Banking blind spots reveal financial health issues

Even amid the current pandemic, consumers report satisfaction with their financial service providers and few have changed these relationships. But beneath the calm surface are signs of persistent struggles with financial well-being and broader changes in payment habits. Consumers continue to turn to alternative financial services and buy now, pay later (BNPL) programs to ease pandemic-induced financial stress, posing a growing challenge to banks’ primacy in their customers’ financial lives. .

Even during turbulent times, satisfaction and trust with leading financial service providers remain constant

Consumer satisfaction with their major bank, credit union, and credit card providers hovers between 80 and 90 for the average American adult using these providers. Trust in these same institutions has also remained consistent among clients and non-clients, showing little impact from the pandemic.

Percentage of US adults who say they are at least somewhat satisfied with their main provider in each category, and percentage of people who say they trust providers in each category

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

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

But financial vulnerability has increased, leading to depressed financial well-being

The firmness of consumer support for their providers contrasts with faltering feelings of financial well-being. Delta and omicron variants, as well as inflation, have continued to challenge consumer finances, leading to a sharp rise in January in financial vulnerability and a statistically significant decrease in financial well-being.

Financial well-being by annual family income

Surveys conducted monthly among 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 per year have fared especially poorly since July. Like Morning Consult economist Jesse Wheeler noted last monthContinued inflation and income losses, coupled with reduced policy support, will lead to a further deterioration in finances, especially among already vulnerable low-income groups, as personal savings dwindle.

Consumers are realizing that their banks cannot meet all of their financial needs, and as a result, they are looking elsewhere for solutions.

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

Despite consumer satisfaction with existing providers, about 1 in 6 adults in a given month say they are looking to start a relationship with a new banking provider. That proportion 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 cashing, money orders, and payday loans) to fill gaps in income or employment that prevent them from meeting basic expenses.

Percentage of respondents who said they have done the following activities with a provider other than a bank or credit union:

Surveys conducted monthly among 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 increasingly turned to overdraft 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 meet their financial needs beyond their banks. Even in a post-pandemic world, consumer habits may change permanently as they learn to rely less on their banks and employ a more diverse range of financial service providers for their different financial needs.