The Financial Conduct Authority (FCA) on Monday released a warning regarding the “gamification” of trading applications. The financial markets regulator expressed its growing concern that online business can use the design of trading applications to manipulate consumers in new ways.
The investment industry watchdog has conducted an evaluation of trading services providers’ use of digital design features as part of a wider FCA assessment of these apps.
Gamification in trading apps aims to enhance specific service, making them more engaging. This is done by using game design elements similar to those in video games in order to engage and motivate users. The FCA said that this involves risks that are too high and prevents consumers from making decisions in their own interest.
FCA’s warning comes with its assessment report, entitled ‘Gaming Trading’. The regulator’s findings show that “gamification” features in trading apps fosters gambling-like behaviours and addiction.
Sarah Pritchard, executive director of markets at the FCA, said:
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.
According to the FCA’s 2022 Financial Lives Survey, 9% of UK adult investors have borrowed to invest, with 49% of them saying they would not have been able to make the investment otherwise.
The FCA found that in the “gamification” of trading apps, positive reinforcement techniques are employed such as falling confetti or celebratory messages, as well as the use of points, badges and rewards. The UK regulator expressed its concern that this may lead to people to trading more frequently or make investment choices that they normally would.
FCA stated:
We are also concerned that the app features may blur the lines between online investing and gambling-like behaviours as suggested by another study. Previous FCA research has shown that for many younger, new investors, emotions such as thrill and excitement are key drivers for investing. This might be especially heightened for investing in riskier investments such as cryptoassets and CFDs.
Earlier in July, the Cyprus Securities and Exchange Commission (CySEC) announced of the launch of its new Investor Protection campaign, aiming to battle the growth international threat of investment harm from the rising use of “gamification” tactics.
