The FCA Offers Caution On The Gamification Of Trading Apps
The Financial Conduct Authority (FCA) of the United Kingdom has cautioned stock trading app developers to consider design aspects, such as those with game-like characteristics, that may encourage customers to take acts against their own best interests.
Features include delivering regular alerts with the most current market info and offering users in-app points, badges, and congratulatory messages for trading. The FCA discovered that customers who used applications with these features were more likely to invest in items that exceeded their risk tolerance.
Alongside its warning to app owners, the FCA has released research that raises concerns that clients who use such trading applications are exposed to high-risk investments and that some seem to display problem-gambling-like behaviours.
While gamification may be used to engage customers positively, the FCA discovered that it was being used in ways that may mislead consumers or result in negative results.
FCA’s executive director of markets, Sarah Pritchard, comments:
“Some product design features could be contributing to problematic, even gambling-like, investor behaviour. We expect all firms that offer stock trading to consumers to review and, where appropriate, make improvements to their products based on these findings. They should also ensure they are providing support to their customers, particularly those in vulnerable circumstances or those showing signs of problem gambling behaviour.”
In the first four months of 2021, four trading app companies established 1.15 million new accounts, almost twice the number of new accounts created by all other retail investment services combined. Many of these clients were first-time investors and younger than typical investors.
Pritchard said the regulator would do more study into the usage and design of trading applications, mainly to determine the extent of broader financial risks for app users, such as whether they borrow to invest and the magnitude of their losses. According to the FCA’s 2022 Financial Lives Survey, 9% of people with investments have borrowed to finance, and 49% of these individuals would not have been able to invest without borrowing.
