Building a digital future for building societies

The building society sector is one of the many financial sectors looking to engage with FinTech’s to enhance innovation. However, there are some distinct differences to this sector that organisations seeking to engage with them need to be aware of. The impact mutuality has on a building society’s decision-making being one of these.

We are delving into these unique nuances over a series of articles culminating in a webinar which will be held on Wednesday 7th December 2022 where we will be joined by 4 industry thought leaders to discuss FinTech For Building Societies.

Below we interview Neil Williams, who has worked in the building society sector since 1996. He joined Market Harborough Building Society where he because Head of IT with overall responsibility for IT Strategy and all IT applications. In 2011 he started his own IT consultancy business and since then has worked with many societies on developing IT capabilities of their society to deliver the business goals and is currently working with a number of societies on digital transformation projects.

Neil Williams, Director, Neil Williams IT Consultancy

How have you seen the relations between Financial Institutions and FinTechs changing over your career?

“30 years ago FinTechs were the large IT service companies and FIs had either their own development resources or were fully dependent on the suppliers. Collaboration wasn’t like it is now. We are now in a world where there are lots of FinTechs clambering over FIs; banks, challenger banks, building societies and credit unions. Back in the late 80’s, when I started in the sector, there were around 200 building societies and only the main banks, now we have only 43 societies but lots of new start-up banks.

How do you think Financial Institutions and FinTechs could work better together?

“There needs to be good collaboration between FinTechs and FIs. FinTechs need to understand the issues that they are developing for and not just develop a solution to a non-issue. It would also be good for smaller FIs to work in groups with FinTechs instead of having lots of FinTechs providing the same solution and not all of them being around in 5 years, which is a concern to some FIs.”

Do you see regulation holding innovation back?

“Potentially yes, the problem is we don’t know today what regulation will be introduced. I’m not sure that all the FinTechs fully understand the regulation that affects their solutions. They seem to be dependent on the FI to provide that level of information but don’t always accept the amount of work required by the FI.”

Do you believe financial institutions should support the fintech ecosystem more?

“I think there is a real opportunity for FIs to look at taking stakes in FinTechs, be it through grants or loans, as that would allow FinTechs to get started and the FI could get new technologies at a reduced overall cost but enable the fintech to get a foot in the door.”

How can the procurement process be made less onerous for vendors?

“One staring point would be for the FinTechs to licence their solutions in a way that encourages smaller FIs. Most licences are aimed at larger FIs, I’ve seen licences for origination systems that start at 5,000 applications per year. Some FI’s only have 5,000 accounts. The FinTechs also need to understand their market, building societies pay VAT which is always a surprise when this is mentioned to new suppliers, this clearly increases the cost to the FI. Also, smaller FI’s are very resourceful and in some circumstances will look at non-technical solutions where possible. Most online systems aren’t real-time and rely on daily downloads as the accounts aren’t current accounts and the balances don’t change daily. Only 2 Building Societies offer current accounts but most have online systems.”

Is that even something that we should aim for?

“Definitely, the more collaboration and improved licences the better the solutions and the take up.”