How brands can effectively leverage finfluencers and bring in the trust factor

When Instagram introduced its short video feature, ‘Reels’, in 2020, no one could envision at that time that the platform could become a hub for financial advice. However, within just two years, Reels has become a preferred space for fintech firms and brokerages to promote their products through finfluencers. The popularity of financial advice on social media platforms is undeniable.

Growth of the Finfluencer Ecosystem

Financial influencers have played a significant role in making personal finance and related topics, such as equity, fixed income, commodities, F&O, and taxes, accessible to the masses. They have taken these subjects beyond a select group and brought them to a wider audience.

According to Ashish Tiwari, CMO, Home Credit India, “The whole finfluencer or finance influencer ecosystem in our country is fuelled by one key factor: low financial literacy rate in our country. India has a literacy rate of nearly 80% of its population, however, only 27% of its adult population is financially literate, and for women, this number is around 21%. Being financially literate might sound obvious, but in the real world, most people lack understanding and essence about personal finance management.”

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Indepth: Finfluencers Part 1 – The high growth phenomenon amid caution

Indepth: Part 2 - How Finfluencers are shaping the future of investment in India

Stressing on the need for financial literacy, Tiwari noted that traditionally it is considered complex and added that our traditional financial lingo has only fortified this belief. Financial understanding stretches beyond investing in the stock markets; there is a whole universe of personal finance that exists, and this is where the finance influencers fill the gaps. “These finance influencers simplify complex financial concepts and explain them in layman’s terms, which keep people engaged, entertained as well as informed. This would also explain why their content is more popular among people within the age group of the early 20s to early 30s as they usually are first timers to get to play their hand with their own earned money,” he added.

Tiwari further said that one of the major factors that is fueling the growth of finfluencer is the rapid expansion of mobile phones. With data-enabled ubiquitous mobile phones, people have easy access to information on personal finance and investing, which has increased the number of people interested in learning about finance. Additionally, mobile banking apps, loan, and trading apps have made it easier for people to manage their finances. As a result, finance influencers’ range of content has also expanded.

Ayush Shukla, Founder, Finnet Media, noted that the finfluencer ecosystem has skyrocketed in the previous two years. And the reason for this is mostly related to Covid. He pointed out, “Covid indeed helped improve financial awareness because the stock market was rising and people were at home, so they had disposable income because they weren’t spending it on going to movies or on traveling. As a result, they had more cash. The stock market was present. They desired to be financially savvy. They had some spare time. So, all of these led to the finfluencer ecosystem, because they used to educate others about it, tell them where to invest, and encourage them to be aware of these things, which was a significant catalyst. And now, the younger generation is privy to more and more finance information.”

Yash Bhargava, Director - Marketing and Communications, Waterfield Advisors, didn’t find it surprising that the term ‘finfluencer’ has become a part of our vocabulary, however, he said that the jury was still out if it was a boon or a bane. According to Bhargava, there are three key factors that have greatly contributed to the rise of finfluencers. First, given the decreasing attention span of the netizens, the asymmetry of financial information is distilled in a crisp and engaging story-telling format. Second, is the rise of fintech apps, which have made it so easy for people to invest. In any industry, adoption increases when friction reduces. Fintech apps have given people the tools to invest, but have left them to fend for knowledge themselves. “Third, and which I think is the ultimate factor, is ‘free advice’. ‘Finfluenced’ individuals think that the advice is free when compared to a SEBI-Registered Investment Advisor. However, they fail to understand how expensive free advice can be,” he pointed out.

Bhargava considered the rise of finfluencers to be a double-edged sword. “In a country like India, where only 7% of the population invests, as compared to over 55% in the US, we need more citizens to participate in the capital markets. However, the cliche – ‘With great power (and in this case, with great follower count), comes great responsibility’ – has never been more accurate. Finfluencers must realise the impact of poor advice on the lives of their followers,” he cautioned.

