Even before the COVID-19 outbreak, our research showed that US consumers were facing multiple financial challenges and were worried about their financial situation. To see how the pandemic was impacting consumer finances and behaviors, we surveyed 1,122 US online adults in April 10–15, 2020 and found that US consumers:
- Are already feeling the impact of COVID-19 on their finances. Nearly one in five US adults (18%) have seen their income (hours and/or wages) reduced due to COVID-19 or actions taken by governments and companies in response to the pandemic. This is impacting consumers’ ability to spend and meet financial commitments: Most are cutting down on non-essentials, and 16% have missed a bill or loan payment already. And it spells trouble given that, even before this crisis, many consumers felt overwhelmed by debt.
- Have become much more anxious about their financial situation. The number of people who are anxious about their financial situation has more than doubled, from 21% before COVID-19 to 46%. For now, at least, older generations are feeling more confident due to less debt and their reliance on pensions, while Millennials and younger adults, people with dependent children, or those who have been laid off are worrying more about their financial future.
Now more than ever, banks and financial services companies need to offer more holistic and personalized solutions that support and sustain customers’ financial well-being. But banks have their own battle to fight, as well, because customers’:
- Depleted finances are chewing up banks’ profits. The crisis has forced banks to commit almost three times more money to bad loan provisions, which has impacted first-quarter results. JPMorgan Chase’s profits plunged 69%, Citigroup’s 46%, and Wells Fargo’s net income dropped by 89%. In addition, Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo have set aside a vast $25.4 billion in total for loans that might go bad.
- Changing behaviors will reduce transactions and alter credit demand. More than a quarter of US adults (26%) have delayed major purchases, and 18% have postponed major life events because of COVID-19. As customers hit pause on big-ticket items, delay life events such as marriages, and postpone home purchases, banks will feel the impact through reduced demand for loans and mortgages and will need to fight for deposits as consumers tap into savings to finance day-to-day purchases.
You can see our research on the financial impact of COVID-19 on consumers here and read more about COVID-19 on our public content page here. There, you will find forecasts and advice on how companies should respond now and at the same time think strategically about the longer-term impact of the current crisis.
In addition, we’re currently developing planning tools that will help banks navigate three economic scenarios Forrester is forecasting for COVID-19, so stay tuned!