The OSC conducted research to explore how gamification could enhance investor decision-making and outcomes. Find out more about positive ways to uses gamification and also techniques designed to prevent the negative influence of gamification on investor behaviour.
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What is gamification and how can it be used to help investors?
If you use digital investing platforms, you may have noticed game-like elements such as points, rewards, leaderboards or other similarities to games. These elements are known as gamification techniques, and they can influence your behaviour in many ways. Investing is not a game. It’s important to stay alert to how some investing platforms may try to influence your trading behaviour, especially when it’s not in your best interest. For example, gamification techniques may cause you to incur fees or make decisions that are inconsistent with your investing goals.
Gamification techniques are not inherently good or bad. Their impact depends on how they are applied and the specific outcomes they aim to achieve.
Gamification could positively influence your behaviour and outcomes, such as through:
- Reducing cognitive load: Gamification can simplify complex tasks by breaking them into smaller, more manageable steps. For example, a financial planning app might guide you through setting a budget using a step-by-step process, reducing decision fatigue and helping you follow through on your intentions.
- Leveraging social influence: Social references, like peer comparisons, can encourage positive investor behaviour. Platforms might show users with low savings rates how their behaviour compares with others in their age group to encourage increased savings. Other social gamification tactics may be able to help too, like encouraging families or friends to engage with educational content together (or refer each other to it).
- Using design features to increase motivation: Features like badges, progress bars, or achievement streaks can help you see and celebrate your progress towards a specific goal. Particularly effective uses of feedback and progress indicators tap into goal gradient theory — the idea that people become more motivated as they get closer to a goal. For example, a savings tool might show that you are 80% of the way to your goal, encouraging you to stay on track or save a little more.
Gamification has the potential to improve investor education and encourage a wide range of positive investing behaviours, including more deliberate investment decisions.
Why is it important to understand the influence of gamification on investors?
Some gamification techniques could be used to encourage you to engage in more negative behaviours like trading more frequently or only trading certain investments. This can potentially lead to results that are not the right fit for you personally as an investor.
The OSC has done extensive research to understand how gamification, and digital engagement practices more broadly, influence investor behaviour. Understanding how gamification may influence your trading and investing behaviour is important to ensuring that digital engagement practices support, rather than undermine, your investing decisions.
- Previous research looking at gamification and other behavioural techniques found that providing investors with “points” for buying or selling stocks increased trading frequency by almost 40%.
- Follow-up research found that social gamification elements, such as social interactions and copy trading, led to a 12% and 18% increase in trading of promoted stocks, respectively. Gaming the system: Are you being influenced when trading online?
- Shedding light on dark patterns examined dark patterns and how these techniques are being used on investing platforms. It also looked at how regulators in Canada, the U.S., and the EU are responding.
Beyond this research, the OSC conducted a new experiment to examine how gamification could help, rather than harm, investor decision-making.
Read the full report Gamification and Retail Investing: Positive Use Cases and Mitigation Techniques.
How was the experiment conducted and what did it find?
More than 4,000 Canadians participated in the OSC’s online experiment. Participants were given $10,000 in play money to invest across eight stocks in a simulated trading environment. They were exposed to gamification techniques designed to increase the diversification of their portfolios. Diversification is an investing strategy that helps people manage exposure to risk by spreading their investments across different assets.
Within the experiment, participants encountered one of four gamification techniques designed to increase their diversification:
- Diversification Score – a real-time score (out of 100) based on diversification level
- Goal Framing – setting diversification goals and tracking progress in reaching those goal
- Leaderboards – comparing diversification scores to other users
- Rewards (Badges) – awarding badges for meeting diversification thresholds
Overall, the experiment found gamification could be used to encourage positive investor behaviours. All four techniques were found to have a modest yet positive impact. Exposure to the techniques led to a 3.5% to 4.5% increase in portfolio diversification.
The OSC’s Investor Research and Behavioural Science Team partnered with the Behavioural Insights Team (BIT) on the study.
How can investors safely benefit from gamification?
Our report includes a few recommendations to encourage the responsible use of gamification. The recommendations for authorities, who work to protect you as an investor, include ensuring regulatory and supervisory activities do not prevent positive uses of gamification. This means that regulations should address the risks of gamification techniques, while also enabling innovative approaches that improve investor outcomes and decision-making.
The report also recommends that authorities conduct more research on effective gamification mitigation practices and positive use cases in conjunction with regulatory policy development. By investigating and testing mitigation strategies, regulators can develop evidence-based policy and encourage platform operators to deploy these techniques to protect investors. Additional research into positive use cases, conducted by firms, regulators, and others, could explore areas such as savings habits, appropriate risk-taking, and deterring scams and fraud.
Additionally, regulators, other government bodies and other stakeholders should look to apply gamification techniques to investor education activities.
For example, the OSC developed GetSmarterAboutTrading.ca. It uses gamification techniques in a simulated trading environment designed to let you practice trading without risking real money. Using gamified elements in educational initiatives may help improve learning outcomes for investors and lead to more informed decision-making.
Try GetSmarterAboutTrading.ca to see how you may be influenced by gamification tactics in a simulated stock market.
