HUMAN PSYCHOLOGY AND SOCIAL MEDIA AT WORK IN BANKING TREASURY

Back to Page Authors: Jason Chetan Ogilvie Rodrigues

Keywords: banking psychology, financial analytics, risk engineering, behaviour

Abstract: In the banking world, the current interest rates are at an all-time low level. In some of the large economies, the rates have been below zero level. This was unthinkable few years ago, but this is also an inverted model of interest rate business. These record levels are lowest ever since the recorded history. All these are happening at a time when the technology of human communication is at its peak. In an ultra low interest rate economy, the role of social media to influence the behaviour of masses is quite critical. Through this abstract, a thought on how social media can influence the behaviour of masses that can adversely impact the Banking Industry is conceptualized.Human Psychology and the way heuristic behavior of humans is complex to understand. Mob or Group behaviours can be due to fellow human following what others do, without applying rational thinking. The heuristic behavior and crowd mentality can have a very high level of influence on social psychology which can destabilize certain sectors within economy. Arab Spring of 2011 started on social media. The UK (London) riots where mobs rioted in cities and towns across England saw looting, arson and mass destruction of property has no logical trace to reasons of origin, but heuristic behavior can only help explain why people behaved so. In a technology connected world, spread of word can create instant level of panic and herd behavior which can trigger fear psycholsis and trigger people to withdraw the funds from the banks thus destabilizing economies. There are scientific studies that address a tipping point when commonly unknown or unthinkable becomes a subject of common knowledge. Some scientific studies say this is about 10% of the population. In an ultra low interest rate condition, such behaviours (via social media like WhatsApp, Twitter, Facebook) can create irreversible impacts on peoples thinking and bank run situations in real economies. If this occurs, the very system of trust on which the current economies are pillared are at a risk of collapse resulting in liquidity crisis. A global treasury of a large financial institution is contemplating the usage of human psychology on Bank run scenario which can paralyse economic activities of certain communities.