From enticing food photography, to fashion to now forex, the social media revolution is well underway in all aspects of our lives. Over the last decade or so, social media companies have made the all-important journey from ‘curiosity to adoption to now trust’-in the minds of the consumer. We do not even for a moment doubt the veracity of an employment status update of an ex-colleague or a trans-national migration by an old friend. It is this trust, coupled with routinely breaking news, that has bestowed upon social media its transformative power. When it comes to staying connected and updated, social media seems to be the panacea for all ills.
But is it?
The Reserve Bank of India (RBI) recently issued a cautionary press missive, concerning misleading advertisements of unauthorized Electronic Trading Platforms (ETPs) that are offering forex trading facilities to Indian residents. These are available on social media platforms, search engines, Over The Top (OTT) platforms, gaming apps and the like. I’m all for convenience- but the RBI also mentioned that there have been reports of ETPs engaging agents who personally contact gullible people to undertake forex trading/investment schemes.
First off, how and when did forex trading intersect with social media at all?
The big 2 of social forex
Forex as an industry has been more suitable for the LinkedIn and Twitter environment than the Facebook one. Over 1 billion new content pieces are uploaded weekly on Facebook. But as a platform, Facebook was never high-brow or corporate, but rather a place to connect on a more personal basis. Hence, there is but the occasional Facebook page offering Forex content, or the Instagram page suggesting a transaction.
LinkedIn is highly influential. All the major experts in Forex run and maintain active profiles on LinkedIn. They share their insights and tips for other traders to see. Many big names in the Forex brokers’ arena have a serious presence on LinkedIn. Most of them have a group, in which they share all the details of their offering, content, as well as the latest developments in the market in general, and their company specifically. However, it can be used to oversell leverage- Forex markets allow high leverage—50 to 1 for some currencies; someone with only $1,000 to trade can trade $50,000 worth of currency. The opposite, losing everything you have, and more, is also true.
Twitter is perhaps another platform where maximum precaution is needed. Several accounts sell Forex. Twitter is a serious medium; hence it is not out of place for online Forex portals to share their insights in the form of news, analysis, articles, or reviews of Forex products. What should raise your hackles is if you find that there is no engagement in these fake accounts because the tweets (updates) are being generated automatically by what is known as bots, completely missing the point of Twitter.
Twitter posts like “I get paid in my sleep’ form a common enticement pattern. Such posts originate from a new breed of forex traders, who share opportunities for ‘mentorships.’ They follow this up with posting about an aspirational lifestyle. The more people they can persuade to sign up, the more money they start to get back. This is the roll-out of an MLM (multi-level-marketing) chain that, ostensibly, intends to make you rich overnight.
As a consumer, you’re in a quandary. What to believe and what not to. Let’s look at this dispassionately for a moment-
1. We are talking about a subject that is at the intersection of personal finance and embedded finance. So, there are two perspectives-From the personal finance perspective; reports of such ETPs offering disproportionate/ exorbitant returns to vulnerable consumers presents a scary scenario. Consumer advocacy and education is urgently needed in this sector, because frauds are emerging and many residents are losing money through such trading/ schemes. From the embedded finance perspective, such reports of fraud will erode consumer confidence in the idea of ’digital forex.’ The fintech industry has worked long and hard for the consumer to view ‘digital forex’ and ‘digital payments’ as reliable tech solutions. Hence, the e-commerce company on whose platform the forex solution is being offered, must step up and take responsibility to ensure that all regulatory requirements are met and this must not bother the consumer. The platform must have the appropriate license from the regulator and undertake all underlying AML and KYC checks before allowing for any payment to go through.
2. Indian residents can undertake forex transactions only with authorized persons and for permitted purposes, as per the Foreign Exchange Management Act, 1999 (FEMA). While permitted forex transactions can be executed electronically, they should be undertaken only on ETPs authorized for the purpose by the RBI or on recognized stock exchanges (National Stock Exchange of India Ltd., BSE Ltd. and Metropolitan Stock Exchange of India Ltd.) above list of authorized persons and authorized ETPs is available on the RBI website.
Social media and forex trading have become deeply intertwined in recent years. The carefully curated feeds (if you follow the right accounts) are just information and must be treated as that.
What needs to be understood is that you can have an active and successful trading life without going on social media at all. Likewise, you can be an influencer on social media without ever using it for forex transactions.
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