The Ontario Securities Commission (OSC) has released a new report delving into the digital engagement practices employed by online investing platforms, revealing techniques that might not always align with the investors' best interests.
The report, titled "Digital Engagement Practices: Dark Patterns in Retail Investing," brings to light the concern regarding the use of dark patterns and other manipulative strategies on these platforms. Dark patterns are identified as user interface strategies designed to coerce or mislead users into making decisions that benefit the business, often at the expense of the investor. These tactics can obscure the true cost of investing through hidden fees, gather personal information without clear consent, and complicate the process for investors to withdraw funds or close accounts.
This exploration into digital engagement practices outlines not only dark patterns but also examines dark nudges, sludge, and targeted advertising. Dark nudges push users towards choices against their best interests, while sludge creates barriers to prevent users from executing their desired actions. Targeted advertising uses personal data to display specific ads to users, further influencing their decision-making process.
The report’s findings are based on research conducted by the OSC’s Investor Research and Behavioural Insights Program, led by Meera Paleja. "Our research provides important insights for retail investors and regulators about the prominence of digital engagement practices by online investing platforms,” Paleja stated. She emphasized the importance of registrants considering how such practices might negatively impact client decision-making.
This publication follows previous OSC research on digital engagement practices, including the effects of gamification and behavioural techniques on investor behaviour. These studies aim to improve investor experience and protection, advocating for the integration of behavioural science in regulatory policies.
In response to these findings, the OSC encourages increased investor awareness about digital engagement practices, aiding investors in recognizing when their decisions might be influenced externally.