The Silicon Valley Bank Collapse Drove Some U.S. Adults to Diversify

To say it’s been a tumultuous week in banking would be putting it mildly. Yet despite the failure of two regional U.S. banks and the first social media-driven run on a bank, consumers remained mostly calm and trusting of the banking system. There was, however, an unignorable share of U.S. adults who did move their money as a direct result of Silicon Valley Bank and Signature Bank failing and Silvergate Capital collapsing — but their action wasn’t driven solely by fear. Instead, recent Morning Consult data indicates that some consumers who moved their money did so because they saw a financial opportunity. Overall, consumers’ actions in the wake of the largest bank collapse since the Great Recession are a testament to just how cemented they feel to their primary providers, regardless of how or whether they move their money.

Consumers were most likely to move money to a national bank after the recent failures

As of March 17, 10% of consumers said they had moved all of their money somewhere else as a direct result of the two bank failures, and an additional 6% said they had moved at least some money.

Among those who moved money, the most common place to put it was in another bank, specifically a national bank. This aligns with where consumers believe their money is most secure: Nearly a quarter of U.S. adults (22%) said national banks are the safest place to keep money right now, the highest share of any option surveyed, followed by 18% who said credit unions.

However, money movers didn’t just shift their funds from one bank to another — they diversified. A noteworthy share of consumers who moved money in the wake of the recent bank failures said they put it in the stock market (10%), toward cryptocurrency (10%), toward physical assets like gold and silver (7%), or into bonds (5%).

These actions could be interpreted as consumers losing trust in America’s banking system, but that’s not the case: A week after the collapse of three U.S. banks, 70% of consumers say they trust banks, up 4 percentage points from the end of February.

Some millennials, high-income adults and crypto owners viewed the bank collapses as an opportunity to make money

There are several distinctive characteristics of those who moved their money as a result of the recent bank failures. They were disproportionately high earners, they were much more likely to own cryptocurrency than the general population and a majority were millennials.

What doesn’t differentiate the money movers is their trust in banks: They are as trusting of banks as the average consumer. Furthermore, these adults are nearly as likely as the general population to believe that their money is safest at a national bank (20% vs. 22%). This suggests that while money-movers — the majority of whom do not currently consider their primary bank to be a national one — put some of their money into national banks for safety, they spread the rest of it around to make money. Those who purchased cryptocurrency have already made a return, as the price of bitcoin has risen 40% from March 10, when Silicon Valley Bank failed, to March 21.

The primary banking landscape remains unchanged, for now

Moving money between or out of bank accounts is one thing, but closing accounts entirely and altering primary provider relationships is another — and it’s much more cumbersome for consumers. Movement of money between or out of bank accounts has not swayed measurably in any type of bank’s favor or altered what type of institution consumers consider their primary bank: They are still most likely to consider a national bank their primary bank, followed by credit unions and then regional banks.

That isn’t to say consumers didn’t open or close some accounts. Overall, 7% said they opened a bank account with a new provider, while 5% said they closed an account with an existing provider. Another 5% of consumers said they moved their primary account to a different bank. A slim majority of consumers (51%) said they only have one banking relationship, equal to the share that said the same before the bank failures — meaning consumers haven’t measurably diversified their banking providers either, but instead are moving from one provider to another.

While financial services leaders can rest assured that their customers tend to keep calm heads during challenging news events and maintain trust in their primary banking providers, they should not remain complacent, as there’s always a dormant group of bank-switchers. Thoughts of switching have risen. Nearly a quarter of consumers (23%) say they are thinking of starting a relationship with a new banking provider in the next six months — an 8 point increase from February. Another 14% say they are considering ending a banking relationship in that same time frame. Banking leaders should continue to communicate their strong financial positions to consumers, and especially focus retention efforts on customers who consider them to be their primary bank, while identifying dormant switchers and what might compel them to move providers.