Apps ‘turn investors into problem gamblers’
Watchdog condemns use of gaming features that could cause market traders to take greater risks
THE City watchdog has warned that “game-like” features in stockbroking apps can make investors act like problem gamblers.
The Financial Conduct Authority (FCA) condemned trading apps that send frequent notifications to customers with the latest market news and provide users with in-app points, badges or celebratory messages for making trades.
The regulator said it found that consumers using apps with these features were more likely to invest more money than they could afford to lose or otherwise exceed their “risk appetite”, in some cases exhibiting the type of behaviour usually associated with problem gamblers.
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 companies that offer stock trading to consumers to review and, where appropriate, make improvements to their products.”
The watchdog told companies to ensure that their products were not offering inappropriate features.
The industry-wide warning came after the FCA examined a handful of apps and concluded some could be used in ways that may “mislead consumers or lead to poor outcomes and problem behaviour”. The regulator declined to say which companies it examined.
Apps including etoro, Revolut and Trading 212 are known to send regular push notifications to users about market movements, with the latter frequently sending “hottest stock” recommendations.
In recent weeks, amid turmoil in cryptocurrency markets, Revolut has also sent notifications to non-trading users, asking whether they are “crypto curious” and saying they can “dive into crypto starting from just £1”.
Commenting on the influence of push notifications, FCA researchers said: “We are concerned that giving information to consumers in this way may lead them to pay attention to spurious information and make investments which are not in their interests.
“Research has found that push notifications can stimulate people to trade in a riskier way using higher leverage and trading larger amounts, with the biggest impact on younger and less experienced investors.”
Other design features that gave the FCA “cause for concern” were celebratory messages or falling confetti appearing after users made a trade, along with points, badges, rewards, leader boards that ranked users against each other and flashing real-time prices.
“We are concerned that these positive reinforcements may encourage people to trade more frequently or make investment choices that they otherwise wouldn’t,” the report said.
The FCA said that another area of concern was that default investment and leverage amounts were sometimes set too high.
A Revolut spokesman said: “In line with our regulatory obligations, the Revolut app provides clear and detailed information about our products, and any associated risks with trading.”
Dan Moczulski, etoro UK’S managing director, said: “Gamification is not a feature of the etoro platform and we absolutely agree with the FCA’S view that there is no place for it in investing. We do not issue badges or celebratory messages to clients in any shape or form.
“We do however want our investors to have access to tools and information that can aid them in their investment decisions, and on occasion this means providing users with a non-gamified and informative notification, for example on significant market news.”
Trading 212 was contacted for comment.