The Financial Conduct Authority (FCA) has warned that trading apps which steer savers towards high-risk products such as CFDs and crypto could breach its Consumer Duty rules.
In a discussion paper published earlier in December that was not widely reported on at the time, DP25/3, the UK regulator cautioned that the distinction between long-term investing and short-term, speculative trading has become increasingly blurred.
It placed particular emphasis on non-advised platforms such as trading apps, especially those that push users towards riskier products through elements such as gamification, push notifications and default settings for investment amounts or leverage.
The FCA refers to these features as digital engagement practices (DEPs). The authority said such design choices can influence consumer behaviour and, in some cases, blur the line between investing and gambling-like activity.
Where these features exploit behavioural biases in ways that do not support good consumer outcomes, the FCA said this would be inconsistent with the Consumer Duty.
Given that several established trading apps operating in the UK currently make use of such elements and earn considerable revenue through offering CFDs alongside long-term investment products, the eventual impact on the sector could be significant.
Research cited by the regulator found that users of apps with a high number of engagement features experienced significantly worse investment returns.
Almost all of the underperformance identified in the study was linked to trading in cryptoassets and CFDs, which in the sample analysed were only offered on apps with high levels of digital engagement features.
The FCA noted that while DEPs are not inherently harmful, the behaviours they amplify and the products they promote are closely linked to investment outcomes. Users of high-engagement trading apps were more likely to be younger, experiencing financial difficulty, and to display harmful trading behaviours.
“Consumers with low financial resilience or low risk appetites are unlikely to be well-served by high-risk investments,” the regulator said.
These findings are particularly relevant to the Consumer Duty, which requires firms to act in good faith, avoid foreseeable harm, and support retail customers in pursuing their financial objectives.
The regulator said that digital engagement features could be used constructively and in line with the Duty, for example by providing in-app education, support tools, or clearer illustrations of costs and long-term returns.
However, it warned that firms directing consumers with low risk appetite or low financial resilience towards high-risk products may struggle to demonstrate compliance with its rules.
