Stock trading app operators have been warned to review their design features, including those with game-like elements, amid concerns they could encourage people to trade more frequently or take on more risk.
The Financial Conduct Authority (FCA) said there could be a risk of app features prompting consumers to take actions against their own interests and it raised concerns about features potentially contributing to “gambling-like behaviour”.
Features include sending frequent notifications with the latest market news and providing consumers with in-app points, badges and celebratory messages for making trades, the regulator said.
The FCA found that consumers using apps with these kind of features were more likely to invest in products beyond their risk appetite.
It raised concerns that those exposed to high-risk investments may appear to exhibit behaviours similar to problem gambling.
Some product design features could be contributing to problematic, even gambling-like, investor behaviour— Sarah Pritchard, FCA
Trading apps allow retail investors to trade directly and easily in a range of products, including high-risk investments such as cryptoassets.
While gamification can be used to engage consumers positively, the FCA found it being used in ways that may mislead consumers or lead to poor outcomes and problem behaviours.
Many customers are new to investing and younger than traditional investors, the regulator said.
Sarah Pritchard, executive director of markets at the FCA, said: “Some product design features could be contributing to problematic, even gambling-like, investor behaviour.
“We expect all firms that offer stock trading to consumers to review and, where appropriate, make improvements to their products based on these findings.
“They should also ensure they are providing support to their customers, particularly those in vulnerable circumstances or those showing signs of problem gambling behaviour.”
The FCA said it intends to do further research into trading app use and design features, in particular to understand some wider financial vulnerabilities for users of these apps, such as whether they borrow to invest and the scale of any losses.
The FCA’s 2022 Financial Lives Survey found 9% of all adults with investments have borrowed to invest and 49% of these would not have been able to make the investment without doing so.
To ensure customers are being treated fairly and ahead of the new consumer duty coming into force next year, all firms should be reviewing their products now to ensure they are fit for purpose, the regulator said.
The consumer duty stipulates that firms must design services so that consumers can make effective, timely and properly informed decisions about financial products and services.
