In today’s market, where 70-80% of a company’s market value comes from its public image, protecting that brand is critical. The dangers of marketing influencers can be severe, with millions of dollars and company’s reputations on the line.
In 2023 alone, the influencer marketing industry was worth over $21 billion, with 88% of marketers using it or planning to boost their spend. Goldman Sachs estimates that the creator industry will reach $500 billion by 2027.
Initially, influencer marketing was limited to retail, travel, and beauty brands. But, with the rise of social media, financial institutions and international conglomerates are using influencer marketing to build stronger customer loyalty. A UK Digital Distribution Report found that 43% of banks wanted to expand their relationships with influencers.
As more mainstream corporate and financial firms dip their toes into influencer marketing, the reputational and financial risks posed by this marketing tactic grow.
Marketing Influencers: Key Background
Influencer marketing largely dates back to the 2008 financial crisis, which prompted early users on platforms like YouTube and, later, Instagram to monetize their following. Early influencers sold the idea that they’re ‘just like’ their followers, similarly struggling amidst difficult economic times.
Today, 86% of young Americans want to become influencers because of the lucrative salary. For the same reasons, some emerging influencers misrepresent their backgrounds and expertise. Crazy political leanings and misaligned or derogatory sentiments can cause significant financial losses for a partner company or sponsor.
Few firms have tools to vet such risks, and major influencer platforms like Sprout Social, Collabstr, Aspire, and CreatorIQ don’t conduct influencer due diligence beyond following and engagement rates.
In the financial space, so-called ‘finfluencers,’ or finance influencers, have come under scrutiny for inexperience: Few are qualified or have expertise in the financial systems and products they advertise online.
Unfortunately, even ‘harmless’ suggestions, like which investing app to use, can have serious consequences, both for finfluencers and for the financial institutions they’re associated with.
Influencer Marketing: Reputational Risks
Influencer marketing is contingent on trust; when that trust is broken, consumers act accordingly. Consumers strongly associate influencers with the brands they represent, and they’re more likely to have a more positive brand evaluation if that influencer seemingly aligns with a brand.
Conversely, an influencer’s immoral or unethical behavior transfers to the product they endorse, drastically lowering purchase intent.
Company backlash from such incidents yields significant consequences, including decreased sales, negative brand perception, and the need for costly damage control efforts.
Regulatory Risk
In the years since COVID-19, influencer marketing has evolved into what HBR article “Why the Influencer Marketing Industry Needs Guardrails” calls “a sophisticated, albeit chaotic, space, [operating] largely outside the confines of regulatory or professional oversight.”
The problem is this: Influencer marketing lies beyond regulatory purview, meaning there’s little regulation, if any, protecting companies working with influencers. In other words, nothing is in place to hinder influencers who misrepresent themselves or safeguard firms from simple brand misfitting.
Influencer Fraud: Brief Case Studies
With damage figures in the billions, the reputational, regulatory, and financial risks of influencer marketing are top of mind for U.S. companies. Finfluencers specifically come under scrutiny in the financial space for making false claims about investment products.
Famed rapper DJ Khaled and boxer Floyd Mayweather Jr became finfluencers a few years ago after signing a deal with Centra Tech, a crypto firm. The firm was selling fraudulent products and scamming investors. Each was sued for millions, and the firm’s founder was prosecuted severely.
Other cases involving financial influencer fraud are more occluded, with influencers making false claims about the products they’re selling. In the UK in 2024, nine finfluencers were charged and sanctioned for selling an illegal trading system to consumers.
In the U.S., FINRA recently fined a financial institution $850,000 for false claims made by its associated influencers. It’s likely that, as influencer marketing grows, FINRA and other regulatory bodies will enact stricter legislation for firms and their influencers, with the FTC already recommending jail time.
A recent study found that 90% of online financial influencers don’t have the expertise to offer investment advice. And, without a tool to break through this confusion and misrepresentation online, firms must do so in the dark.
Beyond the regulatory and financial dangers, influencer marketing poses a real long-term reputational risk to financial institutions, who rely on trust with customers to maintain their business model. Broken trust translates to lost market share, especially in the fickle financial landscape.
Social Media Background Checks: A Solution to the Influencer Problem
Influencer vetting with social media background checks emerges as a key tactic to prevent brand misfitting and to prevent more severe types of fraud and reputational damage.
Vcheck’s social media screening targets influencer risk head-on, allowing brands to evaluate an influencer’s fit, background, and digital footprint before partnership. Our AI model pinpoints high-risk influencers through behavior and pattern recognition, characterizing historical behaviors to provide a comprehensive risk assessment score:
- Risk assessment: Vcheck’s social media monitoring tools develop a high, medium, or low score, clearly quantifying the risk an influencer may pose.
- Historical Data: Our social media monitoring solution leverages social listening methods and pattern recognition to uncover past scandals or negative sentiments that could lead to cancellation.
- Brand Fit Alignment: Clients can verify an influencer’s communities, interests, and online behaviors to ensure proper brand fit.
- Fraud Detection: Vcheck also offers cutting-edge ID verification tools used to verify an influencer’s identity and safeguard firms against influencer fraud.
Reputational damage, regulatory violations, and financial losses are all potential outcomes of poorly managed influencer partnerships. Financial institutions must approach influencer marketing with caution, implementing comprehensive vetting processes, continuous monitoring, and clear guidelines to safeguard their reputation, maintain regulatory compliance, and protect their customers’ trust.
Contact us to learn how Vcheck’s social media monitoring and reputational risk tools help companies maximize the benefits of marketing influencers while mitigating its risks.
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