Global Regulation Tomorrow

On 20 June 2024, the Financial Conduct Authority (FCA) published the results of its research on digital engagement practices.

In an online experiment with over 9,000 consumers, the FCA found that digital engagement practices (DEPs) used by trading apps (such as push notifications and prize draws) can increase trading frequency and risk taking. It also found evidence that DEPs can have a larger impact on some subgroups, including those with low financial literacy, women and younger participants (aged 18-34).

The FCA’s Consumer Duty requires trading apps to ensure services are designed and tested so they meet consumers’ needs and enable them to make effective, timely and properly informed investment decisions, including for those with characteristics of vulnerability. In 2022, the FCA warned stock trading apps to review game-like design features ahead of the Consumer Duty’s implementation.

Following its research, the FCA concluded that firms and regulators should continue to closely scrutinise the effect of trading app design features on consumer investment decisions, especially in light of the Consumer Duty.

In its related press release, the Executive Director of Consumers and Competition at the FCA, Sheldon Mills, confirmed that the FCA would be keeping trading apps under review to ensure customers can make investment decisions that suit their needs. He also highlighted that: “The FCA continues to educate consumers about making better investment decisions and understanding the opportunities and risks, through its InvestSmart campaign. It has also brought charges against ‘finfluencers’ promoting financial products on social media.”