The news: The UK’s Financial Conduct Authority (FCA) has warned that the gamification of trading apps can lead to amateur investors taking on more risk, being misled by spurious information, and making investments which aren’t in their interests.
Gaming trading clampdown. The FCA surveyed 3,000 app users as part of a review into firms’ use of “game design” features. The research found:
The bigger picture: Trading apps are increasingly employing gamification tactics in the battle to keep the attention of Gen Z investors. Apps like eToro and Chip have flooded the market following the GameStop stock saga in early 2021 and the investment craze for commission-free trading apps like Robinhood.
However, as the FCA points out, gamification features can encourage risky or addictive behavior in investors. And the UK regulator looks set to clamp down on firms potentially exploiting amateur traders.
What firms can do: Trading apps in the UK should review their offerings for any features that could harm consumers and lead to future punishments from the FCA.
They should also ensure they are providing support to customers, especially those showing signs of addictive or gambling behaviors. Apps can introduce features to help support users in controlling their investing. Examples of this are Freetrade’s trading break or features that educate users on amateur investing and the associated risks.