The virus that shaped us all

To understand where the difficulty of building trust exists, we must first look at today’s consumers and the economic climate that has shaped them.

The Covid-19 pandemic has permanently altered how we live and interact with each other, how we work and communicate, how we move around and travel. As social distancing became the norm, it resulted in an observed growth of digital consumption and the     deterioration of mental well-being within the general populace. Let’s take a closer look at some of those factors and how they culminated in the rise of the finfluencer.

1. Covid-19, a naturalistic stressor - How chronic stress impacted our cognitive functioning and risk taking

Studies in Singapore have seen a decrease in overall health and mental well-being. Based on a study conducted by the Institute of Mental Health (IMH), 9.3% met the criteria for mild to severe stress. With the top sources of stress including risk of family members or friends getting infected by Covid, financial loss, and unemployment. Additionally, studies have shown the correlation between chronic stress and the decrease in cognitive function and heightened risk- taking patterns. A study done in the US showed a marked decrease in individuals’ executive functioning, due to anxiety displacing cognitive resources (i.e. working memory) necessary for successful goal-directed control.

2. Rise of user generated content - People spending more time watch videos that other people make

For reference, internet services have seen rises in usage from 40% to 100% as compared to pre- lockdown levels, while video content services have seen a tenfold increase of usage. While some of these changes are due to the shift from office to online work model, many people are also switching towards digital forms of entertainment such as gaming and social media. In a survey conducted by Digital Commerce 360, 72% of participants agreed that their social media consumption has increased during the pandemic, while 43% posted more frequently. Among all platforms, the most popular, Instagram (30%), TikTok (24%) and YouTube (21%) were identified as the preferred platforms. With greater numbers flocking to social media platforms, the creator economy has also exploded. Most notable is TikTok, which had 33% of respondents trying out the platform for the first time, a 75% growth from January 2020 to September 2020.

The rise in social media consumption has also resulted in the growth of a new trend of influencers – finfluencers. As defined by Deloitte, finfluencers can be involved in:
- the advertisement of financial products
- sharing of experiences with a particular product, service or topic
- ‘knowledge-sharing’ on budgeting, financial management or investment

There are also three primary channels through which finfluencers operate:

Media platforms like TikTok or YouTube. Finfluencers either utilize a short video format to shill content in bite-sized pieces or attempt to provide technical analysis through a longer video, such as a 20-minute upload.

Chat platforms, such as Telegram or Discord, whereby they mass add / direct message users to enter their finance classes, or a ‘pump and dump’ group which is exclusive to invited members only.

Online forums. Reddit’s wallstreetbets is probably one of the most infamous examples. With   the moniker ‘Like 4chan found a Bloomberg terminal’, it saw mainstream adoption following its infamous Gamestop Short Squeeze, rapidly topping six million members.

Finfluencers tend to follow a few key strategies to build their following. Primarily, they attempt to portray the illusion of authority – showcasing that while what they may be doing “is not financial advice”, their analysis is likely going to play true. This is done through:

1. Exploiting negativity bias. Research early in the pandemic predicted Covid-19 would lead to the next Great Depression, with IMF even publishing an article on it. Among ordinary citizens, there were concerns over a next big bank collapse, fanned by coverage by reputable media sources. Finfluencers were quick to latch on to these weaknesses, warning that governments would only be interested in bailing out their large banks while leaving retail customers to fend for themselves. They positioned themselves to be like average retail  investors, trying to make profits and fighting the hedge funds. 

2. Utilizing peer influence. Leveraging on the previous point, finfluencers attempt to use their following to build their credibility status. The expertise in their knowledge is dictated by quantity of followers, rather than if the followers are well trained in financial knowledge. As such, their entire videos are based on marketing. Diving deeper into the videos of BitBoy, a crypto influencer who is notorious for peddling advice riddled with ‘ignorance, conflict and moral hazards’, his videos are rife with references, memes and jokes, alongside the attempt to display wealth through sprinklings of personal details such as his travel trips. This creates a snowball effect – new investors view him as benevolent for providing access to great wealth through financial advice, while he is able to further his credibility through the mass of followers accumulated. Often, when criticized over analysis, finfluencers both within forum boards and videos will accuse their critics of FUD tactics (Fear, Uncertainty and Doubt), claiming that they are attempting to destabilize the stock/cryptocurrency as they themselves didn’t get in fast enough.

