In the new FinTech notebook "Financial communication through digital channels", Consob highlights the main risks that retail investors face in the ecosystem of financial communication on the web and social media.
Finfluencer, neobroker, financial web communities, Academy. Terms and realities that until a few years ago would have seemed abstruse to the vast majority of people and which today have become common use for anyone who has experienced a little finance on social networksSocial communication is in fact profoundly transforming the way in which financial products are presented and distributed and, above all, the methods and means through which savers come into contact with information potentially relevant to their investment decisions. But behind this apparently golden world there are hidden risks, which Consob highlights in the new FinTech notebook "Financial communication via digital channels. Which ones? Information bubbles, hidden advertising messages, aggressive use of Gamification e information overloadAn excess of information disorients investors and can lead to compulsive trading. And the results, in the most extreme cases, can be disastrous. Because what is often perceived as a game or experiment can ultimately lead to the loss of real money.
"In a constantly evolving context, new realities also emerge that exploit ever-changing ways of interacting with the public, all characterised by the maximisation of user experience, using typical logic of digital entertainment to ensure smooth navigation and immediate execution", notes the Market Supervisory Authority which underlines how this reality is also added artificial intelligence which then "also contributed to the birth of virtual celebrities and influencers and the 'cloning' of real people to defraud investors", explains Consob.
Influencers and financial web communities: what they are and what they do
The Notebook outlines the new protagonists of digital finance who move alongside traditional intermediaries, "often trying to exploit some behavioral weaknesses of investors, identifying four different categories", writes the Authority.
The best known and most numerous are the so-called influencer, These are financial influencers who spread content related to potential investments and represent the true link between the digital financial market. These figures operate across the board, using social media to spread their messages, influence public decisions, and consolidate their visibility. The problem is that "in some cases, they may conceal conflicts of interest, linked to personal gain or hidden sponsorships," warns Consob.
In addition to these, the following are taking the field: financial web communities, communities within which financial analyses and strategies are shared, with the risk that group approval will prevail over fundamental analysis and the authoritativeness of sources. Whether it's a Reddit forum or a Telegram/Whatsapp group, "these communities act as a collective body in which information is validated by group consensus rather than the authoritativeness of the source," the Notebook states. The risk, in this case, lies in synchronization: unverified information circulates instantaneously, catalyzing massive investment decisions in a timeframe too short for any verification of reliability.
The role of Neobroker and AcademyConsob then focuses on the Neobroker - digital platforms that communicate with the user and provide investment services, with the risk of turning an investment activity into a game - and above all on Academy which in some cases can function as "investor bait" because they promise free training to gain the trust of savers and then push them to invest capital that in extreme cases disappears into thin air. A subcategory of these "academies" are the Prop Firm These offer aspiring investors the opportunity to trade in a simulated test environment, without having to commit their own capital, but requiring an outlay for a course/subscription that serves as an entry requirement. The real danger is that by exploiting gamification techniques (the use of typical video game elements in other contexts), users will be encouraged to continually make new paid investment attempts without any guarantee of profit.
A survey of over a thousand university students shows that the public places less trust in communication that appeals to emotion than in communication that focuses on rationality and information. Not surprisingly, 79% of those interviewed believe that these reality must be regulated to ensure transparency, verifiability and reliability, while only 7% do not see the need for it. The study shows a widespread difficulty in distinguishing information from advertising, even when promotional markers are present (such as #hashtag, @tag, and links), and therefore the need to strengthen investor protection through "continuous monitoring of digital channels, careful institutional communication, and financial and digital education interventions aimed at transferring the skills needed to recognize risk signals," Consob finally emphasizes.
