We have published a Multi-firm Review, 'Trading apps: high-level observations'.
The publication aims to support new firms and traditional investment brokers seeking to offer these services, to help them understand their existing obligations.
The review assessed the business models, product offerings and services of 12 trading app firms, identifying both positive practices and areas needing improvement.
Key findings
- Business models: Some firms act as introducers, directing customers to other platforms or an affiliated firm. Firms are encouraged to fully understand their obligations as both manufacturers and distributors, as set out in our rules.
- Revenue drivers: Firms generate income in a range of ways, including transaction fees on trades, subscription fees and interest earned from cash balances. Some firms may need to reassess whether their current pricing structures provide good value for consumers.
- Digital engagement practices: All firms demonstrated awareness of the need to use digital features, such as notifications, responsibly.
- Appropriateness testing: While some firms had strong processes for assessing customer understanding of high-risk investments, others lacked adequate checks, potentially exposing consumers to unnecessary risks.
Research on consumer behaviour
We have also published an Occasional Paper, ‘Playing the market: a behavioural data analysis of digital engagement practices and investment outcomes’. This research looks at how app features, particularly DEPs like notifications and prize draws, influence consumer behaviour. The study found that apps with more DEPs tend to attract younger, lower-income users who trade more frequently and often suffer worse investment returns. While the research doesn’t directly link DEPs to financial losses, it raises concerns about their potential impact.
Next steps
We urge firms to consider these findings when designing trading apps and improving consumer protection practices.
For more details, refer to our full publications on digital engagement practices and pricing.