Your Investing App Is Not Neutral
What catches our attention affects what we buy
Long before modern investing apps existed, behavioural-finance researchers Brad Barber and Terrance Odean studied how attention affects retail investors.
They found that individual investors were more likely to buy stocks that had become unusually visible: companies appearing in the news, stocks with abnormal trading volumes and stocks experiencing extreme price movements (Barber & Odean, 2008). IDEAS/RePEc
The logic is surprisingly intuitive.
There are thousands of stocks someone could potentially buy. Analysing all of them is impossible.
So before deciding which stock to buy, an investor first needs a smaller group of stocks to consider.
Attention helps create that group.
What becomes visible becomes more likely to be considered.
Now put that behavioural tendency inside a smartphone.
The FCA actually built a trading app to test this
The UK Financial Conduct Authority conducted an experiment with more than 9,000 consumers to understand whether common digital engagement features influence investor behaviour.
The researchers tested flashing prices, push notifications, trader leaderboards, points and prize draws.
The result was not trivial.
These features could increase both trading frequency and investment risk-taking. The FCA also found evidence that some effects were stronger among younger participants and people with lower financial literacy (Financial Conduct Authority, 2024). FCA
A notification is therefore not necessarily just a notification.
A leaderboard is not necessarily just a convenient way of organising information.
Product design can influence the decisions users make.
Gamification changes behaviour too
A randomized experiment by Chapkovski, Khapko and Zoican found that hedonic gamification — features such as confetti and achievement badges — increased trading volume by an average of 5.17%.
They also found that investors with lower financial literacy were more attracted to gamified environments, while certain price notifications could reinforce mistakes among participants holding incorrect beliefs (Chapkovski et al., 2024). PubsOnline
This does not mean gamification is inherently harmful.
A fitness app can use streaks to encourage exercise.
A language app can use points to encourage learning.
The real question is:
What behaviour is the design encouraging?
Robinhood provides another clue
Research using Robinhood trading data found unusually concentrated attention-driven trading among its users. Stocks experiencing intense Robinhood buying subsequently produced negative abnormal returns; the average abnormal return for the most heavily purchased stocks was approximately -4.7% over the following 20 days (Barber et al., 2022). doi.org
The authors do not argue that an interface single-handedly caused those losses. Investor characteristics matter too.
But the paper provides further evidence that the interaction between attention, interface design and investor behaviour deserves to be taken seriously.
Good design can work in the opposite direction
If digital design can encourage activity, it can also encourage patience. A financial app could make recurring contributions easier than impulsive trades. It could display long-term progress before daily profit and loss. It could explain volatility precisely when a user becomes worried. It could ask someone why they are selling before they abandon a 30-year strategy after a bad week. It could celebrate a year of consistent investing instead of celebrating a transaction.
None of these features guarantees better returns.
They simply recognise something finance has often ignored: the interface is part of the investment experience.
For years, the industry focused on removing friction, perhaps the next generation of financial products needs to be more selective.
References
Barber, B. M., & Odean, T. (2008). All that glitters: The effect of attention and news on the buying behavior of individual and institutional investors. The Review of Financial Studies, 21(2), 785–818.
Barber, B. M., Huang, X., Odean, T., & Schwarz, C. (2022). Attention-induced trading and returns: Evidence from Robinhood users. The Journal of Finance, 77(6), 3141–3190.
Chapkovski, P., Khapko, M., & Zoican, M. (2024). Trading gamification and investor behavior. Management Science.
Financial Conduct Authority. (2024). Digital engagement practices: A trading apps experiment.
