Recessionary Consumers in Financial Services
Consumers are coping with high degrees of uncertainty regarding the pandemic and depressing recessionary news. As a result, there will be key changes to attitudes and behaviors that will persist well after the crisis subsides. Each consumer will respond in a different way depending on their country, job security, personal situation, and general optimism, as well as the real-life effects they have felt. Countries are now beginning to exit the crisis into a harsh recession; some lockdown behaviors will become embedded, while others will change based on the severity of the economic contraction. This will impact consumers irrespective of their financial position.
This report details the major enduring changes to consumer spending and banking habits that occur during a recession and recovery. It outlines how banks should tailor their targeting strategies, messaging, and product features to best cope with the precipitous and enduring loss of consumer confidence around the world.
– Consumer confidence has collapsed and will remain depressed.
– Uncertainty avoidance and risk aversion will be dominant forces.
– Consumers will be streamlining their spending even outside of lockdown periods.
– Switching will decline for core banking products.
Reasons to Buy
– Develop and enhance your client targeting strategies using our data on how consumer behavior will shift in the recession.
– Give your marketing strategies the edge required and capture new clients using insights from our data on customers’ preferences for the various key banking products.
– Tailor your investment product portfolio to match the current and future demand for different asset classes among recessionary-minded investors.
– Develop your payments proposition to match the service and product demand expressed by consumers streamlining their lifestyles in light of the recession.
Table of Contents
Table of Contents
1. EXECUTIVE SUMMARY
1.1. Market summary
1.2. Key findings
1.3. Critical success factors
2. RECESSIONARY CONSUMERS
2.1. Consumer confidence is low regardless of direct experiences
2.1.1. The crisis has precipitated a dramatic and enduring fall in confidence
2.1.2. Consumers in the post-COVID-19 crisis period are anxious and will remain so going forward
3. AVOIDING UNCERTAINTY
3.1. Change and uncertainty are hallmarks of crisis and recession
3.2. Demand for PFM rises as consumers worry
3.2.1. Economic uncertainty and change leads most consumers to engage more with their finances
3.2.2. Consumers want to cut back and save more in recessions, andvalue tools that help them do so
3.3. Despite being more exposed to risk assets those in higher asset bands bear up the best, but liquidity solutions are key
3.3.1. Mass affluent investors’ greater holdings of and allocations to risk assets expose them to greater losses, but the segment will recover more rapidly
3.3.2. HNW investors’ more diversified portfolios and higher penetration of advice mitigates downward volatility, but providing liquidity is essential
3.4. Market downturns have a significant impact on risk aversion
3.4.1. 2008 financial crisis data foreshadows greater risk aversion in the HNW space
3.4.2. Younger consumers and those in lower affluent bands are more willing to take risks to capitalize on a market rebound, but a certain amount of hand-holding is paramount
3.4.3. Being more receptive to financial engagement campaigns amid market turbulence suggests now is the time to foster loyalty with the desirable millennial segment
3.4.4. A focus on funds will prove beneficial as investors are looking to diversify their portfolios
5. CONSUMERSWITCHING BEHAVIORS
6. DIGITAL CHANNEL SHIFTS
7. THE RISE OF NEW PRODUCTS
8. ACTION POINTS
List of Tables
List of Tables
Table 1: Monthly Australian household deposit growth, selected banks, December 2019 to April 2020
Table 2: Mobile wallet usage, penetration, and interest in adoption, 2020
List of Figures
List of Figures
Figure 1: Consumer confidence takes many quarters to recover after the initial plunge
Figure 2: Improving views on the virus doesnot mean concern goes away
Figure 3: Anxiety around the economy dominates consumer thinking and results in low consumer sentiment
Figure 4: Consumers value budgeting and money management functionality but it is rarely top of mind
Figure 5: Change – particularly negative change – drives consumer engagement with their finances
Figure 6: Expectation of change drives consumerengagement with their finances, as seen during the global financial crisis
Figure 7: Investment product holding rises in line with level of affluence across the world
Figure 8: The global financial crisis had a significant impact on customer loyalty and risk appetite
Figure 9: Barclays’ structured product offering appeals to risk-averse investors
Figure 10: Quirin Privatbank addresses investor uncertainty through its webinar and podcast series
Figure 11: Younger investors are notably more open to new investment ideas
Figure 12: Millennials have been eager to capitalize on a market rebound
Figure 13: Younger consumers are more likely to pay increased attention to financial literature in challenging investment times
Figure 14: A need for diversification is driving demand for fund products
Figure 15: Growth in the value ofcard spending will be slow for much of the 2020-21 period
Figure 16: Cash will be squeezed in all economies, accelerating a trend already in play
Figure 17: Consumer credit does decline in times of crisis and recession, but the trend is erratic
Figure 18: In the first quarter of 2020, Australian consumers had started cutting back on major purchases in anticipation of a formal recession
Figure 19: Current account switching has declined significantly in the UK due to COVID-19
Figure 20: After an initial spike, refinance collapsedalong with broader consumer confidence
Figure 21: Consumers have typically valued convenience and transparency in their banking partners
Figure 22: Neobanks were making headway in deposits but lag when it comes to credit
Figure 23: Banks have much more competition as financial advisors and wealth managers
Figure 24: Investor retention requires clear and effective communications
Figure 25: Repairing trust will be critical in the financial advice industry as the global financial crisis showed
Figure 26: E-commerce has received a big boost in consumer awareness and use
Figure 27: A drop in cash usage will reduce the deployment of ATMs and increase POS terminal adoption
Figure 28: Only the Middle East and Africa will see enduring growth in ATMs
Figure 29: General banking activity has trended digital,with mobile banking on the rise
Figure 30: Digital channels dominate key relationship-building activities with customers
Figure 31: COVID-19 has had a significant impact on channel preferences
Figure 32: Some markets are yet to transition from payment cards to mobile wallets
Figure 33: Some markets are yet to adopt contactless while others have leapfrogged to mobile
Figure 34: Younger consumers are more likely to offshore parts of their wealth
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