On 11 April 2025, the Financial Conduct Authority (FCA) published its observations following a multi-firm review of trading apps.

Background

The FCA conducted the review as it wanted to understand how retail customers were using trading apps. It looked at the business models, product offerings and services of 12 trading app firms. It identified some positive practices and areas for improvement.

Findings

In its findings the FCA sets out good and poor practice relating to:

  • Business model. A key message from the FCA is that whatever the business model, the regulated firm needs to ensure it understands the requirements that apply to manufacturers and distributors as set out in the Handbook. Where affiliates are based overseas, firms should make it clear to customers their trading agreement is with the overseas entity and whether there is any loss of protection on their assets.
  • Target market. Firms are likely to be both manufacturers of a trading app and distributors of products sold on it. They should consider PRIN 2A.3 and PROD 3. The target market should be specified at a sufficiently granular level.  The good practice observed by the FCA included that it saw evidence of firms using risk indicator scoring and classifications to help define their target market. Another observed good practice was some firms clearly identifying their ‘negative target markets’. These are any groups of retail customers for whose needs, characteristics and objectives the investment or service is not compatible.
  • Revenue drivers. The FCA’s rules on price and value in PRIN 2A.4 require firms to ensure products deliver fair value. This means ensuring the price of a product or service is reasonable, compared to the overall benefits customers can reasonably expect to get. Good practice included some firms with subscription models showing that they had considered whether a customer’s choice of subscription level and their level of trading volumes implied fair value. 
  • Digital engagement practices (DEPs). The firms the FCA reviewed did not use a significant number of DEPs. It did not identify notifications or other DEPs being operated in a way likely to be harmful. Good practice included a small number of firms using analytics tools and making the analytical data available to customers. This allowed customers to track their trading activities and patterns.
  • Appropriateness tests for high-risk products. Trading apps allow access to a range of products and some of these may be high-risk or complex for retail customers. Firms must therefore ensure that these are appropriate for retail customers, using appropriateness tests (COBS 4.12A.28R or COBS 10/10A). Observed good practice, included firms having clear eligibility criteria to ensure customers had sufficient assets and income prior to sitting the appropriateness test. Poor practice included some firms not having robust appropriateness tests that meant some customers were able to access products or services for which they did not have appropriate knowledge or experience

Next steps

The FCA encourages firms to consider the findings when designing trading apps and improving consumer protection practices.