banks, which can be seen as remote and inaccessible.

Given that ethical and environmental considerations are being driven strongly by under 35’s in a period characterised by consumer activism around these issues, this is the perfect time to bring back the meaning to “building a society” which draws on the ethos of what building societies stand for and chimes with the core values of this audience.

Break down the barriers – product range and digital access

Under 35’s can be sceptical about the ability of building societies to meet all of their banking needs in a way that fits with their lives. Our research shows key concerns surround product range and accessibility: “Can a building society offer me a current account?” “Will they provide competitive products?” “Can I bank via mobile app seamlessly in conjunction with a range of other channels?”

Although not a selling point on its own, this last point is a crucial one for the sector – young customers are more likely to be comfortable using mobile apps and the success of FinTechs like Moneybox, Monzo and Starling reflects the appeal of superior banking apps that can assist with money management through budgeting tools and savings pots. While some of these firms have yet to turn a profit, it is the customer experience and frictionless ability to transact on accounts that proves appealing. While the set-up costs of apps like these may be prohibitive, it’s something worth considering.

Be a reassuring presence – the branch network and targeted guidance

Under 35’s value advice and guidance, especially for complex financial products like mortgages, often consulting a wide range of sources before making a product choice.  They are likely to use price comparison sites, read product review websites, access relevant TV and radio programming and they are also influenced by friends and family, and parental choices.  That said, from Ipsos MORI FRS data, talking to someone in branch is also of critical importance, and this is where building societies have a natural advantage over the FinTech sector.

With the UK’s departure from the EU, the FCA, Bank of England and the Treasury are joining industry calls for less stringent UK-based principles around advice and guidance, meaning that guidance services could become more prevalent in the UK in the years to come. Increasingly, financial services providers are competing with unregulated sources of information targeted towards young adults including Tik Tok, online adverts, social influencers on social media. 

To reach younger adults, the building society sector needs to ensure that it capitalises at key life-stage events, such as taking out a mortgage or opening a savings account and not solely through the branch relationships but looking more broadly at other channels to promote the messages that resonate.

Increase relevance of values – reframe mutual status as ‘community’

Our research for the BSA shows under 35’s generally don’t understand the concept of mutual status, so talking to them in a language they understand and can relate to their own personal values is vital in leveraging the longstanding sustainability, community and social interest aspects of the building society sector.

For example, young consumers want to hear about the tangible impact of building societies’ community and sustainability initiatives, and, as many find it hard to think about broad nationwide initiatives, hearing about local initiatives will resonate more strongly.

Again, looking at the FinTechs there are some valuable lessons on generating a community feel in a digital world: they have achieved this through co creation, blogs, tweets using informal language, and community forums. Some building societies are already active online but maintaining this, finding sites that younger consumer use and finding digital ways to “talk” to them will aid engagement and longevity of active relationships.

Build your roadmap to overcome the challenges

There is a path to sustained growth through the acquisition and ongoing retention of younger consumers, without alienating existing older customers. But to make it more traversable, the building society sector needs to leverage its existing assets in highly visible and sustained, yet cost efficient campaigns, through channels that are relevant to the audience, such as social media.

• Leverage local branch networks, which can help younger consumers feel safe in case an issue needs resolving, for product guidance and for easy access to their money.
• Showcase tangible results and reiterate the values of the building society sector through its local and societal initiatives.
• Combine expertise with approachability, clarity and ethicality.

In conjunction with this, the sector needs to further develop in specific areas.

• Digital capabilities, such as app-based account management facilities are preferred by younger audiences. Specialist banking technology providers like Fidor or Banxy can spread the cost of platform development and provision, enabling the sector to catch up with FinTechs and banks. If a syndicated solution can be devised, in principle, multiple building societies could benefit from one over-arching agreement. If that’s not possible, due to budget constraints, then the use of online budgeting tools and mortgage calculators are a cost-effective way to provide support.
• Reframing and refreshing the product portfolio to make it more relevant to younger customers. Where viable, consider new products, for example a Lifetime ISA or save-to-borrow products.
• Guidance and money mentoring services to help younger customers feel comfortable navigating increasingly complex needs as they grow older. Building these into both branch and digital provision as an easy to access service is essential.

For more information contact Alpa Shah, Associate Director, Financial Services - alpa.shah@ipsos.com

You can access details about the Ipsos MORI Financial Research Survey (FRS) here