New research reveals how children face financial harm online

The new study published by the UK regulator Ofcom reinforces the urgent need for effective regulation of loot boxes, in-app purchases and other persuasive design strategies that exploit children’s vulnerabilities and drive them to spend money online.

The study reveals that one third (32%) of UK children regret money they spent while playing games online, while 43% regret purchases made on social media – clear evidence that current practices are failing children as long advocated by 5Rights.

Evidence of systematic exploitation

The research, conducted by Discovery and commissioned by Ofcom, consulted 93 children aged 8-16 and 62 parents about children’s online spending. Researchers examined how service design influences children’s spending and documented both parents’ and children’s experiences of financial harm.

The findings reveal a pattern of design strategies that deliberately play on children’s vulnerabilities, enticing them to spend through five key categories of persuasive design tactics embedded in platforms, games and services::

• Risk-based tactics involve children risking something for an unknown outcome. Older children and parents likened these features – including loot boxes –  to gambling.
• Dissociative features prevent children from actively tracking their spending, by obscuring real costs. Typically, in-game currency has different names or symbols than real world currency and is often sold in large bundles that disconnect children from understanding the actual monetary value.
• Misleading design withhold crucial information to children about rewards, gameplay benefits or costs, including unclear or undisclosed promotions of products and fake reviews on social media that manipulate children’s decision-making.
• Impulsive features pressure children into quick spending decisionsthrough limited-time rewards and artificial scarcity tactics.
• Social influence mechanisms exploit children’s developing cognition and amplified peer pressure, promising rewards that allow them to change their appearance, in-game competitive advantages istreak-based rewards for repeated or daily use.

Children bear the burden of industry failures

The report exposes how design strategies are deployed to play on children’s vulnerabilities, revealing troubling patterns of regret and confusion. Of the 58% of children surveyed who spent money online in the past month, 32% regretted purchases made in games and 43% on social media. Further, 42% said they find it unclear what they’re buying in games, while 41% reported overspending. Parents also described feeling pressured when children repeatedly asked for money for in-app purchases.

One Year 11 pupil captured the core issue:

These are troubling findings are further proof of children’s systematic exploitation and demonstrate that industry self-regulation is failing children. In May, 5Rights raised concerns about this failure after research published by the Royal Society revealed “non-existent” enforcement of standards on loot boxes.

5Rights continues to push for a robust regulatory framework that addresses the commercial harms children face in the digital the world. The UK Government must act urgently to classify loot boxes and mystery reward features as a form of gambling, bringing the tech industry into scope of these laws and removing the unfair burden on children and their parents to navigate exploitative practices alone.