Gamification Revisited: New Experimental Findings in Retail Investing

Securities regulators worldwide are working to protect retail investors from potentially harmful digital engagement practices used by online trading platforms.

These include gamification and other behavioural techniques, from confetti animations celebrating trades to displaying leaderboards. Typically, these tactics make certain actions more appealing – actions that may not always be in investors’ best interests.

Building on our 2022 research, which found that gamification tactics can harm investors by encouraging them to trade more frequently, BIT partnered with the Ontario Securities Commission on a follow-up experiment. In a randomized controlled trial, we tested four more engagement techniques that platforms are starting to use:

• Social interactions: Design elements that enable platform users to interact with each other by creating, sharing, viewing, and reacting to content – essentially promoting the stocks they trade
• Social norms data: Design features which signal how other users think and behave
• Copy trading: Platform functionality which allows users to copy the trades of other profiled users
• Leaderboards: A public display of ranked information about users’ weekly returns

Key result: social influence had a huge effect

Investors were deeply swayed by what they saw others doing.

Participants in the social interactions and copy trading conditions traded significantly more ‘promoted’ stocks. They made 12% and 18% more of the total volume of their trades in the stocks promoted, respectively, compared to the control group. 

This means that investors followed the behaviour of other people – even when they had no idea if those people knew what they were doing.

Takeaways for regulators

• Consider if updates to regulations around how trading platforms use digital engagement practices are required, particularly techniques that, through high-quality research, have been demonstrated to harm investors
  
• Consider whether to limit trading platforms from using tactics that our research indicates can compromise investor protection, including copy trading, social interaction feeds, top traded lists and reward points
  
• Continue gathering data from firms to measure the impact of digital engagement practices on investor behaviours and outcomes

Read the full report for more insights or contact us to explore working together to develop consumer protection solutions.