AN ANALYSIS OF FINANCIAL LITERACY FROM THE PERSPECTIVES OF INDIVIDUALS AND FINANCIAL INSTITUTIONS USING SOCIAL MEDIA

Abstract

Financial literacy has become a mandatory concern to improve economic growth and development for all the nations. For this, several governmental initiatives have been taken to reduce financial illiteracy and to make people better financial decisions. On the other hand, social media platforms are very popular among people. And, with the help of these social media platforms, many organizations are connecting with the people for multiple reasons. Thus, this study is divided into two phases; first is to investigate financial literacy level of urban Indians; second is to examine the impact of social media in creating financial awareness among people. The first phase of this research is aimed to investigate the impact of demographic factors on financial literacy and its components, namely, financial behavior, financial attitude and financial numeracy skills. It also aims to examine the relationship between the components of financial literacy and the influence of financial numeracy skills on investment pattern. For this research, a slightly modified questionnaire is adopted which has been originally developed by the Organization for Economic Co-operation and Development (OECD, 2011). The study considers 500 individuals from Tier 1, 2 and 3 cities in India. The data will be analyzed by using two logistic regression tools viz. Multinomial logistic regression (MLR) and Ordinary Least Square regression (OLS) in Statistical Package for the Social Sciences (SPSS). Further, the reliability of data will be measured using Cronbach’s Alpha method. The data shows that financial literacy in terms of familiarity with financial instruments and participation in formal financial system is quite reasonable at 65 percent among the participants. Demographic variables like gender, age, education, income, and reliability of income are found to have significant influence on financial literacy. Further, all the components of financial literacy are found to impact each other positively. The findings also suggest that financial numeracy skill may improve overall financial literacy and secondary market participation in India. However, the use of financial websites or social media sites for investment decisions is meager. Next, the second phase of this research is aimed to identify the extent to which social media is used by Indian Financial Institutions (FIs) for various purposes such as connecting with customers, explore new market, sell products etc. including generating financial awareness more options. For this, a total 32 FIs that are listed with Bombay Stock Exchange (BSE)/ National Stock ii Exchange (NSE) India are considered; 22 of them being banks and 10 non-banking financial companies (NBFCs). Managers of all the FIs will be interviewed using self-administered questionnaire. The result shows that Facebook, Twitter and LinkedIn are the most widely used social media platforms for exploring new markets, developing new ideas, selling financial products, connecting with the customers and customer relationship management (CRM). Further, banks and NBFCs are found to adopt these media pages to post important financial announcements, which increases customer’s interest in investment options. The study provides a view on social media usage in terms of cost reduction and customer satisfaction. However, there are some risks associated with social media such as reputation risks, operational risks, data and information risks etc. Furthermore, managerial discussions highlight their contribution to the use of social media to increase financial literacy.