By Liam Edwards

The FCA has published a research article on the ‘gamification’ of trading apps, and the potentially harmful effect this trend may have on consumers. This research was conducted by Lucy Hayes, Stephen O’Neill, Max Spohn, and Cherryl Ng. The research identifies a number of increasingly prominent design features of trading apps which introduce ‘game-like’ elements into a service, which risks inducing consumers to take decisions that aren’t in their own financial best interests.

Concerning design features

The research identifies a range of trading app design features that have been identified as representing cause for concern. These include:

• use and commodification of in-app points / badges for making trades;
• highly frequent notifications on market news and stock movement; and
• leaderboards to ‘rank’ trading performance of the user and their peers.

The research expresses concern that such app features “may blur the lines between online investing and gambling-like behaviours”, a possibility which has previously been suggested by researchers from Carnegie Mellon University. Despite acknowledging that gamification can be used to positively engage consumers, the FCA found that, ultimately, it was often being used “in ways that may mislead consumers or lead to poor outcomes and problem behaviours”.

Sarah Pritchard, Executive Director of Markets at the FCA, said the following:

“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.”

Approach going forward

The FCA intends to conduct further research into the use and design of trading apps and their features. The wider financial vulnerabilities of users of such apps has been identified as a point worthy of particular attention, with the FCA’s 2022 Financial Lives Survey finding that 9% of adults have borrowed to invest, and 49% of these being otherwise unable to make the investments that were funded via borrowing. 

The FCA is also following-up with firms whose trading apps were identified as part of this research as problematic, in order to assist with and facilitate consumer-friendly changes. The FCA expects all firms that offer stock trading to consumers to review and, where appropriate, make improvements to their products based on the FCA's findings. The FCA also asks all firms to review their products in light of the Consumer Duty to ensure they are fit for purpose.

For further UK financial services regulatory updates, please visit the Burges Salmon blog.