Finfluencers vs. Banks: Who Do Customers Trust?

On 16 May 2024, the Financial Conduct Authority (FCA) announced it had brought charges against nine individuals. Hearing it accuse these people of promoting an unauthorised foreign exchange trading scheme, you’d be forgiven for imagining them as run-of-the-mill, white-collar criminals. [i] Instead, Westminster magistrates court was treated to the sight of Geordie Shore’s Scott Timlin and several other social media influencers pleading not guilty. This is likely what put the term ‘finfluencer’ on your radar.

However, what may have begun as an amusing tale about social media stars encountering the world of financial services regulation has struck on a deeper truth. Gen Z and young millennial audiences are increasingly withdrawing trust from traditional banks. In 2023, NTT DATA found that 33% of UK banking customers, aged 16-26 years old, do not feel that their main bank or building society has their best interest at heart. As a result, these consumers are seeking relatable and engaging advice from these ‘financial influencers’ in areas such as investment, budgeting, and cryptocurrency.

In the first blog of this series looking at UK banks and their relationship with customers, we’ll explore one key question: how can traditional banks adapt to regain the trust of young customers from ‘finfluencers’?

The risky business of ‘finfluencing’

Aside from finfluencers cutting into banks' opportunities to build trust with young customers, why are they causing such a stir? Firstly, misinformation is rife. Online influencers are often unqualified to give financial advice or unaware of financial regulations, especially around advice, potentially delivering inaccurate or misleading information. Unlike trained financial advisors, finfluencers can't offer personalised guidance tailored to individual financial situations. They also operate in a regulatory grey area, not subject to the same stringent rules as traditional banks, making their promotions harder to monitor and control.

On the other hand, this reveals an issue that isn’t new. Banks have been struggling to connect with younger demographics for some time now. Perception issues loom large, with banks increasingly seen as distant, outdated, complex, and impersonal. Many Gen Z-ers and young Millennials will have grown-up through the 2008 financial crisis and seen the impact on their parents and their own opportunities first-hand. Meanwhile, the media has driven further mistrust and connotations of banks being full of ‘fat cats’ who put profit before people.

A widening communication gap only makes this problem worse, as young consumers gravitate towards the informal, engaging style of social media personalities. Indeed, research shows that 69% of respondents are likely to trust a friend, family member, or influencer recommendation over information coming directly from a brand. [ii]  This leaves traditional financial institutions struggling to effectively reach and resonate with a growing, financially curious audience that could make up their future customer base.

How finfluencers made investing in your financial future cool again

Despite the risks, however, we should acknowledge one thing. Finfluencers are succeeding. They've made financial literacy engaging and accessible by offering entertainment value alongside financial advice, increasing awareness and interest in personal finance among younger generations.

Rather than standing in the way, the FCA has started to embrace this phenomenon. It’s partnered with the Advertising Standards Authority (ASA) to engage influencers and their agents, while also providing clear information about illegal financial promotion and associated risks. [iii] Its goals are clear: to guide, rather than suppress, this new form of financial communication.

Winning back Gen Z

To reclaim their position of trust, banks must learn from finfluencers and adapt their communication strategies. Here's how:

1. Meet young customers where they spend the most time - on social media and other digital platforms.
2. Break down financial jargon into digestible, relatable content.
3. Leverage data to offer tailored advice and products that resonate with individual needs.
4. Instead of pushing back against finfluencers, banks should consider partnerships to ensure accurate information reaches young audiences.

The FCA has recently published new guidance emphasising the need for clearer communication and better disclosure practices to protect investors, particularly in Gen Z. The FCA stresses that any promotion of financial products should provide a balanced view of benefits and risks, using clear language that consumers are likely to understand. [iv]

We’ve also seen other industry bodies, like the CFA, arguing that investment firms should provide finfluencers with compliance training as part of partnerships.[v] If banks and other financial institutions want to engage more effectively with a younger customer base, they could offer these finfluencers training and partner with them: bridging the gap between traditional banking wisdom and the engaging style of finfluencers. This would drive a more personalised and innovative approach to customer journeys and product development and distribution. It could also use new channels and engage in the increasingly popular concept of ‘social banking.’

Over the next couple of months, we’ll be sharing a series of blogs unpacking how banks can build trust and relationships with their customers, focusing on financial education and data personalisation. If you’d like to know more, take a moment to get in touch and arrange a 45-minute consultation.