Last year, when Silicon Valley, Signature, and First Republic failed, four out of five US online consumers knew about it. This year, major bank failures have been small, so I had to search for the “Mary Poppins moment.” Still, consumer attitudes about bank failures haven’t changed. Our September 2024 Consumer Pulse Survey revealed this.
This year, less than one in five consumers knew about the recent failures of Citizens Bank – Iowa, Heartland Tri-State Bank – Kansas, and Republic First Bank – Pennsylvania. That’s what changed. What’s stayed the same, however, is that:
- People will line up for their money. The ways people will ask for their deposits back in a run have remained stable. Nearly 45% of US online consumers will appear in person at a branch to withdraw their money. Some will use digital channels, and mobile edged up versus online as a channel this year. That comes as little surprise, as usage of mobile apps has increased over the years.
- Big still doesn’t necessarily mean better. Even though fewer consumers knew about bank failures, the percentage of them agreeing with the statement that “Larger banks are inherently safer than smaller/regional banks” stayed remarkably steady. The absence of a crisis doesn’t win consumers over to the “too big to fail” argument any more than the presence of one does.
- Deposit insurance won’t keep the lines from forming. Despite decades of FDIC insurance, consumers still want to get their money back fast. Over two-fifths agree that they’d withdraw all funds if news reports indicated their bank was having difficulties. They fear inconvenience from the FDIC resolving a failure. Like young Michael Banks in “Mary Poppins,” they’d arrive before things worsen and demand their money back.
Banks plan to avoid failure. That’s core to their business. As we saw last year, however, rapid shifts in consumer attitudes can quickly put a bank on the ropes. The good news is that bank failures were hard to find (so much so that we couldn’t find one in Europe this year).
Will there be more bank failures? Yes. Consumers think traditionally about them. Some will use their app to transfer money, but most will act like we’re in Victorian England: Read the news, line up, and demand their money back. Despite our advances, last year’s lessons remain true: A run on an adjacent bank affects even sound institutions; customers are ambivalent about deposit safeguards; and calming mechanisms may not maintain the status quo.
Should you wish to discuss our findings further and you’re a client, schedule a guidance session or inquiry with me. Not a Forrester client? Contact your Forrester account team and tell them, “I want Forrester Decisions!”
