More than half of building societies see open banking as an opportunity

More than half (55%) of building societies view open banking as an opportunity, according to a report published by Whitecap Consulting in partnership with the Building Societies Association (BSA).

More than a third have not yet assessed open banking’s benefits for their business, but only 10% view it as a potential threat.

Open finance data, intelligence and payments platform Moneyhub, which contributed to the report, has called for building societies to capitalise on the opportunities surrounding open banking.

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According to the senior leaders interviewed as part of the report, digital transformation is the primary challenge for the sector over the next five years, while the need to remain relevant to customers and improve engagement was also a key priority going forward.

Among building societies, 79% said that open banking would enhance the mortgage underwriting process, 76% said it would improve customer data connectivity and 71% that it would improve operational efficiencies.

The research also found that 93% of building societies said mutuality affects their decision-making; 66% said mutuality is about culture, values and social purpose, and 71% consider the branch network to be a critical part of regionality.

The majority (90%) of building societies consider community involvement a commitment to regionality, 67% identify digital transformation as the primary challenge over the next five years and 65% all stakeholders surveyed believe open banking to be an opportunity for the sector.

Robin Fieth, chief executive of the BSA, said: “Society is rapidly transitioning from an era of big hard-wired mainframes and decades of different programmes to one of cloud-based services connected via APIs, data science and intelligent automation.

“Building societies are already making use of robotics, chatbots, cloud-based solutions, API connectivity, mobile apps, digital IDs and Open Banking.

“At the same time, they are remaining present in their communities reimagining the purpose of the branch using design and technology to turn them into spaces for engagement and support within their communities.

“Where building societies go next, as this report makes abundantly clear, will give a range of answers based on individual strategies, but will be fundamentally driven by mutuality, or social purpose as it is more commonly called today.”

Julian Wells, director of Whitecap Consulting, added: “It’s an exciting time for financial services as we continue to move towards a more digital economy, and our report highlights numerous areas of opportunity for building societies based on the combination of their mutual status, regional strength, and the potential role technology can play in their future.

“Open banking and open finance are fascinating developments for the sector to consider as there is the potential to enhance the customer experience while also improving the underlying efficiency of individual building societies.

“Additionally, this could be an area where non-competitive collaboration within the sector may be possible, due to the common technology and data requirements.”