Technology moves fast, and the law often struggles to keep up. This is particularly true in consumer finance, where new ways of constructing and delivering financial products and services can quickly outpace traditional regulatory frameworks. Indeed, the policy attention garnered by the financial technology (fintech) sector is largely focused on how best to regulate new firms and offerings that do not neatly fit into traditional financial regulatory regimes and which are less amenable to traditional supervisory techniques.
In a new essay, we introduce a data-driven method—social media content analysis—that can help financial regulators catch up with fintech. This method is motivated by evidence of a deepening nexus between social media platforms and consumer financial markets. We call this phenomenon “FinTok,” a reference to the “#fintok” hashtag that often accompanies financial content on TikTok, a popular social media platform.
Younger, “Gen Z” and “Millennial” consumers increasingly seek out financial advice from influencers known as “finfluencers” on social media platforms, with the majority of Gen Zers seeking this information on TikTok and Instagram. Consumers also increasingly discuss their financial experiences in videos posted to these platforms. Beyond TikTok and Instagram, platforms such as Reddit, Discord, and StockTwits have become central fora for discussion and coordination between retail investors—as manifested by “meme stock” phenomenon. platforms thus offer fertile ground for understanding the experiences and attitudes of credit consumers, particularly younger, digitally native consumers and identifying emerging fintech trends and associated consumer risks. Social media platforms thus offer fertile ground for understanding the experiences and attitudes of credit consumers, particularly younger, digitally native consumers and identifying emerging fintech trends and associated consumer risks.
Building on these insights, our Essay argues that financial regulators—specifically, the Consumer Financial Protection Bureau (CFPB) and state financial services regulators—should use FinTok content analysis, and social media content analysis more broadly, as an additional tool for performing two chief functions: the supervision of regulated entities and more general market monitoring. We argue that the early-stage analysis of social media content can help flag potential problems for additional study using more traditional regulatory tools, such as requests for information and other types of market-wide information gathering. More particularly, this method can offer regulators insights into consumer populations that are less accessible through traditional mechanisms, such as consumer surveys or the CFPB’s consumer complaints database. Whereas younger financial consumers are unlikely to file formal complaints, they are much more likely to post their complaints on TikTok, often using the #fintok hashtag.
To illustrate the mechanics of social media content analysis and its usefulness for consumer financial regulation, we selected the online “buy now, pay later” (BNPL) credit market as a case study. The rapid growth of the BNPL market is attracting attention from financial regulators concerned about risks to consumers. Indeed, it is a paradigmatic example of regulators playing catch-up with fintech innovation. More specifically, the BNPL market offers short-term, “pay in four” products, which allow consumers to purchase and defer payment of goods and services for up to six weeks, with no upfront interest. These products are especially popular among younger, Gen Z and millennial consumers, who typically use them to purchase low-value fashion items on online retail platforms. Importantly, these consumers frequently discuss their experiences with BNPL products in videos posted to TikTok—making BNPL especially suitable for test-driving our method of Fintok content analysis. Z and millennial consumers, who typically use them to purchase low-value fashion items on online retail platforms. Importantly, these consumers frequently discuss their experiences with BNPL products in videos posted to TikTok—making BNPL especially suitable for test-driving our method of Fintok content analysis.
Our study reveals tentative evidence of repayment difficulties and strategic default by consumers in BNPL markets. Although these observations are not conclusive, they offer early warning signs of potential consumer protection concerns that could help guide the study and regulation of the BNPL market. Our study also confirms that younger consumers actively use TikTok to express their views on debt, finance, and consumption, including through BNPL. Furthermore, it reveals a new lexicon of consumer finance, replete with memes, hashtags, and emojis. Lastly, it confirms that lenders are actively leveraging the benefits of social media to market their products and reach younger consumers—for example, by commenting on creators’ TikTok videos and encouraging them to use their products, as well as through paid social media influencers, including celebrity influencers.
Nikita Aggarwal is a Postdoctoral Research Fellow at UCLA, School of Law.
Bondy Valdovinos is a Postdoctoral Research Fellow at the University of Leeds, School of Media and Communication.
Christopher K. Odinet is a Professor of Law and Finance (secondary) at the University of Iowa.
This post was adapted from their paper, “#Fintok and Financial Regulation,” available on SSRN.
