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FCA Reviews Trading Apps

June 24, 2024
FCA

The FCA has published findings from a study which indicates the use of digital engagement practices (DEPs) by trading apps can influence user behaviour, increasing trading frequency and risk-taking among consumers.

The study, a first of its kind for the FCA, involved creating an experimental trading app platform to examine the effects of various DEPs, such as push notifications and prize draws, on trading habits.

The research highlighted that DEPs tend to have a more pronounced effect on certain demographics, including individuals with lower financial literacy, women, and younger users aged 18-34.

This revelation comes at a crucial time as the FCA’s Consumer Duty mandates that trading app designs and functionalities should cater effectively to all consumers, helping them make informed and timely investment decisions, particularly for those identified as vulnerable.

The FCA’s warning to trading apps last year to reconsider their game-like design elements was a precursor to the implementation of the Consumer Duty standards. This ongoing scrutiny reflects the regulator’s commitment to ensure that financial services delivered through apps do not compromise consumer well-being for engagement.

FCA Executive Director of Consumers and Competition, Sheldon Mills, expressed concerns about the potential for trading apps to lead consumers towards more frequent and riskier trading behaviours. “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,” Sheldon Mills said. “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.”

In addition to monitoring app functionalities, the FCA continues its efforts to educate the public on smart investment practices through its InvestSmart campaign and has taken legal action against ‘finfluencers’ who improperly promote financial products on social media platforms.

Keep up with all the latest FinTech news here.

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  • TAGS
  • Consumer Duty
  • digital engagement practices
  • FCA
  • finance regulation 2024
  • InvestSmart campaign
  • Trading Apps
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