Trading apps warned on 'gamification'

Trading apps warned on ‘gamification’: City regulator tells providers to review features used to lure customers to buy investments

  • FCA concerned about in-app points, badges and celebratory messages
  • It found consumers using apps with these kind of features were more likely to invest in products beyond their risk appetite
  • Trading apps ‘sometimes play a role in driving poor outcomes for consumers’ 

The City’s regulator has warned providers of investment apps to review the game-like features some use to lure customers to buy investments. 

As we exclusively revealed last week, the Financial Conduct Authority is increasingly concerned that app users are buying investments they don’t really understand – and are being hooked in by the gamification of the products. 

These include points, badges and celebratory messages when they make trades. Many younger investors are drawn to such apps in the hope of making quick returns.

Worry: The FCA is increasingly concerned that app users are buying investments they don't really understand ¿ and are being hooked in by the gamification of the products

Worry: The FCA is increasingly concerned that app users are buying investments they don’t really understand – and are being hooked in by the gamification of the products

The FCA said it had found that consumers using apps with these kind of features were more likely to invest in products beyond their risk appetite. 

Its research published today indicates that trading apps ‘sometimes play a role in driving poor outcomes for consumers’ and are fuelling ‘problem-gambling.’

It says of five apps it researched, nearly half of users on two of the apps were investing ‘potentially beyond their risk appetite.’

Trading apps allow retail investors to trade directly and easily in a range of products, including high-risk investments such as cryptoassets.

Major trading app providers include eToro and Revolut. Both told the Mail on Sunday that they ensure new investors understand the risks associated with trading. 

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.’

The FCA said it intends to do further research into trading app use and design features, in particular to understand some wider financial vulnerabilities for users of these apps, such as whether they borrow to invest and the scale of any losses. 

source: dailymail.co.uk