The Promise and Perils of Gamification
As competition in crypto markets grows, fintech companies look for ways to retain customer engagement and, at the same time, attract new customers. Digital brokerages are also looking to encourage customers to trade securities more actively.
Gamification in fintech apps is an implementation of “game-like” features, such as points, leaderboards, and badges, and are often in reward for completing the financial goals that a fintech app sets for you. Customers can set objectives, view a progress bar that monitors their accomplishments, and get rewards such as bonuses, cash prizes, and other gifts. The goals that get them these prizes can range anywhere from planning budgets to making smart transactions.
Studies show that Gamification in fintech experiences affects customer loyalty, user retention, and word-of-mouth recommendations–typically to friends and family. Companies have found that by ensuring a customer’s interest when interacting with the organization, bounce rates (the percentage of consumers who navigate away from a site after only viewing one page) go down drastically. Indeed, there is a lot of success in Gamification in fintech projects. MarketsandMarkets asserts that “the gamification market size is projected to rise from $9.1 billion in 2020 to $30.7 billion by 2025”.
Besides, Gamification in fintech is producing massive benefits right now. Extraco, the largest independent banking organization in Texas, reported that by implementing Gamification in fintech, customer acquisitions rose by 700%. And Digit, an app that motivates people to save money, has helped customers save a total of $5 billion by utilizing Gamification in fintech. It’s clear that Gamification in fintech has an overwhelmingly positive outcome for both consumer and company, aiding customers with managing their finances through fun and interactive games, and increasing user acquisition, retention, and revenue for the companies.
However, Gamification in online broker-dealer companies has raised concerns about market compliance from regulators. In 2020, top securities regulator William F. Gavin accused Robinhood–an online trading platform–of violating state law by using “aggressive tactics to attract new, often inexperienced, investors” and “gamification to encourage and entice continuous and repetitive use” of its mobile application. Another risk of Gamification in fintech investments includes a self-destructive behavior known as copy trading. An investor may try to mimic the transactions of another trader who was up 15% on the online game leaderboard, leading to serious risks. The investor has no idea whether the other trader’s risk profile is the same as theirs, and whether the other investor took a risky trade simply because they could afford to. The outcome could be devastating for the first investor if the trade produces a loss. Best said by Steven Price, a senior vice president at FINRA, “anything that really pushes” investors to make an “emotional decision rather than a rational decision is a risk.”
What does this mean for the future?
We will likely see a global increase in Gamification in fintech, specifically fintech apps and companies that seek to help manage the consumer’s financial decisions. We might even see fintech workplaces start to adopt Gamification, not just for the consumers, but for the workers as well. Useful in a variety of ways, Gamification in fintech is shaping up to be an invaluable tool.