Big banks adopted savings goals, among other digital services, to attract digital-savvy customers. Perhaps building societies have the tools to do it even better for members.
Savings goals are fun. I remember not having them, so the novelty may take some time to wear off. My current goals are Christmas and moving house, and it appears the latter is something I have in common with the rest of the planet. According to NatWest, saving for a home is the UK’s top goal, followed by rainy days, cars and weddings.
Mobile-first banks and financial apps achieved a toehold by offering services to help us manage our money better. Before they came along, the best we could hope for was access to our bank statements (and sometimes that was a challenge). Starling Bank and Monzo set the pace from the get-go, and the bigger banks have since caught up with what people want by offering their own budget-tracking tools and dashboards. Features such as savings goals can now be seen in apps by the likes of Barclays, NatWest and RBS. And if your bank isn’t able to accommodate savings goals, you can use third-party savings apps such as Chip to do the grunt work on their behalf.
Yet, in the race to stay relevant, innovative and useful, have building societies struggled to keep up with the change of pace?
The benefits of being a building society
The answer is no. While it’s true that building societies often lack the financial heft of the big banks, they have other advantages in their favour. “David has to beat Goliath by using different weapons,” said a football manager recently. That this particular quote came from a manager whose team eventually lost the game is besides the point. It’s a good point. Building societies have to be different from banks, but innovation for the sake of innovation isn’t the right way to approach a digital transformation.
Where building societies are succeeding is in capitalising on their size, their localness and their understanding of members. Knowledge of the customer is all-important, especially at a local level. (This is something we’ll write more about in a client case study we’re preparing.)
By being relatively small, it has been easier for building societies to work with software developers. Digital transformation needs buy-in from stakeholders and the many chiefs that sign the dotted line. The smaller your business ops, the more nimble you are, and the easier it is to implement innovation without drawing the whole process out. Larger banks often find it hard to work with smaller developers because their infrastructure is cumbersome. Bank of Ireland only recently rolled out Apple Pay for its customers, three years after Apple Pay was launched. And let’s see if Caixa’s and Bankia’s post-merger digital transformation succeeds now that they will become a Spanish big bank.
And when it comes to banks knowing their customers, user testing is a drawn-out process where oftentimes it’s too late to change anything! Customer services become overwhelmed with calls, time and money is lost, and the project is abandoned. Building societies can work with agile developers who scrum and iterate regularly, making the transformation process smoother and more fruitful.
Building societies also benefit from learning from big banks’ mistakes, such as not having business analysts in the development scrum team. The BA is the bridge that connects complex software ideas and client outcomes, without which leads to scope creep, budget overrun and (again) project abandonment.
Using technology to enhance customer relationships
And back to savings goals, which is something we know a little bit about. First, they’re effective. Fintech commentator Chris Skinner said: “People who set a savings goal are aiming to save £7,000 over the next 12 months, with those who set a goal saving double compared to those without a goal.” He got these statistics from a NatWest Savings Index report, evidence itself that big banks aren’t sleeping on the job.
Savings goals are also a link between the customer and the financial institution they entrust with their money. Simply adding a savings goal function to a fancy app could be an opportunity missed, and that opportunity is to better engage with the customer. Think of it as another line of communication. Think of it as another line of communication, as well as a bellwether for enabling consumers to take responsibility for their finances (particularly the financially vulnerable). Setting up a savings goal is straightforward, but being helped to save is a different proposition. This is where a building society can play to its strengths and help members meet their savings goals regularly.
They do this by having a range of savings options on offer, then taking advantage of what they already know about that member. For instance, knowing they recently moved house (because of their mortgage plan) helps you follow this up with nudges to save for furniture, energy bills, house modifications, and so on. In other words, why stop at the mortgage? The building society app should act as a two-way communications device that helps deliver sound financial advice, expert financial planning and a personal relationship that big banks don’t generally enjoy.
This is a great time for building societies. Members (particularly tech-savvy younger members) want to be able to save more, but they also want to save better and more efficiently. In these challenging times more than ever, it could be building societies that offer the right balance of financial guidance, technology and customer relations that makes the difference going forward.
Photo by Emily Finch