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A global view of financial life during COVID-19

As the pandemic spreads across the globe, financial decision-maker behavior and sentiment continues to shift.

Financial life during the COVID-19 pandemic

The COVID-19 pandemic has left no one untouched. While effective treatment and a vaccine remain in development, some countries have succeeded in containing the spread of COVID-19, allowing a cautious return to economic life. Even as more businesses open their doors and more people are able to return to work, life may remain indelibly changed.

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To measure and anticipate the evolution in consumer financial sentiment, behaviors, needs, and expectations, we are undertaking a series of global surveys of household financial decision-makers through the crisis (first in April 2020, and again in May). The survey covers 30 countries, together accounting for 68 percent of the global population and 82 percent of all COVID-19 cases reported as of June 17 (see sidebar).

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As of May, across the globe, decision-makers’ perceptions of the health of their national economies were negative and had grown slightly worse since April. Assessment of the current health of national economies deteriorated significantly in hard-hit Brazil and India. 1 However, reported future expectations for the next three months have improved somewhat since April across all 12 countries—most sharply in Italy, Spain, and Turkey.

The survey results offer insights into how financial services providers can best serve consumers now and in the post-COVID-19 environment. Household financial decision-makers across the globe are reporting decreases in income, savings, and spending. In most countries, between 20 percent and 60 percent of decision-makers say they fear for their jobs, with roughly half of these holding four or fewer months of savings. In this environment, the support from banks most desired by customers is on credit terms—waiving late fees, reducing minimum payments, or permission to skip a loan payment. At the same time, use of cash is decreasing and digital forms of payment are increasing, perhaps as people quarantine or avoid interactions more likely to transmit disease. Against this backdrop, in most countries consumers indicate that banks are meeting their expectations—but generally not exceedingly them, at least on a net basis.

The following exhibits present 10 survey observations focused on a subset of 12 countries, selected for their global and regional economic significance, and severity of the impact COVID-19 has had on their populations.

1. Financial decision-maker sentiment

Household financial decision-makers around the world feel their countries’ economies are weak or, at best, stuck in neutral (Exhibit 1). This feeling was most pronounced in South Africa and in hard-hit Italy, where 73 and 64 percent of respondents, respectively, assessed the economy as weak.

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In China, however, where reports indicate greater progress in halting the spread of COVID-19, and the economy is edging toward more normal activity, 11 percent of decision-makers expressed a strong current view of the economy, while only 15 percent assessed it as weak. Among decision-makers in India, 16 percent reported a strong economy.

As with their views on the economy, household financial decision-makers tend to assess their own personal financial situations as weak. Again, this view was most pronounced in South Africa and Italy, at 39 and 21 percent of respondents, respectively. China and the US are outliers: In both countries respondents assess their personal finances, on a net basis, as slightly positive.

Notably, in all countries, respondents assess the current state of the economy more negatively than they assess their own current personal financial situations. This difference is most extreme in the UK, where net economic sentiment is 50 percentage points more negative than net sentiment about people’s own financial situations. The UK is followed by the US, Italy, and Brazil, where the differentials are 46, 44, and 42 percentage points, respectively. In China, assessments of personal financial situation are most in line with views of the economy.

Between the April and May surveys, assessments of both economic strength and personal financial situations held fairly steady in most countries. However, net assessments of economic situation deteriorated by 10 percentage points or more in each of India (-24 points), Brazil (-12 points), and the United Kingdom (-10 points). In India, net assessments of personal finances dropped by 16 percentage points.

We also asked decision-makers to look ahead and call the duration of the downturn (Exhibit 2). In April, more than 60 percent of respondents in the 12 countries, excluding India, expected the impact of COVID-19 to last at least a year or so. In May, this proportion rose to over 80 percent for many economies, including Western Europe and the UK. Outlooks deteriorated the most in South Africa, Brazil, Turkey, and India.

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When asked to project the economy and their personal financial situations three months into the future, in April respondents in most countries thought both would grow worse (Exhibit 3). India, the US, South Africa, and China were exceptions: Respondents in India envisioned both staying close to constant, while in the US and South Africa, people saw the economy improving over the next three months (by a net change of about 20 percentage points) and personal financial situations remaining relatively constant. Respondents in China predicted improvements in both the economy and their own finances.

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From April to May, decision-makers in many countries grew more optimistic about how both their economies and their own personal financial situations would evolve. In Italy, Spain, and Turkey, respondents newly saw the economy turning the corner and improving over the next three months, though on balance they continued to anticipate their own financial situations would decline. Also in May, respondents in Brazil and India joined those in South Africa and China in expecting improvements in both the economy and personal financial situations.

Household financial decision-makers in the UK, France, Germany, and Russia remain less optimistic for the next three months, indicating, on balance, declining expectations for both the economy and their personal financial situations. In the May survey, household financial decision-makers in the US continued to expect that the economy would grow stronger, along with a slight weakening in personal finances.

