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FCA issues warning about trading app gamification

FCA issues warning about trading app gamification

The UK's Financial Conduct Authority (FCA) has warned stock trading app operators to review design features, including those with game-like elements, which risk prompting consumers to take actions against their own interest.

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The Trading App Gamification

Along with the warning, the FCA published research finding that customers using gamified #tradingapps are exposed to high-risk investments, and some appear to exhibit behaviours similar to problem gambling. While the FCA said gamification can be used to “engage consumers positively”, it is currently being used in ways that could mislead investors or lead to poor outcomes and problematic behaviours.

It’s an extremely important issue and it’s clear that over the last couple of years there has been a significant development (through technology) to allow more and more access to markets for retail investors. But now we need to really democratize access to institutional quality information and empower modern investors – after all information is power.

FCA research surveyed over 3000 users of four different apps, adapting the Problem Gambling Severity Index for a survey on investing, asking a range of questions aimed at identifying potential problematic behaviour.

The research found 3.75% of respondents were found to exhibit problem gambling behaviour, a similar incident to problem gamblers for online gambling at 3.5%. A small number, however, also looking at those who are at-risk of problem gambling behaviour, the FCA found it increases to 20% of app users. Those apps with the more game-like features had users that displayed more at-risk behaviours.

Gamification can be used to drive financial literacy and good money management behaviour in many ways, as we have seen in applications focused on teaching children how to save and evaluate spending behaviours. Now, the FCA is “concerned about problem behaviours linked to trading app design” and realises that “some trading apps could be contributing to problematic, even gambling-like, investor behaviour.”

Other game-like features the FCA highlighted as problematic were trader leader-boards and default amounts for investing and leveraging, with the FCA citing research that found people are much more likely to stick to a default.

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1. Your application – an overview – FCA Consumer Credit Guides

Step-by-step guides for consumer credit firms applying for FCA authorisation on the online Connect system.

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