The Current State: A Focus on Managing for the Immediate
The COVID-19 pandemic can be described as sudden, tragic, and an utter upheaval of the way that we live. And at the same time, it can be viewed as a great equalizer; with essentially every American impacted to a certain degree. In this new world that we live in household savings are down, unemployment is (way) up and for those still employed income has weakened with dampened future expectations. As a result, spending has decreased across nearly all non-essential categories – creating a true ripple effect across all industries.
A recent examination of consumer perspectives through ENGINE’s online CARAVAN® omnibus survey of 1,000 US adults found that nearly 7-in-10 (68%) consumers are concerned about their personal finances. As a result, some of the immediate changes include cancelling vacations, delaying home renovations and ultimately eliminating big ticket purchases. Understanding the macro environment, this is perhaps not a surprise, and will likely set the stage for more conservative approaches in the long-term.
Financial Services Firms are Quick To Respond
By understanding their customers’ needs, financial services firms were able to quickly respond and offer flexible solutions during a time of need. Banks, credit card companies and insurance firms acted swiftly to extend deadlines, provide forgiveness in certain areas and even offer discounts where applicable. As early as March 9, the FDIC encouraged financial institutions to help meet the needs of those customers and members affected by COVID-19. Similarly, the National Credit Union Administration, which protects all federal (and most state) credit union deposits, is encouraging credit unions to assist affected members by allowing them to defer or skip some payments, extending payment due dates and waiving late fees and out-of-network ATM fees.
Insurance companies are also keenly aware that their customers’ lives look very different than just a month ago, and many are offering automatic relief. Allstate and American Family were quick to announce relief efforts, Allstate will give most customers 15% of their monthly premium back in April and May, via a credit to their bank account, credit card or Allstate account. American Family will send auto insurance customers $50 for each vehicle on their policies.
Through a deep understanding of their customers, financial services firms were able to meet some of their immediate needs of today. Post-pandemic it will become even more important to remain connected to those same customers and continue to create solutions that address their evolving needs.
From Spending to Saving: Immediate Changes Impact the Long-Term
Recessions and economic slow downs of the past have had profound impacts on the consumer psyche. A fear of the unknown abounds and thus creates a more conservative approach when planning. Downturns are also stressful and typically increase people’s desire for simplicity, impacting the way that they spend and live.
ENGINE’s recent omnibus CARAVAN® study of 1,000 consumers has also shed light on how consumers may alter their financial interactions in the future. When asked “Which, if any, of the following have you done since March?” there was an indication that not all the changes have been negative, and consumers may be setting themselves up for the long game, featuring a more secure financial state post-pandemic.