There’s no doubt that COVID-19 has caused fundamental and lasting changes to the economy with businesses closing at an unprecedented rate, and unemployment growing to 30 million1 and rising. To put that in perspective, in December of 2008, unemployment was 11.1 million2.
On a micro level, we’re seeing significant shifts in consumers’ shopping patterns, and how they’re approaching finances. As people buckle down and prepare for the worst, it seems that their finances might be taking a turn for the better. MX surveyed over 1,000 people to understand their spending and saving behavior during COVID-19. Our research findings show that 50% of respondents plan to put their stimulus check towards their savings, and ⅔ have changed their view on saving money in the last several weeks. Of the respondents, 34% said they were now putting more money into savings.
One key piece of evidence that alludes to the fundamental shift in consumers’ spending behavior is that 48% of the people we surveyed are prioritizing living expenses above all else, followed by 30% who would prioritize food and drink. What’s perhaps even more telling is that only 5% of respondents prioritize spending on hobbies and entertainment. Overall, we’re seeing that 59% of people are spending less since the COVID-19 crisis hit. Although it’s too early to tell if this frugal trend towards spending will last, what is clear is that the shift is definitely occurring.
However, even though people are reprioritizing what they spend money on, and how much they’re putting into savings, there are large differences based on income levels. Those making between $40k - $59k are spending more than every other income bracket, including income brackets above $60k all the way up to 150k and above. Interestingly, people in the $100K - $150k income bracket are spending the most money on alcohol at grocery stores.
We’re also seeing that 40% of respondents that are making less than $40k, and 47% in the $40k -$59k, have changed their view on money due to the pandemic and would like to put more away into savings.
Digital Trends Affected By COVID-19
The spread of COVID-19 is revealing just how essential digital banking solutions are in the current global marketplace. People not only want to avoid brick and mortar locations, they often can’t go to brick and mortar locations. In light of this, financial services companies that don’t have a strong digital presence are losing out to those that do — and this will continue to be the case as time goes on and uncertainty grows. Our findings show that 55% of respondents use their mobile app as the primary tool to check their account balance, followed closely by website use at 40%; while only 2% of respondents are going to a branch. The rise in digital is somewhat expected considering the limited access of branch locations, and peoples increased interest in knowing their financial picture during these times.
Right now, it seems that people are taking a closer look at their finances with 38% of respondents checking their balances more frequently since COVID-19. When broken down by income levels, we see that 40% of people in the $40k - $59k income bracket, and 40% that make less than $40K, have been checking their accounts regularly. Alternatively, we see that only 20% of people making above $150k, and only 26% that make $100k - $150K, check their bank information more frequently.
When it comes down to it, people are already using their digital devices every day, multiple times a day. If anything, the pandemic has made it so they associate their banking needs more closely with the devices they already flock to for everything else they do. This is a critical moment for financial institutions to step in and really own the digital experience, helping their customers through this time, and also repositioning themselves as the digital solution their customers can turn to when it comes to their financial lives.
Now’s a critical moment for financial institutions. They have a chance to move well beyond simply providing a good CX experience, to providing insights that improve the financial wellbeing of customers, ultimately, positioning them as true financial partners and customer advocates.
Helping Consumers Sustain Good Financial Habits After COVID-19
They say it takes 21 days to form a habit and 90 days to turn it into a lifestyle. As consumers adjust their spending behavior to this new normal, it’s a great time for financial institutions to step in and make sure those habits stick. Today, the U.S. adult financial literacy level is 57%3. In other words, a lot of people have little to no knowledge when it comes to managing their financial lives. Our findings show that people making less than $40k, or have no current income, are ranked highest in not knowing if they are eligible for a stimulus check. This indicates that more financial education is needed on how to understand and be aware of the benefits that the government is offering individuals and families, as well as ways to create better saving habits.
Luckily, financial institutions are in a good place in terms of consumers’ sentiment. Our findings show that 54% of those surveyed have complete trust in their banking provider when it comes to their finances amid the COVID-19 crisis.
It’s critical that financial institutions step in and lead their customers to financial stability. Right now, most people are paying very close attention to their finances, but that doesn’t necessarily mean they know where to start or what to do. But it does mean that they’re likely more receptive to advice and tools that can help them take ownership of their financial lives. Financial institutions that provide customer-centric literacy programs and tools can help their customers come out of this economic downturn with better financial habits that will lead to stronger financial health overall.