A “landmark review” by the Financial Conduct Authority (FCA) describes artificial intelligence (AI) as a “defining force” that will change financial services to consumers, but one that could “amplify risks”.
Announced in January, The Mills Review into the impact AI could have on consumers, finance firms and regulators in the future has now been published.
The review, which was carried out by FCA director Sheldon Mills, was announced shortly after a Treasury Committee warned in January that financial regulators’ current approach to AI is exposing the UK public and the country’s financial system “to potential serious harm”.
In his review, Mills sets out how AI will change the retail financial services sector between now and 2030.
It identifies changes to how firms operate, how consumers use services, the competitive landscape, as well as the “amplification of fraud and cyber risk” as major “shifts” driven by the use of AI.
In its conclusion, the review said AI is likely to become a defining force in retail financial services, transforming how firms operate, how consumers make financial decisions and how markets function.
But it warned: “While AI has the potential to improve access, personalisation and efficiency, it could also amplify risks associated with fraud, cyber security, consumer harm and market concentration.”
Mills cited FCA research that found that a fifth of people (11 million UK adults) are likely to use AI that can act autonomously within pre-set goals, but also highlighted consumer concerns over the trust and control of AI.
The FCA director said: “AI will transform financial services by 2030. It creates significant opportunities for consumers, firms and the wider economy. This report sets out a roadmap for how industry regulators and government can prepare for the next phase of AI-driven change in our world-leading financial services sector.”
Political criticism
MPs on the Treasury Committee criticised regulators in January, reporting that the risks come as a result of the position adopted by the Bank of England and the FCA, which the committee described as a “wait-and-see approach”.
“The major public financial institutions, which are responsible for protecting consumers and maintaining stability in the UK economy, are not doing enough to manage the risks presented by the increased use of AI in the financial services sector,” said the committee of MPs.
Commenting on The Mills Review, Ashley Alder, chair of the FCA, said the study “highlights how consumers and firms can reap significant potential benefits, as well as how risks can be managed.
“The recommendations build on work the FCA has been doing – not least allowing firms to test their use of AI with us – and our own use of AI to be a smarter regulator, more efficient and effective.”
Separately, in the wider finance sector, the Bank of England is exploring the use of kill switches that could halt trading in the event of AI models going astray, as it accepts existing regulatory frameworks may not be adequate.
Speaking at the European Central Bank’s (ECB’s) annual Sintra Forum on central banking, the Bank of England’s deputy governor, Sarah Breeden, said the use of AI in commerce and trading requires regulation changes.
“What these two examples – agentic commerce and agentic trading – both highlight is that, as AI capabilities increase, we must keep asking whether existing, technology-agnostic regulatory frameworks remain sufficient,” she told the forum.
