Game-like design features in stock trading apps should be considered, FCA says
Stock trading app operators have been warned to review their design features, including those with game-like elements, over concerns they could encourage people to trade more often or take more risks.
The Financial Conduct Authority (FCA) said there could be a risk that app features could lead consumers to act against their own interests, and it raised concerns about features potentially contributing to “gambling-like behaviour”.
Features include sending frequent alerts with the latest market news and giving consumers in-app points, badges and festive messages to make trades, the regulator said.
The FCA found that consumers using apps with these types of features were more likely to invest in products beyond their risk appetite.
It raised concerns that those exposed to high-risk investments may appear to display behaviors similar to problem aging.
Trading apps allow retail investors to trade directly and easily in a variety of products, including high-risk investments such as crypto-assets.
While gamification can be used to positively engage consumers, the FCA found that it was used in ways that could mislead consumers or lead to poor outcomes and problem behaviour.
Many clients are new to investing and younger than traditional investors, the regulator said.
Sarah Pritchard, managing director of markets at the FCA, said: “Some product design features can contribute to problematic, even gambling-like, investor behaviour.
“We expect all firms offering share trading to consumers to review and, where appropriate, make improvements to their products based on these findings.
“They should also ensure they provide support to their customers, particularly those in vulnerable circumstances or those showing signs of problem gambling behaviour.”
The FCA said it intends to further research the use of apps and design features, particularly to understand some of the greater financial vulnerabilities of users of these apps, such as whether they borrow to invest and the extent of any losses.
The FCA’s 2022 Financial Lives Survey found that 9% of all adults with investments have borrowed to invest, and 49% of these would not have been able to make the investment without it.
To ensure customers are treated fairly and ahead of the new consumer duty coming into effect next year, all firms should assess their products now to ensure they are fit for purpose, the regulator said.
Consumer duty stipulates that companies must design services so that consumers can make effective, timely and well-informed decisions about financial products and services.