Recent banking failures, including the collapse of Silicon Valley Bank (SVB) and Signature Bank, as well as woes faced by First Republic and Credit Suisse, have wreaked havoc on a scale not seen since the initial COVID-19 market crash in 2020.
While most Americans are waiting for the next shoe to drop, many are also beginning to question the safety of their own assets. According to the FDIC, US banks incurred a total of $620 billion in unrealized losses in 2022, making widespread unease somewhat understandable given the concurring inflationary concerns and banking failures. Customers are questioning not only their own banking relationships, but their discretionary spending, retirement plans, and long-term planning. Half of all consumers are extremely or very concerned about their personal finances when considering the economic outlook and cost-of-living crisis, per a February 2023 global PwC survey. While consumer trust in their primary bank and the US banking system may waver in the short term, banks should be focused on long-term consumer confidence and trust.
Forrester Research predicted that banks would lose consumer trust in 2023 amid the dampening economic outlook, and it has already seen signals that trust is softening. Consumer trust in banks fell for the first time since 2018, after reaching an all-time high of 64% in 2021, according to Forrester’s 2022 Banking Customer Experience Index. Given that confidence in banks was already trending low in late 2022, the latest shocks to the banking system are expected to lower trust even further.
Consumer confidence has plummeted following most financial crises since 2007—so we’ll likely see a downturn in confidence in the coming months following the recent implosion of several US banks.