BSA associates give their views on current and upcoming digital trends.  First published in the spring edition of Society Matters magazine.
 

Across financial services firms are facing a third phase of digital transformation

The first phase was the introduction of digital channels, providing members online access to services and products. The second wave has been digitisation, front to back, improving the speed and efficiency of service delivery, with many societies still working to realise the benefits from this phase.

Leading players are, however, now looking to a new set of opportunities - those enabled by a third ‘ecosystem’ phase of digital transformation. This phase is being driven by several factors including the creation of standardised interfaces (APIs) through which firms can combine capabilities, the agility enabled by the move to cloud-based flexible consumption (or -as-a-service) models, and the scale of new services available from the Fintech sector.

This ecosystem approach can improve individual services, such as an instant account opening experience that utilises biometric identification and open banking services from 3^rd party Fintechs. However, it also enables new business models, such as, marketplace offerings with members able to access a range of other 3^rd party products and services, or banking-as-a-service models where non-banking partners can utilise a Societies’ capabilities and banking licence to deliver embedded finance propositions (for example, house builders offering mortgages and insurance seamlessly as part of the purchase of a home).

Capturing these opportunities requires the adoption not just of new technology, but also consideration of new partnering strategies, revenue models, and risk frameworks. However, with continued cost pressures and increasing competition from both incumbents and neo-banks, Societies should now be looking at how they capture the ‘ecosystem’ opportunity.

Next steps: To explore further contact: william.stevns@pwc.com or alex.c.price@pwc.com
 

Navigating the next decade of human-centred digital transformation

Digital transformation has accelerated amid the pandemic. Much of this transformation is more human-centred and markedly different from what’s come before. Three fundamentals have emerged:

1. New ways of working: the almost overnight, global adoption of virtual working with the pandemic has led to increased remote working, now settling into a new hybrid ‘normal’.
2. Accelerated consumer adoption: consumers are increasingly adopting digital and virtual channels for everyday banking and are becoming more comfortable making complex financial decisions through them.
3. Sustainable impact imperative: climate change is forcing every organisation to become more purpose-led and long-term sustainable.

In the customer research that EY Seren conducts, we have found that building societies continue to make meaningful consumer connections at big life event financial moments – like taking out a mortgage - but are slow when it comes to engagement in everyday financial products. Furthermore, since most building societies don’t offer a current account, there is a limit to the frequency and opportunity, to engage members digitally.

Transactional financial data can be easily accessed through available application programming interfaces (APIs), to aggregate spending, saving, and planning behaviour, allowing customers, and their families, to achieve goals across their financial lives.

Building societies can create solutions to:

• help facilitate intergenerational lending for first time home buyers
• encourage members to re-build savings depleted during the lockdown
• support the financial security of vulnerable family members

Financial wellbeing is a profitable differentiator if societies set the right ambition now and use technologies to create high-impact, focused digital member engagement.

Next steps: Contact Peter Neufeld at pneufeld@uk.ey.com for a human-centred digital transformation deep dive.
 

Coming soon, the neo building society?

The pandemic has accelerated forces which were already converging to profoundly change the Financial Services (FS) industry. The emergence of open banking, Banking-as-a-Service, democratisation of data access, the spectre of Big Tech, and FinTech, are combining to re-organise the value chain.  

What does this mean for building societies? The sector has a new version of a familiar challenge. To differentiate itself from both established players and new digitally native challengers while also appealing to the next generation of consumers, who are behaving very differently to their predecessors. 

Our in-house research suggests that what building societies stand for, resonates strongly with younger generations. Gen Z are leading the charge in seeking change in the world with their strong values and beliefs. However, as digital natives they struggled to identify with some aspects of the world created by previous generations. So, they are shaping a new world where online and offline are one and the same.

So it’s time to engage in different ways and show up on new platforms. The currency is engagement and this is earned through truly understanding and addressing each customer’s underlying needs.

It’s time for a new kind of digital challenger, the neo building society.

The neo building society will be assembled, not built; leveraging new technologies such as Deloitte’s Alpha platform, a digital transformation accelerator. New approaches to technology allow us to accelerate the fundamental capabilities required to connect with the FinTechs, and new partner ecosystems required to break through the complexity and cost of legacy, and create a better FS ecosystem.

Next steps: For more information, contact Tom Slade on tslade@deloitte.co.uk.
 

The answer is data – what’s the question?

Much is written about digital transformation but what is the key enabler essential to every digital transformation – data!

Building societies have evolved by stitching disparate monolithic systems together – this has created barriers and silos to the free flow of accurate and consistent data around the organisation. This is a fundamental design flaw if you are seeking to deliver a truly customer centric digitally connected enterprise.

Despite all organisations investing in digital functionality in a post COVID world, most banks and building societies continue to suffer from: poor quality customer data, incomplete single view of their members and lack of real time data across physical and digital channels. This leads to a poor member experience, the inability to deliver personalised service, poor colleague experience and potential regulatory intervention and customer detriment.

In today’s world typically 70% of all ‘digital’ transformation priorities require enhanced data capabilities as a key enabler. Financial Services are eventually waking up to the fact that effective data capabilities are at the heart of effective digital transformation.

For most of our clients today the foundation of a successful digital transformation begins with the development of a real-time events-based data spine that can integrate customer and operational data into a single source of the truth. This allows them to use comment ata APIs to break down silos and provides a platform to introduce new powerful data analytics tools that can support real time decisioning, journey orchestration, personalised offers (based on life events) and effective identification of next best actions across digital and human assisted channels.

Next Steps: For more information about how KPMG can support you on your digital transformation journey contact Hugh – hugh.oreilly@kpmg.co.uk

The views, opinions and positions expressed within guest blogs are those of the authors and do not necessarily represent those of the BSA.