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Mutuals seek to cultivate online customer services not “slash and burn” web strategies, new report claims.

More than half of the UK’s building societies have yet to take their first steps in e-commerce because they say they can’t afford it, according to research commissioned for Deloitte & Touche and ebusiness solutions provider iE.

The survey, carried out by Byline Research, covered 35 of the 67 remaining building societies. Of these only 43% have an e-commerce capability of any kind and only a few go beyond basic online application forms. Most building societies continue to rely on information-only websites. Some don’t even have that.

The biggest barrier to e-commerce, singled out by 66% of respondents, is the cost of implementation. Technology issues ranging from system integration to reliability and performance are also high on the list of concerns.

The surveyed building societies gave surprisingly low estimates when asked the cost of building an e-commerce platform. 40% thought the cost would be between £20,000 and £100,000, a further 29% said they expected to pay up to £250,000. Only two firms put the cost of building a strategic e-commerce platform at £1 million or more.

Jerry Mulle, director of the ebusiness group, iE, said: “Some building societies are looking at nothing more than brochure-ware, while others are considering full on-line servicing. If they are not willing or able to throw money at the problem individually, these organisations are going to need to exploit their collective strengths to reach a solution.”

Gordon Carr, director at Deloitte & Touche, explained that the costs of building an e-commerce capability could be shared: “Building societies’ greatest strength lies in their ability to collaborate. The costs of a common e-commerce platform could be easily spread across a number of societies.”

The main motives for building an e-commerce capability are improved customer service and customer retention, which the report argues, are two sides of the same coin. Building societies make more money from existing customers than from new ones and therefore put a higher priority on keeping customers in the fold than on acquiring new ones.

Building societies do not see e-commerce as a mechanism to cut costs (this was the lowest scoring motive for adopting e-commerce, mentioned by only 20% of respondents). Nor do they see it as a platform for offering a broad range of new products. Cross selling was second bottom in the list of e-commerce drivers, mentioned by 26%.

The report’s authors blame this apparent apathy on a number of factors. Building societies are naturally conservative and risk averse. Even the building societies’ professional body, the Building Societies Association admits that its members have been slow to explore the freedoms granted by deregulation.

The report explains: “One reason may be that, despite the relaxation of the rules, significant regulatory restraints remain: building societies are bound to use no more than three quarters of assets to fund new areas of business, so it’s hardly surprising that few are pursuing diversification strategies.” A third of respondents believe e-commerce will generate new business, but most are relying on its capacity to deliver better customer service.

The report argues that this is the building societies’ biggest problem. “The internet has proven to be a very effective sales mechanism. Acquiring customers is the easy bit, keeping them is much harder. Examples of e-commerce services that deliver real value to existing customers are few and far between, and this is just the sort of service the building societies have in mind.”

Despite these issues, building societies expect to forge ahead with e-commerce plans in the next 12 months. By this time next year, two-thirds expect to offer some kind of e-commerce service. The report also forecasts a dramatic increase in the number of e-commerce offerings that go beyond basic application forms for new customers.

The organisations in the survey currently offer only eight products with some element of online account servicing today. In a year’s time the number of products with on-line servicing will have more than quadrupled to 35.

Jerry Mulle said: “Building societies face unique challenges when it comes to e-commerce. They are not looking to slash costs or close branches or to acquire hundreds of thousands of new customers overnight with discounted products. Those building societies that wanted to revolutionise their businesses have already converted to plc status. The rest are seeking e-commerce strategies that align closely with their current business models and reinforce their existing strengths. They don’t want to rip up the business plan and start again; they want e-commerce that works the way they do.”

Gordon Carr, added: ”Rather than competing on a narrow front, building societies should leverage their brand to gain market share over their main rivals. One example is to offer a range of products, such as credit cards or personal insurance, with members or charities benefiting from fees earned, something that plc’s cannot match. As well as increasing membership, the main benefit is to increase products per member, a key factor in increasing retention.”

For further details contact Rebecca Gunn, Byline Group (direct line: 01628 604758)


Deloitte & Touche is one of the UK's largest professional services firms with 22 offices, over 8,600 staff nationwide and fee income of £796 million in 1999/2000. It is the UK practice of Deloitte Touche Tohmatsu, a global leader in professional services with over 90,000 people in 130 countries and fee income of $11.2 billion. For further information visit the Deloitte & Touche website at

iE ( is the market leading supplier of e-business application products for the finance and insurance sectors. The award-winning iE NetFinance family integrates with existing customer relationship management, workflow and back-office systems to provide a seamless online selling and servicing environment for a range of credit and wealth management products. Founded in 1985, iE is a public company quoted on the London Stock Exchange (AIM) as IEN.

This press release was distributed by ResponseSource Press Release Wire on behalf of Patterson Media Services (formerley ByLine Group) in the following categories: Consumer Technology, Personal Finance, Business & Finance, Computing & Telecoms, for more information visit