Are game-changing tools playing it fair in finance?

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Let’s face it – we are sold to a lot of the time.

Not just through adverts we see and hear, but in the ways products, services, and even places are designed to get us to part with our cash.

Take supermarket layouts. Fresh fruit and veg at the entrance create a good first impression, especially if there’s also the wafting smell of freshly baked bread. Sweets and impulse purchases can be found at the till, where you’re more likely to give in to them.

Casinos are another example – the bright colours and flashing lights of slot machines lure you in, and the sound effect of dropping coins suggest that people are winning all round you.

This kind of influence doesn’t have to be about getting us to spend more. The concept of “nudge theory” encourages us to make better decisions, whether that’s automatically admitting new employees into the company’s pension plan, or placing healthy office snacks at eye level in the canteen. So, what has all this got to do with online trading apps?Recent research from the financial regulator looks at whether the way trading apps are designed impacts our financial behaviour.

Trading apps, or applications, allow you to buy and sell investments through your phone or PC. They mark a move away from the more traditional and – some would say – boring world of investing to something that is more “gamified”.

You can use them to open and manage products like ISAs and more alternative, high-risk options such as cryptocurrency or foreign exchange trading.

Trading apps became very popular during lockdown. The Financial Conduct Authority (FCA) states that between January and April 2021, UK customers opened more than a million new accounts across four trading apps. Over the next three years, an average of 70,000 accounts were opened on the same four apps each month.Its latest research digs into the impact of certain features of trading apps that are designed to get you to use the app more. The researchers were interested in things like a falling confetti graphic after making a trade, phone notifications, trader leaderboards, and setting default investment amounts.

With apps including more of these types of features, the regulator found those using them are more likely to be men and of a younger age. Users often spend more time on the app – including at night – and trade more often. They were also achieving much lower returns.One in 25 trading app users were investing at a time of financial distress – often 90 days or more behind with their mortgage or loans.

The FCA is careful not to blame trading apps for causing financial pain, as there may be other factors at play, but it is important to be wary of any form of investing that feels too much like gambling. Ditto, if key information, such as costs, are difficult to find.As much as some apps may make investing feel like a game, it’s not Monopoly money at stake – both returns and losses are real.