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

Social media influencers have been building up a whole new economy and offering brands and marketers a new platform to engage with their target audience. Among these financial influencers or ‘finfluencers’ have been steadily building up a strong follower base, especially in the last 4-5 years, and seen a accelerated pace during the pandemic period, when people started to lay a greater emphasis on financial planning for the future.

During the Covid pandemic, the popularity of finfluencers in India skyrocketed as a result of a surge in new investors entering the market. This surge was facilitated by user-friendly trading apps developed by modern brokerage firms, along with the widespread availability of affordable smartphones, inexpensive data plans, and digital payment systems. Despite the existence of the term "finfluencers" before this period, Covid acted as a catalyst for the emergence and growth of these finance influencers.

The last few years have seen several finfluencers build a loyal fan base and catching the eye of the people and marketers alike.

However, unlike in the case of most social media influencers, when it comes to financial investment and one’s hard earned money, there are some cautionary notes to be observed as well.

As can be seen in the recent action of the Securities and Exchange Board of India (SEBI) against a well-known finfluencer PS Sundar. In a first such action, SEBI has banned Sundar from trading for a year as well as fined him for violating investment advisor rules.

Finance Minister Nirmala Sitaraman has also sounded a cautionary note on influencers, stating, “Social influencers and financial influencers are all out there, but a strong sense of caution is required in each one of us to make sure we do double checking, counter checking, and don’t go as a flock into something and therefore protect our hard-earned money.”

She added, “There are many Ponzi apps on which we’re working with the IT Ministry and RBI, and clamping down on them like never before.”

Growth amid caution

Amid the Government advising caution, the world of finfluencers continue to see a growth curve. In this two-part series, Adgully seeks to explore the world of finfluencers, understand the factors contributing to the growth, how finfluencers are shaping the future of investment, and much more.

Speaking to Adgully on the growth of the finfluencer economy, Manisha Kapoor, CEO & Secretary General of ASCI, pointed out, “People experienced significant economic uncertainty and financial insecurity owing to the pandemic. This was the time when they looked for reliable sources of information and advice to help them navigate the financial challenges brought on by the crisis and looked to non-traditional sources like social media for financial guidance and education. The pandemic made people more attentive to their finances, and finfluencers, with their insights and guidance, convinced consumers on how to manage money matters during those challenging times and develop a connection with them. So, certainly, Covid has been a significant catalyst for the rise of the finfluencers.”

A study conducted by Motley Fool revealed that 91% of Gen Z and 75% of millennials rely on social media as their primary source of information on investing, surpassing all other sources. According to a report from Statista, the influencer marketing industry in India had a valuation of over Rs 12 billion in 2022, with a projected compound annual growth rate of 25% over the next five years.

It is estimated that by 2026, the industry’s market value will reach Rs 28 billion. As of 2023, approximately 55 million urban Indians were direct consumers of various types of influencers.

The growth factors

The rise of financial content can be largely attributed to its transformation into easily consumable formats. The popularity of social media, which was initially driven by the appeal of bite-sized content, played a significant role in this phenomenon. Younger generations, in particular, are averse to attending lengthy financial conferences or delving into lengthy finance books. Instead, they prefer accessing the same information quickly, for free, and at their convenience through their smartphones.

According to Manisha Kapoor, “Financial knowledge is complex and could be challenging for laypeople to fully comprehend. Before, this was an opportunity for qualified professionals to charge high fees for financial guidance. Topics of money management and making investments have seen rising in popularity in recent years. Finfluencers globally have been able to build engaged audiences by using relatable stories and personal experiences, making the problem of money less intimidating, particularly for Gen Z and millennial audiences.”

She further said, “Some of the factors that seem to have fuelled this growth are increasing interest in personal finance, especially after the pandemic which created financial challenges, digitisation leading to increasing use of digital and social media platforms and also the growing entrepreneurial spirit of the young population.”

Additionally, with advancing technology, the financial sector, too, has made tremendous progress. There are an array of innovative, new, and complex, non-traditional financial instruments available for both first-time and experienced investors. Here is where consumers depend on financial influencers, or ‘finfluencers’ for their advice. The fact that financial influencers claim to have a wide knowledge base which includes information about the latest financial instruments has increased their appeal among consumers. Besides, they don’t restrict their content to one language alone and produce content in regional languages as well which has added to their newfound popularity and reach.

“Consumers who follow finfluencers depend on them to educate themselves about both new and existing financial products and services and to guide them in making informed decisions,” she noted.

Finance influencers possess valuable expertise in areas such as banking, money management, cryptocurrency, stocks, and the economy. However, there have also been instances where prominent fintech brands like HDFC or Dhani Loans have leveraged the potential and influence of non-finance influencers who can better connect with their target audience. While finance influencers specialise in financial matters, they also address everyday concerns like salary management and expenses. This dynamic allows both finance and non-finance influencers to serve as effective mediators for widespread communication that benefits brands on a larger scale.

(Tomorrow: Part 2 – How finfluencers are shaping the future of investment)