FCA Issues Warning About The Gamification Of Retail Trading

The UK’s Financial Conduct Authority (FCA) is concerned that features like falling confetti after a successful trade, push notifications about price changes, and leaderboards could lead to over-trading and exorbitant risk-taking.

The country’s chief financial regulator has told providers to review the design of their existing applications and to make improvements where needed.

The FCA also wants brokers to provide support for users that are displaying problematic, gambling-like behavior.

‘Gaming Trading’

The regulator published a report on Monday entitled ‘Gaming Trading’. The aim is to shine a light on an element of the online investing industry that the FCA believes is working against traders’ best interests.

Gamification is essentially the process of updating products and services to create an experience similar to that found when playing video games, which seeks to keep users playing.

A good example is the ‘scratch off’ feature that could be found on the Robinhood app until earlier this year. This uncovered a free share when new users opened an account.

Overtrading & Excessive Risk Taking

The concern is that some gamification elements are encouraging users to overtrade and take excessive risks.

The FCA also believes that some design features may lead traders to borrow money to keep investing. A 2022 Financial Lives Survey showed 9% of British traders have borrowed money to fund investing activities.

Sarah Pritchard, Executive Director of Markets at the FCA, commented: “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 behavior.”

Design Concerns

The FCA has taken aim at three key features that could be linked to trader harm:

  • Positive Reinforcement – Using confetti or displaying celebratory messages following a successful trade.
  • Leaderboards & Rewards – Ranking investors based on their successes and distributing prizes to celebrate achievements.
  • Push Notifications – Sending push notifications to alert users to major market events and changes in asset prices.

Final Thoughts

Whilst some brokers may not welcome the news that they could have to redesign in-app trading features, the FCA’s warning is in line with the stance taken by the CySEC earlier this year, which initiated a similar campaign to protect retail investors from the harms caused by gamification.

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