The COVID-19 pandemic has taken root in nearly every country on the globe, upending personal and economic lives. Six months into the crisis, some countries have managed to control new cases, while in others the spread remains rampant. While many countries have reopened their economies, allowing a cautious return to work, play, and economic life, the pandemic seems likely to remain a fact of life for the foreseeable future.
This article is an update on the surveys McKinsey conducted in April and May 2020 to assess the immediate effects of COVID-19 on financial sentiment, behaviors, needs, and expectations among household financial decision makers around the globe. The survey covers 30 countries, together accounting for 70 percent of the global population, and 83 percent of all COVID-19 cases reported as of June 30 (see sidebar).
As of mid-June, across the globe, decision makers’ assessments of the health of their national economies were negative, but for most countries they had improved from mid-May. More notably, reported future expectations for the next three months improved meaningfully from May to June across almost all countries.
More concrete markers of financial health remain tenuous. Household financial decision makers across the globe continue to report decreases in income and savings ranging from 30 percent to 80 percent. And in most countries, between 20 percent and 60 percent of decision makers say they fear for their jobs.
In other areas, customer views of banks’ service quality and how they will engage with banks changed little since the May survey. In this stressed environment, what customers continue to want most from their banks is tangible support 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 those interactions more likely to transmit disease. Against this backdrop, in most countries consumers indicate that banks are meeting their expectations—but generally not exceeding them, at least on a net basis.
Following are 10 survey observations focused on a subset of 16 countries, selected for their global and regional economic significance, and the severity of the COVID-19 pandemic on their populations.
Would you like to learn more about our Financial Services Practice?
1. Financial decision makers feel their country economies and personal finances are weak, but sentiment has risen since May
Measures of economic sentiment improved somewhat in the June survey, but household financial decision makers around the world continue to report that their countries’ current economies are weak (Exhibit 1). Net sentiment improved by 7 percentage points or more in Brazil, the U.S., Italy, Spain, and Turkey.
Household financial decision makers also tended to rate their personal financial situations as weak, with very little change from May. However, in China, the US, and the UK, respondents see their personal finances, on a net basis, as slightly positive.
Notably, in all countries, respondents assessed the current state of their economies more negatively than they viewed their own financial situations. This difference was most extreme in the UK, followed by Brazil, Italy, and the US. Ratings of personal financial situations were most in line with views of the economy in China, India, and Indonesia.
2. Each month, more consumers expect the impact of COVID-19 on the economy will last a year or longer
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 most of the 16 countries expected the impact of COVID-19 to last at least a year or so (India and Indonesia were the exceptions). By May, the proportion had risen to over 80 percent for many economies, including Western Europe and the UK. And in June, over 90 percent of respondents within many European countries expected the downturn to last at least a year. Outlooks deteriorated most in South Africa, Mexico, and Indonesia. Countries in Asia-Pacific, including China, India, and Indonesia, are generally more optimistic.
3. Respondents in most countries expect the economy to improve in three months, with more mixed personal financial outlooks
When asked to project the state of the economy and of their personal financial situations three months into the future, in April respondents in most countries thought both would grow worse (Exhibit 3). Decision makers in India, the US, South Africa, and China were more optimistic, and thought that at least their own personal financial situations would improve.
In May, decision makers in many countries had grown more optimistic. Respondents in just four countries—France, Germany, Russia and the UK—continued to think that both the economy and their own financial situations would get worse.
Expectations continued to improve through June, when only financial decision makers in France expected deterioration in both the economy and personal financial situations over the next three months. Decision makers in all examined countries outside of Western Europe and Chile expected that both the economy and their own personal financial situations would improve.
4. Job security concerns remain high—and over half of people concerned about their jobs also have less than four months of savings
To examine the direct impact of the pandemic on consumers, our surveys explore concerns over employment, reported financial behaviors, and use of financial services products.
Job security concerns remained roughly constant from May to June, although they varied widely by country (Exhibit 4). In Germany, 9 percent of household financial decision makers expressed concerns over job security, while in India, Chile, and South Africa that fraction was over 50 percent. Furthermore, in most countries more than half of people with job security concerns held savings to cover less than four months’ worth of expenses.
