Context
In an FCA ‘first’, the regulator built an experimental trading app platform and has conducted an online experiment with over 9,000 consumers to test the effect on customer trading behaviour of different digital engagement practices (DEPs) used by trading apps, such as push notifications and prize draws.
Key points to note and next actions
The FCA found evidence that DEPs can increase trading frequency and risk taking and that DEPs can have a larger impact on some subgroups, including those with low financial literacy, women and younger participants (18-34). The FCA tested four DEPs, looking at their effect on trading frequency and investment risk:
- flashing prices;
- push notifications;
- trader leaderboard; and
- points and prize draws.
The FCA’s key finding is that DEPs can lead to changes in both trading and frequency and investment risk. The findings suggest that firms and regulators should continue to closely scrutinise the effect of trading app design features on consumer investment decisions. Although such practices are unlikely to be used in our sectors, all firms should be aware of the FCA’s emerging views, based on its findings in this experiment.