By Fayze Bouaouid, Co-Founder of Springbox AI
The digital world has also exacerbated the tendency of people to look for ways to shorten the path to riches -- by giving them a broader range of tools and platforms on which to chase after the myth of easy money. People aren’t just buying lottery tickets or trying their luck at casinos anymore.
Since the start of the COVID-19 pandemic, brokers have witnessed a surge in new trading accounts being opened. Unfortunately, this has resulted in some people losing money, even some losing hundreds of thousands of dollars. Additionally, stories have emerged about younger demographics relying on TikTok influencers dispensing flippant and faulty financial advice.
With the coronavirus crisis causing spikes in scams and phishing attacks, it’s increasingly necessary to look at the role that businesses may be able to play in helping consumers avoid financial losses.
Before looking at what businesses can do to help consumers, it’s important to first understand the main underlying factors that lead people to pursue simple solutions to complex financial problems.
Ignorance is not bliss when it comes to finances
People who are poorly educated about the differences between types of investments or the vagaries of stock trading can end up taking big missteps that cost them dearly. They may be more liable to jump on “too-good-to-be-true” advice, even if it comes from disreputable sources.
The pandemic has put more people in dire straits
While there have always been people who are desperately in need of cash, the COVID-19 crisis has significantly increased the number of people who are out of work and in need of extra money. For example, the U.S. Federal Bureau of Investigation has reported an increase in the number of fraud schemes related to COVID-19, particularly phishing emails related to economic stimulus checks.
Taking risks with money can become an addiction
Gambling addiction has increased globally as commercial and online gambling have become more prevalent. And while stock trading addiction has been written about extensively, it is worth remembering this given the pandemic has increased the number of people who are trading stocks online.
How Businesses Can Foster More Financially Stable Consumers
Finance and investment-related businesses have an opportunity to step up to the table and play a significant role in debunking the myth of easy money and help consumers avoid costly mistakes that are, for the most part, preventable. While there are admittedly some things that companies just have no control over, the following are some actions that can be taken.
Provide technical guidance specifically geared toward consumers who are not technologically savvy
Since scammers regularly spoof emails and landing pages, financial and investment platforms need to do a better job of educating their customers. They should provide tips to users on how to know if an email they’ve received has been spoofed and offer advice on how customers can verify that the website they’re accessing is the real one. Businesses should create and host a library of instructional videos that clearly explain their platforms’ functions, so that users aren’t tempted to follow advice from dubious third-parties. Any newsletter by financial businesses can also include a reminder to customers about the safest way to access their accounts.
Give users the knowledge they need to be confident in managing their own finances and accounts
An educated consumer is less likely to fall for the promise of quick cash. There are many ways that financial and investment platforms can help increase user confidence. Blog posts and newsletter articles can be used as educational tools by clearly explaining common terms in the industry. Free webinars on important topics can allow ample time for responding to questions from the audience. On social media, companies can offer weekly or monthly “ask me anything” sessions with industry experts. Trading platforms in particular need to be up-front about the real risks for users.
Incorporate safeguards into your platform or services
Financial institutions and investment platforms can tap into the potential of both technology and human soft skills to recognize risky actions and behaviors and to detect fraudulent actors. Artificial intelligence has already proven effective at preventing fraud. Money-related businesses should make use of the benefits of AI on their platforms. Employees -- specifically customer service representatives -- should be taught how to spot signs that a customer may be engaging in risky behaviors. They should also receive guidance on tactful ways to alert users to potentially dangerous activities. Any financial or investment platform should also have safeguards that are automatically triggered when suspicious activities are detected.
Caveat emptor is not a valid argument for businesses to stand back and watch as consumers fall into financial ruin following advice from internet gurus who profess to know the easiest ways to access quick cash. Fraudulent actors may adapt their methods as technology changes, but they continue to take advantage of the same weaknesses in consumers that have historically made them vulnerable to bad financial advice. As the pandemic continues to impose economic hardships around the world, leading people to become more desperate for easy money, it’s time that businesses -- specifically financial and investment platforms -- take on a larger role in counteracting these vulnerabilities.
About Fayze
Fayze Bouaouid is the Co-Founder and CEO of financial intelligence application Springbox AI. With a Master's of Science in Banking and Finance and nearly 2 decades in the banking and asset management industries working with such institutions as BGL BNP Paribas, Fayze has spent his career learning every detail of financial markets, banking and investing. He brings his wealth of asset management knowledge to Springbox AI, in the service of assisting young investors find success. Fayze is working toward a democratized future of investing.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.