Gamification is no longer just for kids. As democratization of modern finance enters its second and tertiary phases, the fintech revolution continues to adopt many of the techniques and designs popularized by video games to address the challenges of usability and access. This phenomenon is accelerating since the advent of the COVID-19 pandemic, as the number of younger investors has grown exponentially.
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Amid unprecedented unemployment rates, the U.S. stock market has become one of the most reliable sources of wealth with annual returns around 10 percent over the past century, according to Forbes. In fact, fintech gamification has become a nearly $200 billion global industry with about 3 billion consumers across all demographics. It’s burgeoning rapidly; it’s surpassing the entire film industry’s market size.
Making it more intuitive and fun, gamifying investing simplifies the process of selecting investments. It is more than just a dopamine booster; it makes investing more accessible to a new generation of investors who are just getting started.
Gamifying investing is so much more than simply introducing leaderboards and badges. When we think about gamification, we focus on how to borrow from concepts and techniques, which drive game design. You don’t need a tutorial to explore the level of that video game you are playing because you already intuitively know what to do. Imagine if you could apply that same logic and experience when you try to invest using your favorite mobile app? That is true gamification of investing.
Given the growth interest in improving financial literacy and knowledge among younger investors, the process of gamifying the investment process will be a major driver for financial education. The process of simplifying and making the investing journey more intuitive unpacks complex challenges in simple ways and helps everyday investors navigate a jargon-littered world once relegated to the Wall Street elite.
By its nature, gamification inherently and inextricably pulls us toward an alignment with long-term interests while making the journey just as exciting as the end goal. It is one of the reasons gamification techniques are powering the drive toward goals-based investing and encouraging investors to think about investing in the context of tangible goals. Therefore, we wouldn’t be stretching credulity by saying that future gamification of the fintech revolution will lead to better outcomes for users. By better outcomes, we mean users will reach the goals and objectives that really matter to them personally at an individual level, not some general end goal.
It’s no industry secret that game mechanics that enhance the overall user experience, reward positive behaviors and encourage consistency while educating players is beneficial. Some elements of gamification can even make money management feel more tangible, giving users a deeper understanding of their wealth while still minimizing human error. Moreover, gamification may use machine learning to capture data, which fintech companies can leverage to further improve their products, innovate and provide even more value to investors.
That all said, too much gamification can be dangerous. After all, at the end of the day, investing in the stock market–or any type of market–is not a game. There are concerns that too much gamification will desensitize users from the inherent risk in investing. This has been a real problem over the past few years, notably with the proliferation of options trading solutions for individual investors.
The desensitization process can be expressed in many ways. Whether we are talking about falling confetti or free penny stock giveaways, the actions numb a user’s senses to risk. This can be very dangerous and encourage investing behaviors that a user may not normally have undertaken. It isn’t all about the dopamine effect. The fact that users begin focusing solely on the reward rather than the risk in the reward-risk relationship distorts the very purpose of a market. There are always going to be winners and losers–not everyone is going to win all the time in the investing game.
At the end of the day, investing in stocks–or, for that matter, other assets like Bitcoin–is not a game. Conflating gaming and investing can cause users to lose sight of the real risks involved with investing. This will be a challenge for the fintech industry over the coming years, especially as the regulators begin to pay closer attention to the application of gamification to investing (and trading).
We believe artificial intelligence will help alleviate the challenges that will arise with the growth of gamified experiences in fintech platforms. AI can empower fintech users to make more educated and informed investment decisions that are rooted in logic over emotions. AI can also help to further democratize investing for young investors (and all novice retail investors) who don’t traditionally have access to the same tools as the pros—without them having to rely solely on gamification.
AI has the ability to vastly influence businesses and individual investors by providing a wide range of tools that empowers people to think through how they incorporate information, and that heightens decision-making and analyzes data.
We believe the future of the fintech revolution will be powered by the adoption and application of healthy (and positive) gamification to the investing experience. It will be a key driver in the movement’s desire to truly democratize modern finance and empower a new generation of investors.
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