Warning about trading app gamification

The UK’s financial watchdog has warned against the use of “game-like elements” in trading apps, saying that they risk leading consumers to take actions against their own interests. The Financial Conduct Authority(FCA) said , share trading apps were giving their customers “in-app points, badges and celebratory messages for making trades”, and that people using these features were more likely to “invest in products beyond their risk appetites”. It told operators of the apps to review their design.

Along with the warning, the FCA published research finding that customers using gamified trading apps 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 incidence 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 so 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."

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

Dr. Deepak Kumar Sahu, President & CEO, VARINDIA