
Social media algorithms have increased their influence in the financial advice field. They now serve as pseudo-advisers for Gen Zers and millennials searching for financial know-how, sometimes leading to their economic detriment, according to PYMNTS.
A PYMNTS Intelligence report called “The New Challenges Facing Finance: Algorithms, Finfluencers and the Quest for Reliability,” a collaboration with NCR Voyix, demonstrates how digital transformation poses opportunities and pitfalls for consumers and traditional financial institutions.
Social media has materially changed how people find financial information, with algorithms directing 79% of millennial and Gen Z consumers to financial education.
Sites such as TikTok are crucial to this shift. Social media has captured the eye of 62% of Gen Z, who currently regard it as a valuable source of financial knowledge. These sites do not just serve as social spaces but have evolved into centers for financial literacy, where engaging content makes complicated finance ideas more digestible.
The appeal of “finfluencers”—individuals with a digital presence providing financial insights—represents a notable warning, PYMNTS reported. As they teach transformative financial management, 34% of Gen Z reports being influenced by their content. Critics say this influence encourages the spread of financial misconceptions and scams, raising critical questions regarding how credible and reliable online financial guidance is.
As the online financial advice network grows, the demand for regulatory oversight is increasing. The spike in “finfluencers”—who, although including credible advisers, are also fraught with questionable individuals—has led to scrutiny from regulatory bodies.
For instance, PYMNTS reported that the UK’s Financial Conduct Authority actively targets these influencers, examining deceitful promotions and spurious financial advice to protect consumers from possible harm.
The fraudulent side of “finfluencers” cannot be brushed aside. Some use manipulated success tales to lure their audience into suspect financial schemes. The economic fallout from such actions can be destructive and leave victims with debt or worse consequences. The need for regulation highlights the risks of unvetted online financial advice and the importance of consumer protection.
Given the evolving landscape, 53% of U.S. retail banking consumers now look to their banks for financial guidance, a noteworthy rise from prior years. This change shows a general trend where banks leverage partnerships with financial technology firms to provide personalized financial interactions and not use one-size-fits-all approaches.
Banks are now examining how they innovate customer engagement. Financial institutions should focus on transparency and accuracy in their communications to set themselves apart from untrustworthy online advice.