The FCA Has Issued A Warning To Trading App Operators To Discontinue Trading Gamification

The UK's market regulator wants trading app developers to reconsider the key design elements.

Gamification, according to new research, may lead to gambling-like behavior.

The Financial Conduct Authority (FCA), which is in charge of regulating the UK's financial markets, put out a market warning about trading application design on Monday. The watchdog for the financial industry is worried that retail trading is becoming more like a game, which could hurt investors' interests.

According to the press releases, the FCA told developers of trading apps to look at their apps' features and designs, especially those with gamification elements. It could encourage people to trade too much and take too many risks, which may be more than the average investor is willing to do.

Gamification is a way to make services better by giving customers experiences like those in video games. This keeps people interested and motivated. However, in the case of trading applications, the FCA believes there are too many hazards.

The financial market watchdog issued a warning today, as well as accessible research titled “Gaming Trading,” which details the possible drawbacks of that tactic. The results of the survey show that turning trading into a game on a large scale could lead to addiction and behavior like gambling.

“Some product design characteristics may be influencing risky, even gambling-like, investor behavior.” We anticipate that all firms that allow consumers to buy and sell stocks will review these findings and, if required, make improvements to their products in response to what they discover. The FCA's Executive Director of Markets, Sarah Pritchard, said, “They should also make sure that they offer help to their clients, especially those who are in difficult situations or show signs of compulsive gambling behavior.”

According to the FCA, game-like characteristics in a trading app may drive some traders to borrow money to invest. According to the 2022 Financial Lives Survey, 9% of UK traders have borrowed money to trade, and 49% would be unable to do so without extra finances.

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Push Notifications, Confetti, and Leaderboards The Three Gamification Sins

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Push Notifications, Confetti, and Leaderboards The Three Gamification Sins

The study for the 'Gaming Trading' paper identified the primary trading app design aspects that may be connected to possible consumer damage. “Positive reinforcement after a successful transaction, like falling confetti or happy messages, could lead to overtrading,” the FCA found.

Among the “major faults” of the current trading app design, the FCA singles out the use of “badges, awards, and leader boards” that rank traders based on their trading accomplishments, as well as the frequent push, alerts that direct attention to the most essential market news and price movements.

“We are also worried that the app features, as revealed by another study, may blur the borders between online investing and gambling-like behavior.” A previous FCA study has shown that emotions like thrill and excitement are important motivators for considerably younger, new investors. “This may be particularly true for risky investments like crypto assets and CFDs,” the FCA said.

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