Moneyhub Report: Younger Generations Shun Building Societies Over Digital Shortcomings
April 25, 2024

Building societies could be missing out on attracting a new generation of customers and retaining current ones by failing to accelerate their digital propositions and experiences, according to a new report by Moneyhub.

New research from Moneyhub reveals concerns over app functionality and digital services could be preventing customers from joining building societies. Seventy-three per cent of 18-34 year olds said they look for an easy-to-use app when choosing financial products pointing to a clear customer need for better digital services.

Almost half (47 per cent) of building society customers reported difficulties engaging with their services, with digital experience a frequent pain point for many.

While building societies hold 32 per cent of the market share in the UK across all banking services, this drops to just 24 per cent for the share amongst 18 to 34 year olds. This age group is predominantly interested in financial services providers that can offer the technology to make money management easy and efficient. As such, younger generations are increasingly more likely to turn to the challenger and neobanks for their financial products - this group hold over a quarter of market share among 18 to 34 year olds compared to 16 per cent overall.

According to the research, three quarters of 18 to 34 year olds said they look for an easy-to-use app when choosing financial products compared to 58 per cent of over 55s. Building societies risk losing out on the younger customer base if they do not digitalise and embrace the opportunities that technology offers to their business and their customers.

In addition, when asked what building societies could do to better support their customers, 31 per cent said they would be more likely to join a building society if they had a mobile app and 26 per cent would be more open to them if they had a web based portal.

Moneyhub’s research asked consumers who don't currently use a building society why they don’t, with one in 10 saying they were unsure whether building societies have as good digital banking services as other banks, and a further seven per cent were concerned that the majority of building societies didn’t have mobile apps.

In addition to technology services, customers are also looking for their building societies to provide better support on their money management with one in five asking for insight on saving and investments from building societies, as well as (19 per cent) guidance on the state of their finances. Seventeen per cent of consumers also want to better understand their financial health score.

Mark Horwood-James, MD of personal finance technology at Moneyhub, comments: “Building Societies have traditionally been some of the most customer-centric organisations within financial services. It is clear that their customers are core to their values but Building Societies have generally failed to embrace and implement digital and data-led experiences. They are struggling to meet the needs of the customers of now, and will definitely fail to meet those of the future unless they take action.

“Building societies are at a pivotal juncture. There is still a huge opportunity for them to transform their digital capabilities and bridge the gap between consumer expectations and product offerings. At Moneyhub, we believe that open finance offers this opportunity to Building Societies, and can be easily implemented into existing experiences and systems.

“The research shows a clear demand from consumers that Building Societies have to digitalise now. We hope that our report serves as a roadmap to help firms get ready and embrace the transformation that changes like Open Finance bring, which are now essential for creating advocacy and loyalty among today's and tomorrow's consumers.”

Moneyhub’s latest report aims to provide building societies with insights and guidance on navigating the complexities of a marketplace that is increasingly governed by data and evolving consumer demands.

Download Moneyhub's Digitise or Die: a Call to Arms for Building Societies whitepaper