The Financial Conduct Authority has warned online trading apps that their use of gamification in their services could be pushing consumers to trade more and trade riskier.
In an online experiment with over 9,000 consumers, the FCA built its own trading app and through testing found that digital engagement practices like push notifications and prize draws were shaping trading frequency and risk taking.
Push notifications from trading apps increased the number of trades made by 11 per cent, while increasing the proportion of trades that were in risky investments by eight per cent.
Meanwhile, points and prize draws increased the number of trades made by 12 per cent, while increasing the proportion of trades in risky investments by six per cent.
These were especially effective on young people, those with low financial literacy and women.
The FCA found that people with low financial literacy increased their trading, especially from the presence of flashing prices and trader leaderboards.
Women increased their trading frequency more than men when push notifications and points and prize draws were used, while young people increased their riskiness by more than older participants for every tactic, except flashing prices.
The FCA has continuously warned trading apps about their conduct, stating that stock trading apps should review their game-like design features, and today adding that they are “under review“.
In the last three years, at just four trading companies, over 2.47 million accounts have been created across the UK, the regulator added.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “Trading apps have the potential to transform retail investments, but some in-app features might be pushing consumers towards more frequent or riskier trading, which isn’t right for everyone.
“With usage and popularity of trading apps growing, we’ll be keeping them under review to make sure customers can make investment decisions that suit their needs.”