3. Appealing to instant gratification. Finfluencers attempt to showcase short-term gains, such as their account balance doubling over a few days, and paint a story that their followers could   be the next big winner. What is not mentioned is that such investments, while promising high returns, play on favorite-longshot bias: in fact, the extremely low likelihood of winning often cancels the profit. In the meantime, losses are downplayed if mentioned at all. For instance, finfluencers may boast that they made 50% on a stock in the past month, but what they fail to mention is that the stock has fallen 75% over the past three months.

Arguably, there are numerous concerns over the rise of a finfluencer culture. Due to lack of regulation on the various platforms, there are concerns over the factuality of the information provided, alongside fitness and propriety of the person providing advice. In addition, the viewers themselves may lack the necessary financial literacy, risk appetite and risk tolerance. Lastly, finfluencers often base their strategy around high-risk assets, such as crypto tokens and meme stocks, which are also susceptible to misleading information and potential scams.

So, with the above points taken into consideration, how can financial institutions re-shift consumers’ trust back from unregulated sources such as finfluencers?

1. Utilization of social media listening to understand customer data. Analysis of consumer sentiment toward the company alongside their own attitudes towards investing. Multiple public platforms such as Twitter, Instagram, LinkedIn.

2. Identification of customers who have higher risk propensity towards making rash investment decisions. For example – a risk profile 5 customer who only earns a low income. Alternatively, multiple transactions a year to a brokerage account. Could the customer be trying to ‘invest’, but his high-risk behavior is causing losses and he’s depositing a monthly amount of his salary to try and recoup his losses? Is he even aware that he may be falling into a gambling trap? Nudges can help relationship managers potentially steer the conversation tactfully into investing in safer products, so that customers are able to establish trust with the banks.

3. Personalization of newsletters to target the right content to customers. By understanding a customer’s psychology and profiling, we can provide them with more tailored infographics. For instance, the same message may be attempted across varying demographics, BUT a 20-year-old may be more engaged if the message is conveyed in a light-hearted manner (see example below), compared to a 40-year-old who may be more engaged if the message is more  sober – for instance discussing family future/legacy planning and the importance of investing responsibly.

While these are still exploratory concepts – the feasibility, viability and regulatory concerns are not yet fully researched and investigated – there is much potential for financial institutions to develop trust-building strategies.

In conclusion, as the financial landscape evolves and the number of information sources and ease of access to them increases, building trust with customers becomes more challenging. The Covid-19 pandemic has accelerated this trend, with consumers relying more heavily on digital channels and being more susceptible to the sway of financial influencers. However, financial institutions can mitigate this by tactfully navigating the landscape and providing education to help customers make better-informed decisions. 

One example of this is using tools like Nav Planner, which allow customers to visualize their finances and cashflows, simulate benefits, and access a variety of portfolio diversification options that align with their risk levels. This not only helps customers understand themselves better but also enables them to gain self-awareness of any biases that may negatively impact their ability to invest wisely. By building strong relationships and providing valuable resources, financial institutions can safeguard customer value and build trust at scale.

The Deep Xperts Programme was launched in 2021 by the Innovation Group, Platform Transformation Office, and HR Learning & Development, to establish world-class authorities who will serve as key contributors to ambitious innovation within the Bank.  The programme aims to develop a group of trusted advisors to senior management and departments across the Bank who will provide direction on key innovation investments and opportunities based on their deep knowledge in their respective domains of expertise. The program has various interventions to nurture individuals in identifying, developing, and implementing new ideas, products, and processes. They often use their expertise in problem-solving, creativity, and strategic thinking guided by the innovation radar and other proprietary tools to help the bank stay competitive and drive growth. Their role often includes analyzing market trends, researching new technologies, and working with the innovation team to generate and implement new ideas.