Social Media, Communication and Fintech: The Compliance Risks

30 June 2019

In the age of social media and FinTech, can these two modern-day powerhouses work harmoniously in the eyes of the regulator?

By Harrison O’Brien

Over the past decade, social media platforms like Facebook, Twitter, Instagram and LinkedIn have been a part of one of the most influential marketing and communication trends to emerge.

However, with FinTech radically changing the financial service industry, is there space for these two technological forces to interact and possibly work together?

Here, we take a look at the current regulations, address the risks of using social media and try to predict the future of FinTech, social media and communication as a whole.

Assessing the current landscape

In the coming years, the difference between FinTech and social media will undoubtedly blur. Previously, social media has been recognised as a low-cost marketing channel, which is accessed by millennials through mobile devices.

In contrast, FinTech has been viewed as an ever-faster improved “how-to” within the financial sector. The similarity between both is that regulations are still being ironed out in certain sectors, which creates uncertainty for businesses and organisations.

Over the course of the decade, newer banks like DenizBank in Turkey and Amex worldwide have been integrating Facebook and bank accounts. Their services involve using the social media platform’s popularity to run their entire financial lives and pin all of their marketing efforts using the consumer behaviour data collated from it.

Cambridge Analytica has opposed these actions, meaning the regulations on trading of social media data by financial sector technology companies could soon be limited.

The General Data Protection Regulation (GDPR) should already be stopping this, but it appears the task of containment is a lot harder to achieve than first expected.
What are the compliance risks of social media?

The appeal of social media to businesses and financial institutions is clear. It’s not only another affordable avenue for generating business, but it can be used to attract talent, offer incentives and ensure they stay connected with their customers.

Although when it comes to regulation, there are some real problematic areas. For instance, having instant access combined with the fact of how easy it is to make an error can present significant risks to the reputation of businesses. This is a key reason why employee training is becoming increasingly important in a company’s compliance policy.

You don’t have to look very hard to find another case where a big company’s social media account has been hacked or misused.

In more recent times, McDonald’s Twitter account was hacked, resulting in a series of posts criticising President Trump. (I’ll let you decide whether that was a touch of genius or a travesty!)

And then there was the catastrophic error by Adidas when they sent a congratulatory email to people who ‘survived’ the Boston Marathon.

In addition to the impact of the company’s reputation to customers, social media can also create a vast amount of legal issues too. Including:

  • privacy laws
  • content ownership
  • defamation
  • marketing and advertising regulations
  • workplace harassment and discrimination
  • insider trading
  • intellectual property infringement.

Using social media in a regulatory environment

Getting to grips with the risks of social media is one thing, but how can businesses and organisations use it in a regulatory environment?

As a starting point, a normal requirement across financial services, energy, healthcare and the public sector is that businesses or organisations must be able to archive, capture and make e-discoverable all business records.

A business record is defined if a company answers “yes” to any of the following questions:

  • Does the information or the data support a business activity of some sort?
  • Is it required by a statue of regulation?
  • Does it have any business, legal, historical, operational or regulatory value to the company?
  • Would it be kept if it was in a paper format?
  • Could it be used to help resolve any future disputes?

A business record can involve any channel including instant messages, collaboration tools, social media or even email.

This will become even more important as the Security and Exchange Commission (SEC) continues to enforce more regulations on maintaining all communications and social media posts.

In fact, the SEC already requires investment advisors to report all social media accounts – including corporate and individual business-related profiles. This requirement opens its firm up to even more scrutiny.

The current issue with financial service providers is that their customers want them to communicate to them via social media, but they are scared of saying the wrong thing. While there’s no official guidance on what to say from the regulators, anything a financial institution posts can be heavily scrutinised and subjected to any of the said laws.

On the other hand, regulators have warned financial institutions that they need to be careful about what’s being said about their brand on social media too. So, they must have a presence in some shape or form, leaving them often feeling like they’re walking on eggshells when communicating.

Is there a probable solution to fuse both FinTech and social media?

In theory, the clearest way for social media and FinTech to work together in a compliant manner is through artificial intelligence (AI).

By using AI, a start-up business can turn a social media channel into a self-improving business system – altering the entire business strategy.

AI can assess databases, behaviours and key information to personalise an experience, match consumers with a business and streamline the process altogether. Integrating an AI platform into the social media platform strategy will effectively mean a business can hand over the reins and allow it to make its own smart decisions.

Programming generic responses also minimise the risk of breaking any cases of misuse on social media too.

However, it’s all speculative talk at the moment. In reality, the future of banking largely depends on how AI evolves and whether it can exploit the many benefits of social media to create true value, while adhering to ever-changing regulation.

 

This article was originally published in “Blockchain Compliance Bulletin”, number 7. Cover image: © ASDF / Adobe Stock

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