Have UK Financial Institutions’ Investments Into the Digital World Provided Returns?


Digitisation in banks was a process that began some time ago but was rapidly increased as a result of the pandemic. Bank’s physical branches have been steadily declining for years, as more and more adopted digital features. However, following the pandemic, digital channels for banks and building societies alike are no longer a ‘nice-to-have’ – they are an essential ‘must-have’ that should not be ignored.

We all know that technology has enabled people to increasingly conduct their financial affairs online, be it through apps on their smartphones or tablets, or simply using a personal computer to “log on”. The days of braving a windswept high street to open a current account or having to write yourself a cheque to transfer money between accounts have long gone.

Indeed, a survey by finder.com reveals over a quarter (27%) of British adults have opened an account with a digital-only bank, equating to 14 million people (2021). This is an increase of three times compared to just January 2019 (9%). By the end 2021, 38% of the UK will have or intend to have a digital-only bank – almost 20 million people.

We all know the big banking names on the UK high street have invested heavily in digital channels over the past few years, which has enabled people to continue managing their finances despite branch closures.

However, what about that other great stalwart of the UK banking scene, the traditional building society? Is there a correlation between their digital maturity and recent financial performance? Have those building societies that have invested in digital platforms fared better overall than those which, for whatever reason, still rely on face-to-face transactions?

Positive digital returns

The overwhelming evidence points to the assertion that those smaller, regional providers that had foreseen this online revolution have fared better than those that continued to rely on customers visiting their branches.

The 160-year-old Dudley Building Society presents a useful case-study here. It has recently introduced brand new online services to help its members manage their savings and mortgage accounts. This includes functionality around online applications and account management, and personalised features such as savings goals and budget planning.

Dudley Building Society has confirmed that in the period of 13 weeks since launching the new digital offering, almost 600 new accounts were opened through the platform. Previously, members would have had to visit a branch to open an account. By comparison, just 19 of the more traditional passbook accounts were opened in-branch in the same period, even though both methods – online and passbook – were launched with the same savings rate.

Dudley Building Society also confirmed that 5% of existing members registered and started using the new online service. These results were all achieved while minimal advertising was done while the new channels were being bedded-in

Dudley Building Society has also confirmed that it has experienced a 1.2% increase in new users since launch, attracting new members across various demographics and UK regions. Previously, account holders tended to be in the same geographical coverage area as the branch network due to a need to physically visit a branch to manage their accounts.

Another interesting result from the introduction of new digital functionality is that many of the new members have been aged between 60-74 years old proving that e-platforms are certainly not out of reach for more mature savers.

Negative digital returns

It is a far different story for those building societies with a low digital maturity.

Without singling out specific names, statistics in the latest Building Society Association (BSA) handbook reveal it is those with a low digital maturity that are seeing a low increase in assets. Some are even reporting an overall decrease. Of course, various factors could be at play. We certainly do not know all the reasons behind fluctuating balance-sheets, and there could be a whole host of reasons behind the scenes. However, on the face of it, the figures do show a direct pattern linking those with a good digital offering to much more robust financial figures.

Of course, let us not get too carried away. The shift to complete digital banking for all consumers will take time and it will not be wholesale. There will always be a significant number of people who will want to visit a branch – but implementing a digital capability should increasingly be a vital complimentary service at the very least for the UK’s building societies.

It is also worth pointing out here that Chancellor Rishi Sunak has also emphasised the importance of UK businesses embracing digital channels, with the ‘Help to Grow’ scheme announced in the Budget that will offer discounts on software to smaller businesses.

While covid has undoubtedly had a major impact, it has only accelerated a major digital shift that was already well underway beforehand. Digital channels for banks and building societies alike are no longer a ‘nice-to-have’ – they are an essential ‘must-have’ that should not be ignored, even as we begin the move into a post-pandemic life.