COVID-19 and the changing financial services landscape

YouGov
July 10, 2020, 2:51 PM UTC

YouGov data reveals how coronavirus has disrupted British banking

COVID-19 came at an already tense time for British financial services. An industry that was already facing the complexities of the UK’s exit from the European Union – and the lingering aftereffects of the 2008 recession – now faced an entirely new set of challenges.

So how has the sector adjusted to the new normal, and what does its future hold?

A new YouGov webinar, hosted by Matt Palframan (Director, Financial Services Research), explores the impact of COVID-19 on financial services companies and the customers they serve.

The state of financial affairs

The session began by outlining the pre-virus status quo – a state of affairs that may have left the sector singularly unprepared for the challenges of COVID-19.

Following LIBOR, PPI, and money laundering scandals (as well as the 2008 crisis), banks experienced severe reputational consequences, as well as increased regulation and scrutiny. With damage to share prices and higher cost to income ratios between 2006 and 2018, financial services developed a decidedly conservative bent. Seven out of ten (71%) consumers think all banks are basically the same, and three in ten (3%) don’t trust them. 

Because of this, technology-driven challengers have sensed an opportunity, and have enjoyed slow – but steady – levels of growth. But they remain a small minority: three-quarters (75%) of customers bank with the big, well-established providers, and even if many think all banks are similar, they’re not too bothered about it.

Half of customers say they’d recommend their bank (51%) and a similar proportion say their bank provides great service (48%). Only 17% say challengers are as reliable and trustworthy as regular banks, and only 19% say they’re easier to use.

So desire to switch has been quite anaemic: just 4.8% intend to change banks in the next 12 months, and only 1.4% have actually done so. That said, it was also noted that 63% of Brits are now more open to digital-only mobile banks. Could COVID-19 change the status quo?

COVID is having a disproportionate effect on the financially distressed

The webinar moved on to discuss the way coronavirus has affected consumer finances. While the average of those managing their finances without difficulty has crept upwards, it may be masking the true effects of the pandemic.

Of those who consider themselves financially distressed, for example, seven in ten (70%) say they’ve experienced negative effects compared to 34% of the population in general. Over three quarters (77%) of this group have lost income, and of those who have lost income, they’ve lost 66% of it on average – and 36% estimate it will take a year to recoup these losses. Six in ten (61%) say they’ve been unable to make payments because of the pandemic, two-thirds (67%) believe they won’t be able to repay their debts because of it – and four in ten (41%) say their overall debt levels have increased.

And it’s impacting the financially distressed in ways that go beyond their bank balances. Some 37% say they’ve eaten less than normal, and 31% have reduced the number of showers or baths they’re taking.

How consumers are approaching an uncertain financial future

The final section of the session focused on how the pandemic has changed the public’s financial habits and attitudes.

The pandemic has had a dramatic effect in some key areas. Most (54%) are cutting back on non-essential spending, and 47% say they’re not using cash anymore.

The webinar explored the financial desires and priorities of Brits during the pandemic, with most (54%) cutting back on non-essential spending and 47% saying they’re not using cash unless they absolutely have to. Two-thirds (64%) say they only intend to use established and recognised providers.

But what do Brits actually want from a financial perspective? Over half (52%) just want to live their lives and enjoy themselves, while 37% just want to keep their heads above water. Eight out of ten (81%) are confident they’ll be able to achieve the former, and three-quarters (76%) say they think they’ll be able to achieve the latter. Whether this confidence is well-placed or not – and how the pandemic affects these aspirations – remains to be seen.

See the full webinar here