How Covid paved the way for Finfluencers

Amidst the unprecedented situation caused by the Covid-19 pandemic, India’s financial capital faced significant challenges. However, simultaneously, the financial markets were experiencing an extraordinary surge. The stock markets witnessed a remarkable rally, reaching new record highs. Foreign investors showed great confidence and invested billions of dollars, while millions of new investors joined the market, leading to unprecedented trading activity. However, it is important to note that not only financially savvy investors were taking advantage of these market conditions.

During the Covid-19 pandemic, individuals found solace and entertainment in their favourite influencers on platforms like Instagram. This added to the growing trend of seeking financial advice and solutions through social media platforms, blurring the lines between entertainment, influence, and financial recommendations. However, followers need to exercise caution and conduct their research before relying solely on influencer recommendations, especially when it comes to financial matters.

“The Covid-19 pandemic has been a strong catalyst for the rise of finance influencers in India. With the lockdowns and economic uncertainties, people started looking at their finances and financial planning, in particular, to secure themselves from any emergency. The news of job loss and salary cuts during Covid was rampant, which prompted people to explore other sources of income. This trend led to a surge in the number of people turning to finance influencers for guidance and advice on managing their finances. Additionally, with more people spending time at home due to the pandemic, there has been an increase in the consumption of online content, further contributing to the growth of finance influencers in India,” said Ashish Tiwari.

Yash Bhargava pointed out, “The COVID-19 pandemic significantly catalysed the rise of ‘finfluencers’. Firstly, an increase in disposable income due to lifestyle adjustments led to a surge in Demat accounts from 40.9 million to 100.5 million, according to data from NSDL and CDSL, signaling a widespread investment interest.”

“Secondly, lockdown-induced shifts in digital content consumption resulted in substantial growth in finfluencer follower counts. Lastly, the pandemic’s harsh reminder of life’s uncertainties led to a heightened awareness of financial security, thereby underscoring the importance of finfluencers’ guidance. Their combination of digital fluency and financial expertise uniquely positioned them to fill this need, further propelling their prominence,” he further added.

However, increased scrutiny of financial influencers has emerged due to unethical trading practices observed in the market. Government officials and regulatory bodies are now exploring ways to regulate the actions of these individuals.

SEBI expressed its intention to introduce regulations starting from January 2022, but official guidelines have not been issued yet. Recently, SEBI prohibited mutual funds, registered investment advisors (RIAs), and research analysts (RAs) from advertising through influencers with more than 10 lakh subscribers.

Addressing concerns about financial influencers, Finance Minister Nirmala Sitharaman had cautioned about the dangers of ponzi apps that offer financial solutions. While there is currently no proposal to regulate finfluencers, the Minister emphasised on the need for caution, noting that not all advice may be objective and unbiased.

In a recent announcement, the Reserve Bank of India (RBI) stated that there are no immediate plans to introduce regulations specifically governing the activities of finfluencers. The situation remains under observation.

BFSI brands and finfluencers

Despite the cautionary tone, the fact is that financial influencers play a crucial role in informing consumers about financial products and services. Ashish Tiwari noted that while financial companies have traditionally relied upon conventional methods to convey information related to products and services, working with finfluencers enables them to tap into their expertise, build brand awareness, and drive customer acquisition. “By leveraging channels such as partner marketing, brands like Home Credit access a vast network of pre-qualified leads who are actively seeking financial services such as mobile financing, personal loans, and EMI cards. This approach allows BFSI brands to stay ahead of the competition and reach a wider audience through the influencer’s established and engaged following,” he added.

Ayush Shukla, too, said that both new and established brands understand that if they want to be relevant to the younger generation, they need finance influencers because they have the younger audience who will be the spenders. And new brands have no choice but to do so, because it is how they will gain trust through credibility by association with finfluencers. “This is how they collaborate from Instagram posts, using their faces and running advertisements to communicate with their customers,” he added.

While stating that primarily, finfluencers are becoming invaluable assets for customer acquisition, Yash Bhargava pointed out, “These influencers possess an engaged and ready audience, ripe for investment and trading. This audience is keen on exploring and using the variety of investment products offered by BFSI brands. This dynamic not only enables a brand to widen its customer base but also has the potential to boost the average revenue per customer, leading to an overall increase in the brand's profitability.”

