The Financial Conduct Authority (FCA) has released new research into how gamified elements in the design of stock trading apps could be engaging consumers for the worse.
Following a considerable rise in digitalisation in financial services during the Covid-19 pandemic, with 1.15 million new accounts opened by four trading app firms in the first four months of 2021, the research highlights policymakers’ concern that online businesses are increasingly able to manipulate consumers.
While the FCA’s Consumer Duty sets new standards for consumer protection to mitigate against problems such as ‘sludge’ design practices – where the design of something makes it harder for a user to make an action that is in their best interest – the new research suggests that gamification, which has been widely incorporated into the design of all kinds of digital apps, “can sometimes play a role in driving poor outcomes for consumers”.
The research was done by Lucy Hayes, Stephen O’Neill, Max Spohn (during his time at the FCA) and Cherryl Ng. The team undertook a survey of over 3,000 app users, sampling customers of four trading apps, as well as those from the app of a “more traditional investment platform, “which does not have the features we were concerned about” as a comparator. Further in-depth qualitative interviews were done with a sample of 20 app users.
Gamified features the FCA is concerned about include “positive reinforcement” such as “celebratory messages and falling confetti”, and “points, badges and rewards” and leader boards, linking to a report that finds these celebrations can cause consumers to take on more risk.
Other features include push notifications with market news and “flashing elements” highlighting real-time price changes of stocks, which may cause users “to pay attention to spurious information and make investments which are not in their interests”, the authors say.
The authors also expressed concern that “app features may blur the lines between online investing and gambling-like behaviours”, adding that a number of survey participants made a connection between gambling and addictive behaviours “without prompting”.
The research also highlights how customers who may be new to investing have easy access to high-risk investments including crypto assets and contracts for difference (CFDs). There may be the higher risks for vulnerable users, as answers to survey questions adapted from the Problem Gambling Severity Index, indicated that “a subset of financially vulnerable customers are exhibiting problem gambling-like behaviour”, it says.
FCA executive director Sarah Pritchard says: “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 behaviour.”
“Performance is measurable, design ethics are harder to quantify”
Matthew Iliffe, co-founder and chief executive officer at Beyond, points out that the use of gamification and its associated tensions can be seen “more broadly in digital product design”.
“We are seeing the tension between wanting to optimise experiences for conversion and wanting to put the customer’s interests first – those techniques are performant; that’s why they’ve been used”, he says.
“Performance is concrete and measurable, and design ethics are much harder to quantify, so it makes sense that sludge design is as prevalent as it is”, he adds.
Matt Leighton, creative director DSCX at Method, agrees that the issue of engagement produces a tension in the sector. “We want engagement with apps, and if you work at a bank, one of the KPI’s that you’re measured against is: how many users do you have, how long do they spend in the app?”.
However, Leighton also discusses the differences with traditional banking. “I’ve worked at a lot of the larger banks in America and there are so many legacy things about banking that don’t translate one-for-one to the digital space”.
He describes how investments were traditionally done by a person with a “knowledge and a lot of background” who could act as a “gatekeeper” to “help you make good decisions with your investments”. While the apps offer the consumer new freedoms, he says, “you don’t have the fiduciary responsibilities of that advisor”.
He suggests that the app could take on an educative role, while still letting the consumer have the choice.
He also suggests using “good sludge” or “friction”, and design features that cause a “double tap moment”, such as asking users to confirm twice before making an investment.
Iliffe agrees that app design could include “personalised learning moments to educate so that users can make more informed decisions”. This is not just in the individual customer’s interest but for the industry, he adds.
“It’s an opportunity for the industry to think differently. A customer is going to have a more valuable long-term relationship with a product if their ongoing experience is more equitable and customers make money from their investments”, he says.
Understanding engagement and reward
Leighton says that when it comes to financial products, it needs to be “the right type of engagement, in the right type of context.” As design features, “push notifications and confetti that pops when you’ve done something great”, are not inherently bad things, he says, but there can be “unintended consequences”.
While he believes gamification, the psychology of video games and how these ideas are used in other contexts is impressive, “you’ve got to understand those ripple effects and you can’t just apply it apples-to-apples with every industry”.
“I always say I want my banking apps to be fun, but then maybe it’s too fun. [If] I get that little rush of dopamine every time I get the little confetti pop, then it’s like yeah, I’ll keep trading here”, he says, adding that features such as leader boards are inappropriate for the context.
Iliffe adds, “And, of course, gamification and designing for behavioural economics can be used for good in many contexts.”
Discussing the idea that a feature that is safe for one user might cause risks for another, Leighton explains that it is hard to design for every possible user. “Every human is different, so even if you had 10 personas that you wanted to pick from […] really, it’s only 10 people you’re accounting for”.
Leighton also highlights how investment practices don’t necessarily align with the expectations of consumers. “Investing is more of a long game and a lot of people don’t want to wait. There’s also a disconnect there […] when you talk about traditional investments, it’s not how is it doing every hour it’s how’s it has done over the past quarter”.
Leighton also agrees that some investment can be “like gambling, especially with the way the market is right now” or with “volatile” crypto. “And with crypto, we’re finding out that you don’t have any kind of insurance, as you would with traditional banking”, he adds.
An ethical question
Iliffe says that the research shows the FCA is “challenging brands and product design teams to answer for the ethical choices in their digital experiences, which is really positive”.
He suggests that to improve practice, designers should “advocate for all customers’ best interests throughout the design process”, while product and design teams should “continuously upskill […] around the topic of sludge and deceptive design practices and actively critique their design choices accordingly”.
“Otherwise”, he adds, “teams will try to optimise for performance, and if every competitor is using gamification, it’s hard to avoid a race to the bottom.”
Leighton says that in addition to designers, the client must take responsibility to follow up on design teams’ suggestions. “I think the onus really falls on a lot of the actual banking companies”, he says.
Iliffe highlights the expectations for investment firms set out in the FCA’s Consumer Duty to help customers to make “properly informed decisions about financial products and services and…take responsibility for their actions and decisions”.
“It’s not enough to merely avoid deceptive practices – product design teams need to embed useful information and decision support in order to meet this bar”, he says.
In a sector that is constantly evolving, Iliffe also suggests that there will be different levels of knowledge across teams.
“It’s important to communicate the implications of using these patterns to product and commercial teams so everyone has a shared understanding of the ethical implications”.
Banner image by shutter_o, Shutterstock
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