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The UK Financial Conduct Authority (FCA) is monitoring the use of game-like design features in trading apps, wary of the potential to drive risky trading.

Following an online experiment involving 9,000 consumers, the FCA issued an update regarding the use of digital engagement practices (DEPs) in trading apps.These features include push notifications and prize draws, which the financial regulator believes can cause risky trading and increase trading frequency among consumers.

Sheldon Mills, Executive Director of Consumers and Competition at the FCA, said: ‘Trading apps have the potential to transform retail investments, but some in-app features might be pushing consumers towards more frequent or riskier trading, which isn’t right for everyone.

“With usage and popularity of trading apps growing, we’ll be keeping them under review to make sure customers can make investment decisions that suit their needs.”

This is not the first time the FCA has highlighted the presence of gamification features in trading apps, having issued a warning back in 2022. Gamification, as the name suggests, is the process in which “game-like features’, as the FCA calls it, are incorporated into non-video game platforms.

Gamification is a common practice across various industries, with gambling being a notable sector heavily influenced by the process. In the fields of banking, payments and fintech, it is utilised for customer engagement, particularly among Gen Z demographics.

The FCA is concerned about the potential negative implications of gamification. The regulator’s study found that push notifications and prize draws increased the number of trades made by 11% and 12%, respectively.

These same notifications also increased the portion trades in risky investments by 8% and 6%, with people deemed to have ‘low financial literacy’ having increased trading more significantly than those with high financial literacy when presented with flashing prizes and leaderboards.

Demographically, push notifications were observed to have a more significant impact on women than men regarding trading frequency. Younger consumers aged between 18-34 also increased end-of-trading portfolio risks more than those aged 35 and above when engaged with DEPs, with the exception of flashing prizes.

The UK trading scene has exploded in popularity in recent years, with more than 2.47 million accounts created across four trading platforms in the past three years. Against this backdrop, the FCA has become increasingly invested in consumer protection, which was placed at the forefront of its agenda for 2024 at the start of the year.