What is a Building Society?

At Smart Money People we’ve been fascinated by building societies for a while. While there’s no doubt that there's a lot of focus on FinTech start-ups like mobile-focused challenger banks, we’ve been wondering what the future looks like for building societies.

In this post, we take it back to basics, and ask just what is a building society? What do consumers really think they do, and how do they compete for the hearts and minds of consumers in the twenty-first century?

We’ve aimed to provide a quick consumer guide to building societies. What are they, what do they do, who’s who, and what does the future hold for them. We’ll also present the results of a survey we carried out, which has provided us with real insight into the attitudes of the UK population towards building societies.

1. Definition of a building society

2. The banking landscape

3. Consumer survey

4. Who’s who

5. The future

1. But first, the definition of a building society:

A building society is a financial organisation owned by its members as a mutual organisation (unlike banks which are owned by shareholders). Building societies offer banking and related services, but tend to focus on savings and mortgages products. Most building societies have a clear regional focus. For example, the Marsden Building Society is focused on the North West of England.

2. The landscape

Banking is getting more competitive. Banks like M&S Bank, Tesco Bank and Virgin Money are expanding into traditional markets. And although it’s too early to analyse the impact of digital challenger banks, there’s a clear rush to lead the mobile banking field, with the likes of Atom Bank, Starling Bank and Tandem Bank all gearing up to launch current account propositions.

The growth of FinTech has meant that nimble start-ups are able to jump into attractive (and profitable) markets. But in an increasingly competitive (and digital) landscape, where do building societies fit in, and what makes them special?

3. Our Building Society Survey

In order to really understand what a building society means to UK consumers, we asked 1,511 consumers three key questions:

1) Which one of these best describes a building society? (we provided 4 possible options to describe a building society)

Our findings: Just 45% of our survey respondents correctly identified the key ingredient that separates a building society from a bank – mutuality. Perhaps alarmingly, some 10.4% of all respondents believed that a building society is a ‘local organisation that builds houses.’

2) Building Societies don't pay profits to shareholders. They reinvest any surplus in their society and local community. How important is this for you? (consumers rated the importance of this from 1 to 5)

Our findings: Younger respondents cared least about mutuality (providing a rating of 3.15 / 5), while older respondents viewed this as a more important factor (a 3.75 rating).

3) What one thing would make building societies better for you? (we provided a free text field to allow consumers to tell us their thoughts, in their own words)

Our findings: Other than better savings rates (which proved to be the overwhelming consensus), other suggestions included: longer opening hours, greater awareness about community activities, special employee ownership incentives, and direct sharing of profits with account holders.

We’ve summarised our key findings in the below building society inforgraphic:

4. UK Building Societies: Who’s who

The UK has 44 building societies. They range in size from a single branch up to 700 branches. Here’s a list of building societies ordered by total assets (data from the KPMG Building Societies Database, December 2015).

We’ve also linked to their review pages so you can take a glimpse at what consumers have to say about each society:

700 branches: Nationwide Building Society reviews

231 branches: Yorkshire Building Society reviews

70 branches: Coventry Building Society reviews

99 branches: Skipton Building Society reviews

67 branches: Leeds Building Society reviews

53 branches: Principality Building Society reviews

37 branches: West Bromwich Building Society reviews

31 branches: Newcastle Building Society reviews

35 branches: Nottingham Building Society reviews

8 branches: Cumberland: Building Society reviews

12 branches: Progressive Building Society reviews

1 branch: National Counties Building Society reviews

12 branches: Saffron Building Society reviews

18 branches: Cambridge Building Society reviews

11 branches: Monmouthshire Building Society reviews

12 branches: Leek United Building Society reviews

11 branches: Furness Building Society reviews

11 branches: Newbury Building Society reviews

9 branches: Ipswich Building Society reviews

10 branches: Hinckley & Rugby Building Society reviews

10 branches: Darlington Building Society reviews

1 branch: Manchester Building Society reviews

6 branches: Market Harborough Building Society reviews

3 branches: Melton Mowbray Building Society reviews

6 branches: Marsden Building Society reviews

6 branches: Scottish Building Society reviews

4 branches: Tipton & Coseley Building Society reviews

6 branches: Hanley Economic Building Society reviews

6 branches: Dudley Building Society reviews

6 branches: Harpenden Building Society reviews

6 branches: Vernon Building Society reviews

3 branches: Loughborough Building Society reviews

4 branches: Mansfield Building Society reviews

2 branches: Bath Building Society reviews

1 branch: Stafford Railway Building Society reviews

1 branch: Teachers Building Society reviews

2 branches: Swansea Building Society reviews

3 branches: Chorley & District Building Society reviews

1 branch: Buckinghamshire Building Society reviews

1 branch: Beverley Building Society reviews

1 branch: Holmesdale Building Society reviews

1 branch: Ecology Building Society reviews

2 branches: Earl Shilton Building Society reviews

1 branch: Penrith Building Society reviews

5. The future

We're optimistic about the future for building societies. Some building societies, such as the Yorkshire Building Society are increasingly seeing themselves (and starting to act) like challenger banks...albeit in a mutual skin. And although in the first half of 2016 just 10% of our community told us that branches were their preferred channel, it's clear that a segment of the community still really values local branches.

We’re currently running the British Bank Awards. These awards champion great customer service as well as real innovation. They also help to provide a real barometer of what’s going on in the wider financial world and deliver industry leading customer insight. Will one or more building society walk away with one of our awards? We’re calling on building society members to share their experiences via a quick review. We’ll update this post if they do!