Banking blind spots reveal troubled financial health

Even amid the current pandemic, consumers are reporting satisfaction with their financial service providers, and little has changed those relationships. But beneath the calm surface lie signals of ongoing struggles with financial well-being and broader shifts in payment habits. Consumers continue to turn to alternative financial services and “buy now, pay later” (BNPL) programs to alleviate pandemic-induced financial stress, posing a growing challenge to the primacy of banks in financial life of their customers.

Even in tumultuous times, satisfaction and trust in leading financial service providers remains constant

Consumer satisfaction with their primary bank, credit union, and credit card provider remains in the 80s and 90s for the average American adult using these providers. Trust in these same institutions also remained stable among clients and non-clients, showing little impact from the pandemic.

Proportion of U.S. adults who report being at least somewhat satisfied with their primary provider in each category, and percentage who report trusting providers in each category

Surveys conducted monthly with representative samples of 4,400 or 2,200 US adults each, with unweighted margins of error of +/- 1 or +/- 2 percentage points.

Additionally, consumers have remained loyal to their suppliers, showing little overall change in the number of banks, credit unions and credit card companies they work with. In January, the average American adult works with only one bank, but almost a third work with more than one.

But financial vulnerability has increased, driving down financial well-being

The firmness of consumer support for their suppliers belies a wavering sense of financial well-being. The delta and omicron variants, along with inflation, continued to challenge consumer finances, leading to a sharp rise in January financial vulnerability and a statistically significant decrease financial well-being.

Financial well-being by annual household income

Surveys conducted monthly with representative samples of 4,400 or 2,200 US adults each, with unweighted margins of error of +/- 1 or +/- 2 percentage points.

Households earning less than $100,000 a year have been doing particularly badly since July. Like economist Jesse Wheeler of Morning Consult rated last monthcontinued inflation and revenue losses, coupled with reduced political support, will cause finances to deteriorate further, especially among already vulnerable low-income groups, as personal savings decline.

Consumers are realizing that their banks cannot meet all of their financial needs and as a result, they are looking elsewhere to take care of them.

Outside the purview of banks, consumers are looking for new providers and continue to rely on expensive alternative services

Despite consumer satisfaction with existing providers, around 1 in 6 adults in any given month say they are looking to start a relationship with a new banking provider. This share rises to more than 1 in 4 among millennials, who report lower financial well-being than the general population.

More immediately, consumers rely on providers other than banks to make ends meet, which could threaten the role of banks in the lives of their customers, even for those who are satisfied with their banking provider. Americans continue to use expensive alternative financial services — check cashers, money orders and payday loans — to fill gaps in income or employment that prevent them from covering basic expenses.

Proportion of respondents who reported having conducted the following activities with a supplier other than a bank or credit union:

Surveys conducted monthly with representative samples of 4,400 or 2,200 US adults each, with unweighted margins of error of +/- 1 or +/- 2 percentage points.

In addition to these services, consumers have increasingly turned to discovered and BNPL Options to make ends meet during the holidays.

Especially as the pandemic continues and economic conditions remain uncertain, leaders of traditional institutions can no longer assume that a satisfied customer is financially secure or loyal, and must pay attention to how consumers respond to their financial needs beyond their banks. Even in a post-pandemic world, consumer habits can be permanently reshaped as they learn to depend less on their banks and employ a more diverse array of financial service providers for their different financial needs.

Comments are closed.