5. Respondents continue to report reduced income, savings, and spending
We also surveyed decision makers on their household income, savings, and spending over the preceding month (Exhibit 5). In June, respondents across all countries reported decreased income and savings on a net basis. The most drastic reductions were found in South Africa and Indonesia, where over 70 percent of respondents reported declines in both income and savings.
Household spending presents a more mixed picture. In wealthier countries such as the US, Canada, and the UK, more decision makers reported reducing spending than increasing spending. For example, in Canada, 51 percent of respondents have reduced household spending while only 19 percent have said they increased spending. On the other hand, in countries in Asia-Pacific and South America such as Indonesia and Brazil, more consumers claimed to have increased spending than decreased. In fact, 46 percent of respondents in Indonesia actually increased spending while only 25 percent claimed to have decreased spending.
6. Cash use has decreased while remote payments have increased
We also asked about changes in decision makers’ banking patterns during the COVID-19 crisis, and found that reliance on cash payments has decreased substantially in most countries examined (Exhibit 6). From May to June, indicated forms of payment changed little from the April survey. However, in some countries where economies began to reopen in May—most notably Italy, Spain and the US—the use of cash increased. In contrast, in Mexico, consumers reported a decrease of 8 percent in the use of cash.
7. Missed loan payments and plans to change asset allocation vary widely by country, with some patterns in high-income economies
We also probed a broad range of additional financial behaviors, including, for example, missed past loan payments, and plans for asset allocation (Exhibit 7). Rates of missed mortgage payments over the past month vary by country and region, but across high-income countries, the proportion of survey participants that noted having missed a mortgage payment grows roughly proportionally with the share of people reporting weak personal financial situations.
Intent to change asset allocation over the coming three months also varies widely across countries. Decision makers in emerging markets were more likely to make changes than those in Europe, the US, and Canada. Across high-income countries, the fraction of people reporting plans to change asset allocation is roughly proportional to the fraction who deemed the economy to be weak.
8. In most countries, respondents indicated banks were at least meeting expectations—with several exceptions
The survey also explored decision makers’ current relationships with their banks (Exhibit 8). In June, in most countries most respondents indicated that their banks were at least meeting expectations during the COVID-19 crisis. Performance above expectations was highest in Turkey and India, and lowest in Chile and Russia. Sentiment in most countries was largely unchanged from May. However, the US and Turkey both saw a significant gains in satisfaction with bank performance, with respective net increases of 9 percent and 8 percent.
Financial decision-maker sentiment during the COVID-19 pandemic: A global perspective
9. In this stressed environment, what customers continue to want most from their banks is tangible support on credit terms
When asked how their banks could provide support during this period of uncertainty, consumers indicated a wide range of needs—creating service and support opportunities (Exhibit 9). Again, opinions varied little between May and June. 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. Higher limits on contactless payments were also in demand in Western European countries. In June, we also found an increase in the number of countries in which decision makers rank “improved website that enable seamless transactions across all banking services” in the top three considerations.
In China, where mobile and digital banking are highly evolved, consumers instead requested education on their banks’ mobile and online tools, and 50 percent called for improvements to banks’ web sites.
10. Consumers indicate they will use digital banking more once the crisis is over, but with significant variation by country
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 online and mobile banking once “normal life” resumes. Even in countries with mature digital banking such as China, roughly 40 percent of respondents said they would make greater use of online and mobile services. In the US and Europe, the expected shift to online and mobile banking services is more muted.
In addition to the dozen countries summarized above, we have developed detailed surveys on an additional 14 countries, which will also 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 in all these countries.
Or click directly to see one of these countries in our survey: Australia, Brazil, Canada, Chile, China, Egypt, France, Germany, Greece, India, Indonesia, Italy, Japan, Kenya, Malaysia, Mexico, Morocco, Nigeria, Pakistan, Romania, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Turkey, United Arab Emirates, the United Kingdom, or the United States.
