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Research from the Financial Conduct Authority (FCA) has revealed that gamification features, such as push notifications and prize draws, in trading apps can lead to increased risk-taking among users.

To assess the impact of various digital engagement practices (DEPs) on trading behavior, the UK watchdog developed an experimental trading app platform and conducted a study with 9,000 participants.

The study found that push notifications led to an 11% increase in the number of trades made, while points and prize draws resulted in a 12% rise. Additionally, these features increased the proportion of trades in risky investments by 8% and 6%, respectively.

The research also highlighted that DEPs have a more significant impact on individuals with low financial literacy, women, and younger users.

In response to these findings, the UK regulator has already implemented measures to address gamification in retail trading platforms through its Consumer Duty. This directive mandates that trading apps must ensure their services are designed and tested to meet consumers’ needs, enabling effective, timely, and well-informed investment decisions, particularly for vulnerable individuals.

Sheldon Mills, the FCA’s executive director for consumers and competition, commented: “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 the growing usage and popularity of trading apps, we will keep them under review to ensure customers can make investment decisions that suit their needs.”

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