2. Consumer impact

Many consumers entered the COVID-19 crisis ill-prepared for the prospect of diminished or lost income. Accordingly, we explored the impact of the pandemic on their financial behaviors and use of financial services products.

To establish a baseline view of current financial strength, we asked about people’s concerns over their employment (Exhibit 4). Concern was more or less steady from April to May, although it varied widely by country: In Germany 13 percent of household financial decision-makers expressed concerns over job security, while in both India and South Africa this number was roughly 60 percent.

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Within this vulnerable group, in most countries half or more held savings below four months’ worth of expenses. On a relative basis, however, decision-makers in Germany and China indicated they felt better off: In both countries, fewer than 10 percent of respondents said they feared for their jobs and had four or fewer months of savings.

We have also surveyed decision-makers on their household income, savings, and spending over the past month (Exhibit 5). In May, respondents across all countries reported decreased income and savings on a net basis. The most drastic reduction was in South Africa, with 71 and 76 percent of respondents, respectively, reporting decreases. Even in China, decision-makers are still reporting reductions in household income and spending, at 50 and 43 percent respectively.

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Household spending presents a more mixed picture. In South Africa again, the largest number of decision-makers reported a decrease, at 54 percent, followed closely by the UK, India, and Russia. By contrast, in each of Turkey, Brazil, and China more people reported spending increases than decreases.

Since the experience of the COVID-19 lockdown is sure to alter many aspects of personal and business life, we inquired on decision-makers’ expectations of future banking patterns. Not surprisingly, consumers’ reliance on cash payments during the COVID-19 lockdown has decreased substantially in most of the representative countries (Exhibit 6). From April to May, meaningfully more customers shunned cash in South Africa, the UK, and India. For credit cards and mobile payments, shares of consumers changing their habits were mixed, while electronic payments showed stronger gains.

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We also probed a broad range of additional financial behaviors, including, for example, missed past loan payments and asset allocation plans (Exhibit 7). Rates of missed mortgage payments over the past month vary by country and region, with India and Italy reporting the highest rates at 16 and 13 percent, respectively, and Russia reporting the lowest at 1 percent. Across high-income countries, the percent of people who report having missed a mortgage payment grows roughly proportionally with the fraction of people assessing their own personal financial situations as weak.

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Intent to change asset allocation over the coming three months also varies widely across countries. More consumers in India and China plan to make changes, at 70 and 46 percent, respectively, whereas fewer consumers in the EU expect to make portfolio adjustments. Across high-income countries, the fraction of people reporting plans to change asset allocation is roughly proportional to the fraction assessing the current state of economy as weak.

3. Consumer expectations of banks

The survey also included questions on decision-makers’ current relationships with their banks (Exhibit 8). In most countries, a large majority—over 70 percent in most of Western Europe, for instance—indicated that their banks were at least meeting their expectations during the COVID-19 crisis. Performance above expectation was highest in Turkey and India. However, in several cases, decision-makers’ banks were not meeting expectations for a significant minority, including in Spain, Russia, France, and Italy.

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By May, assessments of bank performance had changed little, and were on the whole positive, but disappointment persisted above 20 percent in South Africa, Brazil, Spain, and Russia.

When asked about how their banks could provide support during this period of uncertainty, consumers indicated a wide range of needs—creating service and support opportunities for banks (Exhibit 9). Again, opinions varied little between April and May. Customers were nearly unanimous in desiring waivers on late fees, and in a number of countries expressed a desire for reduced minimum payments, as well as forbearance on loans and mortgages (although on the last point, fewer in May than April). Higher limits on contactless payments were also in demand in Western European countries.

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In a handful of markets—Germany, Spain, and Italy—consumers are looking to their banks for an explanation of the COVID-19 crisis. In China, where mobile and digital banking are highly evolved, consumers instead requested education on their banks’ mobile and on-line tools, and 50 percent called for improvements to banks’ web sites. Similar on-line expectations were seen among about one-third of customers in the US, Turkey, and Russia.

4. Future outlook

Looking ahead to a potential next normal, consumers expect to increase their reliance on remote banking, but with significant variation across countries (Exhibit 10). The preference was especially pronounced in South Africa, Brazil, and India as a net gain of over 30 percent of consumers indicated they will increase their use of on-line and mobile banking once “normal life” resumes. Customers in China retreated from the April survey, although a net 15 percent of people say they will increase use of on-line and mobile services. In the US and Europe, the expected shift to on-line and mobile banking services is more muted.

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In addition to the dozen countries summarized above, we have developed detailed surveys on an additional 14 countries, which also will be regularly updated. In coming months, we will conduct further surveys on the evolution of economic and financial expectations, perceptions, and behaviors of financial decision-makers all of these countries.

About the author(s)

Olivia White is a partner in the San Francisco office, Jonathan Gordon is a partner in the New York office, and Atakan Hilal is a partner in the Istanbul office. Ajay Gupta is a senior expert in the Atlanta office, and Joshua Hsu is a consultant in the Cleveland office.