The Finfluencer Opportunities and Threats

A “finfluencer”—or finance influencer—is an influencer that shares financial information and expertise. 

They offer Gen Z and Millennials financial advice in snackable, light-hearted formats and are becoming an increasingly popular source of financial information on social media. 

What are the opportunities?

Connect with new generations and upcoming spenders

Using social media and influencers is one of the best ways to connect with the Gen Z and Millennials. Traditional and fintech banks can use finfluencers to help connect and teach these generations genuine and helpful financial advice. As a result of COVID uncertainty and high unemployment rates, these younger generations are actively seeking financial advice. These generations are also becoming the largest spending spenders, so banks and fintechs can use finfluencers to explain budgeting and saving advice in bite-sized and understandable ways. 

Prevent high-risk investing and crypto FOMO

FOMO culture dominates social media, but particularly on TikTok. As a result of the popularity of Fintok, many TikTok users have created videos discussing their own success with investment in stocks and cryptocurrency. However, some neglect to inform about the risks of investing in these, leaving the Financial Conduct Authority (FCA) concerned at the number of high-risk investments from young people. Using expert finfluencers, financial institutions can inform TikTok users on how to safely identify and invest in real stocks and cryptocurrencies. This way TikTok users aren’t feeling like they are missing out but are being wise and safe with their investments. 

Gain cultural relevance

Using finfluencers can be a great way to show social media users you understand their wants and needs. By using popular and relevant finfluencers, financial institutions can earn a competitive edge over their competitors as they are showing cultural relevance. Using finfluencers that can appear natively in people’s feeds, financial institutions gain social proof and allow viewers to connect with them through the chosen finfluencer. As the world continues to favour digital, using finfluencers is an easy way for traditional banks to get their foot in the social-door. 

Teach younger generations about fintech

Millennials are less financially literate than the generations before them and are also one of the most indebted generations. However, they are the most likely to use fintech. This gives an opportunity to established and upcoming fintech businesses to use expert finfluencers (or perhaps use their own employees as finfluencers?) to promote their services while teaching Millennials about personal finance. Social media offers instant access to financial information, but using finfluencers helps personify fintech companies and makes a typically confusing topic easy to understand.

What are the threats?

Excessive positivity and encouragement for high-risk investments

Finfluencers are actively trying to reinforce their position as finfluencers. They are more likely to gain followers and a viral hit if they explain investment opportunities through rose-tinted glasses. However, by emphasizing the positive wins of investing, these finfluencers are not fully informing their audiences of the risks involved. In addition, as many platforms aren’t regulated, advice finfluencers are giving may not be correct, opening the threat of misinformation and even fraud. This means people are making high risk investments without understanding the incredibly serious risks involved. 

Influencers abusing their position of power

In recent times, many reality stars and influencers have abused their positions of power by promoting dubious finance assistants, debt schemes and cryptocurrencies to their large audience bases. When financial information is provided by a non-financial expert, the likelihood of their audience being well informed on personal finances is relatively low. This means any financial information is incredibly misleading and stands a high chance of being fraudulent; Kim Kardashian has been criticised by the head of the FCA for promoting an untested cryptocurrency on Instagram. As these stars have large fanbases, many of their audience members will follow blindly as a result of misplaced trust.

FCA concerns over social-media encouraged investments

The FCA has voiced serious concerns over young people actively seeking out investments online and says social media is responsible for young investors taking on too much risk. Research has shown that more than half of young investors have purchased a cryptocurrency using loans and credit cards. 

Discussing TikTok directly, the FCA has said people should be wary of fake finfluencers “promising high-return investments” and encourages people to do their own research. The FCA has called for social media platforms to create regulations for the promotion of financial products that have not been approved by an FCA-authorised firm. 

Platforms banning the promotion of financial services

As a result of the FCA threatening action if social media sites continue to promote risky, and occasionally fraudulent, investments to inexperienced consumers, many have begun taking steps to protect their users. In July, TikTok globally banned the promotion of certain financial services products including investment services, foreign exchange and cryptocurrency. Google has also clamping down on finance fraud by forcing all financial services advertisers to prove and display they are authorised by the FCA. 

In addition, it is likely the developing Online Safety Bill will include new regulations financial institutions and social media platforms need to be aware of. 

Our Influencer marketing agency and Social agency are located worldwide, with our agency network based in the USA, UK, UAE and China.

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