What are the consequences of gamification for retail investors?

Published on: Jun 21, 2021

More and more people participate in the capital markets and instead of making sound investment decisions, they often speculate with their savings. Trading apps and other similar platforms reinforce this trend, as they reduce the complexity of investing and give almost everyone the opportunity to trade risky assets. The simplification leads to an increasing number of individuals investing who have no or insufficient expertise. In this context, the apps and platforms are increasingly designed to offer the best possible user experience and to make the investment process as smooth as possible. New customers are then tied to the company’s own platform via playful trading. This raises the question of what consequences gamification of financial services has for retail investors. This post will look at what is meant by gamification, how this trend affects new investors, and what potential dangers are associated with it.


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The term gamification is still relatively young, but its use in practice is nevertheless already very controversial in some cases. Many terms exist that describe similar constructs and are sometimes used as synonyms. However, one definition that is frequently cited in the literature is that of Deterding et al. (2011). The authors define gamification as follows:

“Gamification is the use of game design elements in non-game contexts.”¹

Design elements that are normally used in the context of games that serve to entertain thus also find application in other areas of everyday life. It is important to note that gamification always refers to regulated games that follow clear rules. Such elements are thus implemented in corresponding activities that are not classically considered entertainment.²

Gamification is already taking place in various industries. One example of the far advanced use of such design elements is the health sector, where it is applied in various apps and fitness gadgets. In comparison, the financial sector is still in its infancy, although the trend has accelerated considerably in recent years. Trading platforms in particular use gamification to attract new customers and simplify trading so significantly that, in principle, everyone has the opportunity to participate in the capital market via the corresponding platforms. However, the simplification also leads to impulsive decisions being made more frequently, which are usually not sufficiently thought through. Nevertheless, one also hears many positive arguments in favor of the current development. Financial service providers are confronted with a changing customer image and must adapt their range of services to the wishes and needs of the new customers. This is especially true for established organizations, as they otherwise run the risk of losing their position to up-and-coming FinTech organizations. Millenials and other young adults are now acquiring significant wealth, making them a relevant investor group. Their quest for freedom and independence is also impacting financial decisions, and financial services providers are trying to appeal to them through attractive interfaces and ease of use. As entertainment and short-term rewards are preferred over hard work, service providers are also increasingly relying on game-like features to engage the new customers. Comparison with others via leaderboards, for example, leads to a kind of competition, and rewards for progress result in a quest for the next success.³

The fact that more and more people have access to the capital markets also results from the fact that trading platforms and corresponding apps reduce the complexity of investing by their design. However, the simplification and complexity reduction of a complex area also lead to more and more private investors making rash decisions. The design of platforms is changing the way investors invest, and many investment decisions already exhibit a more betting-like character. The individuals involved make heuristic decisions because they have limited information or do not consider all available information as part of their decision-making process. This is particularly problematic when investors also trade in complex and speculative assets such as options and certificates without actually understanding them. Chaudhry & Kulkarni (2021) have therefore developed a guideline on how organizations could design appropriate platforms for the broad mass of investors without the risk of insufficient knowledge on the part of private investors.⁴

However, the gamification of financial services could also be exploited by service providers to deliberately manipulate retail investors. Even though such platforms often advertise that no direct costs arise for the customer from trading in financial products, the organizations must monetize their services in some form. If this is done via lending fees or similar, it would also be conceivable that there is an incentive here for providers to introduce new investors to speculative assets as quickly as possible. If the investment process is structured as a kind of game and complexity is sufficiently reduced, this could potentially help organizations do this. Moreover, if inexperienced investors suffer significant losses due to insufficient knowledge, this could result in potentially existentially threatening consequences. Unfortunately, there have been many such scenarios in the past, some of which have even ended in life-threatening situations.

However, if the providers of trading platforms are aware of their responsibility and consciously use gamification, this could benefit the financial education of users. Game-type elements are also successfully used in other branches of education and it is conceivable that their use in the context of financial services could also be promising. Interactions with other users, for example, could lead to investors acquiring new knowledge and building relevant skills. Simulations, which are already used in various apps in the context of demo accounts, for example, could also promote the individual learning process and support users in acquiring a minimum of relevant expertise before they invest their own capital. Gamification could thus be used to make the learning process interactive and interesting so that a greater proportion of new users could make informed investment decisions. The responsible use of gamification by financial service providers could thus actually promote the much-cited “democratization of financial markets” by making it easier for individuals to access financial services and helping them to acquire the skills they need.

Gamification in the financial sector is a polarizing topic that is increasingly coming to the foreground. On the one hand, game-like elements can support the learning process of new investors; on the other hand, such elements can also be used by platform providers for deliberate manipulation. The decisive factor here is always responsible use on the part of the financial service providers. If they have the well-being of the retail investors in mind and are not only driven by their own profit, all parties involved may benefit. The current trend of gamifying investment decisions is not expected to slow down, and service providers face a changing customer picture in the coming years, so it is to be expected that gamification will increasingly find its way into financial services to satisfy the wants and needs of new customers. If established service providers miss this trend, they potentially face losing their own market position to emerging FinTech organizations.

¹ Deterding, S., Dixon, D., Khaled, R., & Nacke, L. (2011, September). From game design elements to gamefulness: defining” gamification”. In Proceedings of the 15th international academic MindTrek conference: Envisioning future media environments. Page 10.

² Deterding, S., Dixon, D., Khaled, R., & Nacke, L. (2011, September). From game design elements to gamefulness: defining” gamification”. In Proceedings of the 15th international academic MindTrek conference: Envisioning future media environments. 9-15.

³ van der Heide, A., & Želinský, D. (2021). ‘Level up your money game’: an analysis of gamification discourse in financial services. Journal of Cultural Economy, 1-21.

⁴ Chaudhry, S., & Kulkarni, C. (2021). Design Patterns of Trading Apps and Their Effects on Investing Behaviors. In Proceedings of Design of Interactive Systems (DIS). (pre-print – viewed on 20.06.2021). ACM, New York, NY, USA, 1-18.

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