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FCA Takes Stance Against Trading Apps Promoting Problem Behaviours With Design

The Financial Conduct Authority (FCA) is calling for a redesign of stock trading apps is discourage gambling-like behaviour. 

Stock trading app operator must review design features that promote consumers acting against their own interest, warns the regulator.

The caution is specifically targeting the incorporation of any game-like elements within trading apps.

This includes frequent notifications on market news and the rewarding of trades with in-app points, badges and celebratory messages.

The FCA says that these kind of features are more likely to lead consumers to invest in products beyond their risk appetite.

Problem behaviour 

The statement coincides with the regulator’s latest research, which raises concerns that trading apps are exposing customers to high-risk investments, and that some appear to exhibit behaviours similar to problem-gambling.

While gamification is positively engaging consumers, the research also uncovers it’s potential to mislead consumers into poor outcomes and problem behaviours.

Sarah Pritchard, Executive Director of Markets at the FCA
Sarah Pritchard, executive director of markets, FCA

“Some product design features could be contributing to problematic, even gambling-like, investor behaviour,” says Sarah Pritchard, executive director of markets at the FCA, discussing the statement.

“We expect all firms that offer stock trading to consumers to review and, where appropriate, make improvements to their products based on these findings,” she continues

Pritchard advises firms to ensure that they’re supporting their customers, “particularly those in vulnerable circumstances or those showing signs of problem gambling behaviour.”

The FCA confirms its intention to develop its research around app use and design features. The regulator particularly wants to understand the wider financial vulnerabilities for users of these apps, such as whether they borrow to invest and the scale of any losses.

According to the 2022 Financial Lives survey, published by the FCA, nine per cent of adults with investments have borrowed to invest. Forty-nine per cent 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 Consumer Duty stipulates that firms must design services so that consumers can make effective, timely and properly informed decisions about financial products and services.

Author

  • Tyler is a fintech journalist with specific interests in online banking and emerging AI technologies. He began his career writing with a plethora of national and international publications.

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