How Social Media is Changing Finance
Social media has had a profound impact on how we share and access information on the Internet, and the personal finance and financial markets are some of the areas that have been changed by social media. The impact of social media has arisen in part from providing users with new ways of connecting with companies and learning about finance.
1. Product and Service Information through Social Media
Research suggests that a growing number of consumers are using social media to source information about financial services or products. A recent study by Cogent Research revealed that almost 70% of those surveyed reallocated investments, or changed or began existing relationships with investment providers due to content from social media.
Over a third of the investors surveyed said they used social media for personal finance and investment purposes. This included obtaining a first impression of a provider or seeking advice. The study also showed that consumers are carefully reviewing information and opinion found on social media with the information obtained through traditional sources such as websites.
While in the past consumers might have conducted only a search engine search or consulted the phone directory, today they are more likely to also look on social media. They might connect in the first instance with an advisor through a Facebook or Twitter account, or they might ask for recommendations from followers.
2. Seeking Recommendations and Opinions
Consumers today are more likely to seek recommendations or opinions about investment products or services through their social media accounts. They may ask directly for advice from their followers or connections, or they may do a search on their social media account for opinions. These public opinions could be available for services or products such as financial advisors and specific stocks.
Social media can be contrasted with mainstream media in the sense that the former facilitates opinion (through ‘Likes’, ‘Retweets’, and comments). Hence, the world of social media is considered by many users to be a valuable source of information about services and products. Additionally, a recommendation is likely to be more highly regarded if the recommendation is from someone the consumer is closely linked with.
3. Accessibility of Financial Education
Social networks facilitate self-education on financial topics. An interested consumer can do research on websites before referring to social media forums and platforms for opinions and reviews. They can also connect directly with authority figures, content providers or teachers to ask questions and provide feedback. As such, social media may be facilitating faster and more effective learning.
4. Marketing and Reach
Social media has been used as a marketing tool for financial organisations. Platforms such as Twitter and Facebook have given financial businesses more ways to reach and engage consumers.
Businesses can seek feedback from customers, review what consumers are saying about their product or services, and communicate their brand personality to their target markets. They can also use social media as a tool for educating consumers about financial or technical products in an accessible way.