Money Advice On Social Media – Who Protects Us?

Parliament is not in session but there’s so much to be said. So let’s pull out the laptop and share a few thoughts on an issue that has always interested me: content creation. The Central Consumer Protection Authority (CCPA) Chief Commissioner recently announced that the government is set to introduce guidelines to regulate social media influencers (including penal provisions to the tune of ₹ 50 lakh) for non-disclosure of financial ties with brands.

Content creation on social media has become a legitimate industry with a growth estimate of 25% per year and is slated to be worth ₹ 2,200 crore by 2025. As of January 2022, YouTube has more than 26 crore monthly active users in India; 1,200 of its creators have crossed the one million subscriber milestone. Instagram had a total of 23 crore users in India in January 2022, the largest Instagram audience in the world. Nearly two-thirds of the Indian population follow an influencer.

As an avid social media user myself, I was intrigued by the revenue model of this industry. I found that content creators get a share of the platform’s revenue. But more than 70%-80% of a creator’s revenue comes from branded content. This revenue is determined by the number of followers, type of content, genre, engagement rate and demographics. A micro-influencer (one who has 10,000 to 1 lakh followers) can earn anywhere between ₹ 10,000 to ₹ 30,000 per Instagram post. This number increases to more than 4 lakh rupees for mega influencers (more than 10 lakh followers).

The area becomes murky when financial influencers, daily vloggers (people who record their daily chores) and people generally not qualified to tender financial advice promote financial products without full disclosure of a brand collaboration.

Many first-time investors turn to the internet for financial advice to make easy money with a single swipe. Influencers have filled the void created by unemployment and lack of access to credit by promoting a variety of financial products on specific trading platforms, attracting very high returns. Nearly 70% of the new acquisition on stock trading platforms is under 30 years of age.

There exist significant concerns around influencer content: the fitness and qualification of the person providing advice, the veracity of the information provided, the risk of potential scams and the risk appetite of consumers of such content.

In July 2022, a crypto-trading platform which was heavily promoted by influencers suspended all its operations including withdrawals and deposits, leaving 8 lakh patrons at a point of no return. In August 2022, India’s top two crypto platforms had all their assets frozen by the ED due to non-compliance. These platforms had been talked up by various influencers in the garb of giving financial advice in good faith.

A 2021 study from the Digital Marketing Institute reports that 70 percent of teens trust influencers more than traditional celebrities. 40 per cent of Twitter users reported making a purchase at the recommendation of a tweet alone.

In 2021, China held a consultation laying out detailed regulatory requirements for online promotion of financial products. It included procedures to curb illegal financial product marketing, misleading advertisements and unfair competition. The norms dictate that influencers, at least, must have used the product first-hand and have documentation to prove it. The Financial Market Authority (FMA) of New Zealand issued a Guide to Talking About Money Online in January 2021. In March 2022, Australian Securities and Investments Commission (ASIC) issued an information sheet (INFO 269) for social media influencers, explaining potential violations of the law and discouraging unlicensed finfluencers from creating finance-focused posts.

In May 2021, the Advertising Standards Council of India (“ASCI”), a self-regulatory body, released the “Guidelines for Influencer Advertising in Digital Media” to enable consumers to identify when influencers are deriving some benefit for promoting a product. The said guidelines do not have the force of law and are not binding on companies or influencers.

With specific reference to advertisements of financial products and services, the ASCI Code bars advertisements for financial products from containing misleading statements about the security offered, rates of return. etc. But finfluencers continue to use such dynamic information to attract viewership.

In February 2022, ASCI released guidelines for the promotion and advertisement of visual digital assets (VDAs) including cryptocurrencies and non-fungible tokens (NFTs). However, more than 400 advertisements pertaining to cryptocurrencies by digital influencers on different social media platforms had violated their guidelines in the first five months of 2022. Consumers defrauded by financial products can seek recourse under the Consumer Protection Act, 2019 but influencers promoting high-risk, complex financial products essentially face no consequences under the law for non-disclosure of brand collaboration.

While there is a need for more transparency in the influencer-verse, this is not a call for over-regulation but for better enforcement. This space requires a deeper understanding and not a myopic one-size-fits-all penal provision.

The government should be proactive in at least releasing preliminary Do’s and Don’ts for promoting financial products online in consultation with SEBI to protect naive investors. There should be gradation in penal provisions in accordance with the platform reach of the influencer and the monetary value of the brand collaboration. Penalties should be imposed on both the advertising company and the influencer in question, and the amount accumulated via such penalties should go towards the creation of a social media literacy fund.

I say the government, for once, should put its money where its teleprompter is!

[This article appeared on | Monday, September 12, 2022]