The United States is not known as a nation of savers compared to countries like Germany and Japan, and the pandemic seems like an unlikely time for that to change. But there is evidence to suggest that Americans are in fact changing their ways.
At a Fortune Brainstorm Finance virtual event on Thursday, executives from three digital finance companies – Square, stock buying app Robinhood, and digital bank Chime – reported a marked rebound in saving and investing.
“As stimulus checks roll in, consumers are increasing their blanket of security,” said Jackie Reses, director of Square Capital, noting that the company’s research suggested a “major shift in consumer behavior.”
Meanwhile, Chime CEO Chris Britt reported that savings balances in recent months had reached an all-time high. And Gretchen Howard, Robinhood’s chief operating officer, described an increase in deposits from $ 1,200 to $ 2,400, reflecting the amount of stimulus many individuals and couples received during the week of April 13.
Howard also noticed a 17-fold increase in deposits at Robinhood in March compared to the fourth quarter of 2019, and said that much of the trading activity on the platform consisted of purchases. Among the most popular stocks are those of airlines and cruise ship operators, which have been hit during the pandemic, a phenomenon Howard attributed to people seeking to “buy the dip.”
None of this reflects widespread prosperity, of course. New figures released this week revealed that more than 40 million Americans declared themselves unemployed during the pandemic and that the real unemployment rate in the United States is approaching 24%. While some are putting part of their unemployment checks into savings, as Britt of Chime attested, Americans are also lining up at food banks in record numbers.
Other positive metrics, including the stock market rally, may also reflect a temporary respite. Zach Perret, chief executive of Plaid, which provides digital payment connections to banks and will be acquired by Visa.
On a broader level, participants at the Fortune event predicted that the pandemic will spur a broader transformation of the US financial infrastructure. This will include the arrival of Americans to adopt contactless payment systems used in other countries and Perhaps the opening to adopt other types of financial innovation found abroad.
Julia Sunderland, Google’s payments business operations officer, described the company’s initiatives in India, which have involved collaborations with the government and nonprofits such as the Gates Foundation to build an open source financial infrastructure. The result, he said, has been a host of new services that have enabled Indians to do everything from paying phone bills to buying gold to finding out which nearby stores have essential supplies in stock.
“It was already a crucial time for payments, but now the digitization of economies is happening at a rate 10 times faster,” said Sunderland.
Executives spoke at “Fintech on the Front Lines,” the inaugural event in what will be an ongoing series exploring the role of finance companies during the pandemic.
