The Financial Conduct Authority (FCA) has said it is keeping trading apps under review over concerns about digital engagement practices (DEPs.)

After carrying out an online experiment with more than 9,000 consumers, the regulator found that methods such as push notifications and prize draws can increase trading frequency and risk taking.

In a first for the financial watchdog, it built an experimental trading app platform to test the effect of different DEPs on trading behaviour.

The experiment also found evidence that DEPs can have a larger impact on some subgroups, including those with low financial literacy, women, and younger participants.

The move comes after the FCA warned in 2022 against game-like features in trading apps.

The organisation told stock trading apps to review any game-like design features ahead of the rollout of its Consumer Duty.

It reported at the time that in the first four months of 2021, 1.15 million accounts were opened across four trading app firms.

In the past three years, at just four trading app firms, more than 2.47 million accounts have been created across the UK.

Under the Consumer Duty, which came into force last year, trading apps must 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.

“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,” said Sheldon Mills, executive director of consumers and competition, FCA. “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.”

---