He also mentioned, “Relatively new entrants in the fintech and BFSI sector are turning to finfluencers to build and bolster their credibility. Trust plays a paramount role in the financial services landscape, and newer brands are buying it for cheap. In this context, finfluencers, with their established trust among followers, offer a smart solution. By associating with these influencers, BFSI brands can borrow their credibility and portray themselves as safe and trustworthy options for financial services. This is an especially cost-effective strategy for burgeoning brands aiming to cement their foothold in the industry.”

The trust factor

The entire category of finance is based on trust. As Ashish Tiwari said, “We aim at creating campaigns/ channels that would help consumers celebrate their achievements. What is necessary is how a brand communicates the right message to the consumers at the right time which is easier to comprehend. The financial industry is highly regulated, and consumers need to trust the brands they do business with. Therefore, BFSI brands need to ensure that the influencers they work with have a strong reputation and are viewed as trustworthy by their audience. Hence, marketers need to check the history of influencers and look at their previous content through a microscopic view before any collaboration.”

Regarding ROI, like with any other business, BFSI brands also seek a measurable return on their investment in influencer collaborations. This could include metrics such as increased website traffic, lead generation, customer acquisition, or revenue growth. The exact ROI that a brand seeks will depend on its specific goals and the nature of the collaboration. However, it is important for BFSI brands to carefully measure the ROI of their influencer collaborations to ensure that they are getting the desired results and that their investment is worthwhile.

“Trust, followed by views, and finally, loyalty is what I believe is most vital for a brand,” said, Ayush Shukla, adding, “Trust in that creator, as though he knows what he is talking about, followed by his views and then loyalty. Every brand, I believe, seeks ROI, as evidenced by a 3x return. We don’t work based on ROI; instead, we work based on creative thoughts and execute on what we previously agreed upon.”

On the other hand, Yash Bhargava said, “Dictated by the campaign objective, ROI for every BFSI brand differs considerably. Views or impressions are the go-to metrics for brand awareness, however, click rate, and sign-ups are the metrics to track if the objective is customer acquisition. It all depends on what level of the marketing funnel are you trying to solve. According to me, the follower count of the influencer should define the campaign objective. Above 250K count, it should be brand awareness, but if you’re dealing with a finfluencer below 250K count across all social media platforms, you should look at customer acquisition.”

Kunwar Raj, Founder of Unfinance and Finance Content Creator mentioned, "The content in the finance domain is ultimately going to be limited and revolve around a few major pillars. Therefore, seeing similar content being posted by multiple creators is a common case. In this scenario, while the creator is researching for content and if they come across something that has gained millions of views, due diligence is set aside in lieu of views. The creator shares the same information in his/her unique style and in the end the community suffers."

Harsh Goela, Co- founder of Goela School of Finance and Finance Content Creator shares, "Preventing the spread of fake news and misinformation in the finance industry requires a multifaceted approach, and finance influencers have an important role to play in this process. Here are a few ways that influencers can help curb the spread of false information: Firstly, it would be helpful if there were clearer regulations or guidelines from relevant authorities on how finance influencers should operate. By providing a clear framework for responsible and ethical behaviour, these guidelines could help influencers stay accountable and ensure that their content is  accurate and trustworthy. Secondly, influencers should prioritise facts over opinions when creating content. While opinions and personal insights can certainly be valuable, they should always be based on a solid foundation of accurate and reliable information. By fact-checking their sources and verifying their data, influencers can help ensure that their followers are receiving reliable and trustworthy information. Finally, influencers should make a point of sharing their sources at the end of their content. By providing links to relevant articles, reports, and other sources of information, influencers can enable their followers to cross-check their claims and verify the accuracy of their content. This not only promotes transparency and accountability, but also encourages a more informed and discerning audience that is better equipped to identify fake news and misinformation."