Yorkshire Building Society is the most efficient building society in the UK, according to new research from fintech Target Group.
The analysis measures the technological sophistication of building societies by comparing financial assets to full time employees.
The research found that while the big mutuals are overall better at embracing tech, there are some outliers, with Yorkshire Building Society being more efficient than Nationwide, and Stafford Railway more efficient than The Cumberland.
Target examined the annual reports of building societies with combined total assets of almost £550bn, employing more than 30,000 full-time equivalent (FTE) employees.
The research found that, as an industry, building societies have on average, £18.1m of assets per member of staff employed.
Those judged to be Tier 1 societies, with more than £10bn of assets each, had an average of £20.0m worth of assets per employee. Within this tier, there were variation, however: while Yorkshire Building Society had £28.3m worth of assets per employee, Newcastle only had £10.8m.
In Tier 2 societies, with between £1bn and £10bn of assets, the average value of assets per employee was approximately £9.5m. In this tier, Progressive had £14.4m worth of assets per employee whereas Cumberland had just £6.7m.
The average value of assets per employee was approximately £7.9m in Tier 3 societies – those with between £500m and £1bn of assets. The most efficient mutual of this size was Swansea with £10.4m worth of assets per employee, compared to the Mansfield with £6.0m.
The smallest niche building societies, with fewer than £500m of total assets, have £7.2m worth of assets for every employee – with Stafford Railway, the most efficient, having £10.1m and the Ecology having £5.3m.
The research found that the most efficiently run societies which outperformed in terms of their size were Stafford Railway, Beverley, and Earl Shilton. At the other end of the spectrum were Cumberland, Monmouthshire, and Darlington.
Target says despite their relative outperformance, many of the smaller, less efficient societies need to overhaul their transformation strategies which have, until now, been too cautious.
Target Group’s Melanie Spencer said: “This is a crude measure. But the ratio of assets to employees strikes at the heart of the issue of automation in the sector – of building societies’ willingness or otherwise to adopt technology to improve their productivity. You’d expect the largest societies to be the most efficient since they’re enjoying the biggest economies of scale. But our research highlights that this isn’t necessarily the case. Nottingham is a large operation, with total assets of £5.2bn, but it employs 510 people – that’s £10.3m worth of assets per employee. That’s a similar ratio to Stafford which only has £25m worth of assets.
"At the other end of the spectrum, Nationwide’s total assets are three times greater than Yorkshire’s – but their workforce is five times the size. A lot of this is down to digital transformation. Some societies have invested so they can do more with less while others have not. That’s somewhat concerning for the sector given that societies need to be embracing digital transformation and addressing legacy systems. Technology is going to be absolutely critical for long-term success of the mutual movement. If mutuals don’t adopt emerging technologies, they’ll fall behind.
“To survive in the coming decades, many of the smallest building societies will need to hire a CIO. And they must look at adopting cloud core systems as a service as a matter of urgency, rather than attempting to maintain their out-dated legacy technology. Leaving it any longer risks failing to deliver for a new generation of savers and borrowers.”
