Games, leaderboards and alerts in mobile trading apps drive more frequent trading and increase risk taking among investors, according to a study from the U.K.’s Financial Conduct Authority (FCA) that raises concerns over consumer protection.

The FCA published a report Thursday detailing the results of an experiment it conducted using a trading app it built to test the effects of various “digital engagement practices.”

“As far as we are aware, this is the first piece of research to test the effect of flashing prices, a trader leaderboard and a points-linked prize draw on consumer trading behaviour,” the regulator said.

The experiment found, among other things, that these tactics can increase investors’ trading activity and their risk taking.

Specifically, the FCA found that the use of push notifications increased investors’ trading activity by 11%, while the use of points and prizes drove up trading by 12%. The use of push notifications and points and prizes also increased the proportion of trades in risky investments by 8% and 6%, respectively, it noted.

The regulator found that these digital engagement tactics can particularly impact certain groups — such as younger investors, those with lower financial literacy and female investors.

“Those with low financial literacy increased their trading by more than those with high financial literacy in the presence of flashing prices and trader leaderboards,” the FCA said.

The experiment also revealed that women increased their trading more than men when faced with push notifications and points and prizes. Younger traders (aged 18-34) increased their portfolio riskiness by more than older participants when any of these tactics were used (except flashing prices), the report noted.

“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 with the FCA, in a release.

The FCA said its results are broadly consistent with other research in this area, including research by the Ontario Securities Commission, which also found that points-based incentives can drive increased trading and that these practices don’t do anything to improve investor diversification.

“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,” Mills said.

In 2022, the FCA warned the industry about the use of gamification features to drive investor behaviour, particularly in light of the new consumer duty, which took effect in mid-2023 and requires the industry to ensure that investors are treated fairly.

“Under the FCA’s consumer duty, 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,” the regulator noted.

The FCA said it hopes its research “will prove instructive to all firms conducting their own testing on the effect of design features on consumer outcomes, in light of the consumer duty.”