The FCA’s AI Review

According to research by the FCA and the Bank of England, 75% of Financial Services firms in the UK are already using Artificial Intelligence in some capacity, with another 10% planning to begin doing so in the near future.

This is a field of rapidly changing technology, with the potential to significantly alter the industry. We are in the early stages of a period of far-reaching change. Right now firms may be experimenting with simple AI implementation like customer support chat bots,  but what’s likely to come next in the Financial Services sector, how will it be regulated?

The FCA’s Mills Review has been set up to tackle these questions. The four key themes under consideration are –

“How AI could evolve in the future”, “How these developments could affect markets and firms”, “The impact on consumers” and finally  “How financial regulators may need to evolve”.

Let’s take a look at each of those:

How AI Could Evolve in the Future

Right now we’re operating in the realm of educated guesses. We know the scope of the technology as it currently exists and some of the scope of what the tech sector wants to achieve in the future. There is a lot of speculation around the development and popularisation of agentic AI – where the generative AI products currently popular with consumers create content base on input, agentic AI is able to pro-actively make plans and decisions, working across multiple systems to achieve goals for it’s user.

As the FCA’s “Call for Input” describes it, we’re looking at a shift from “isolated actions to integrated ecosystems”.

The Impact on Markets and Firms

There are almost innumerable ways that this technology could alter the marketplace, firms and their propositions. The FCA’s Call for Input speculates about the possibility of payments being initiated, routed and optimised automatically on behalf of consumers, hyper-personalised retail Banking propositions, automated claims handling in insurance and automated credit decisioning in underwriting.

We know that consumers are already using gen AI to compare products and are even entrusting these chat bots to make decisions for them – with agentic personal AI this could evolve into a practice of robots switching products directly, fundamentally changing the model of some financial intermediary businesses.

All of those factors together could – at the most extreme scenario – see us having a marketplace where AI guided propositions are competing for the attention of automated AI consumer agents.

Whatever this ends up looking like in practice, firms will need to consider how to engineer their offering to appeal to AI agents as well as human customers. The FCA suggests this gives us two big possible outcomes – on the one hand, we could have a highly competitive market where firms are racing novel propositions out to keep AI agents happy, delivering the best value for their end human customer. On the other hand, it’s just as possible this will lead to anti-competitive results if AI firms favour certain providers, creating a feedback loop of “this business is most commonly selected for the product you’re searching for, therefore the AI will select this firm for you” decisions.

Right now, there’s no way of knowing if these evolutions will benefit the biggest organisations who have the most resources or newer, smaller firms who can quickly adapt.

“The Impact On Consumers”

In the FCA’s “Call for Input” they posit that by 2030 consumers may be letting an AI gent handle the majority of their financial decisions – optimising borrowing, insurance and investment choices and managing day-to-day money flows. What happens to consumer expectations in such a scenario?

If people become accustomed to personalised, automated Financial Services offerings, they will likely become more intolerant of any points of friction in their journey or of unclear, sub-optimal outcomes. There are a lot of risks here – if AI itself is not regulated, agents could easily issue non-compliant or harmful advice and firms could mis-sell to agents without the end user knowing. The industry will also need to be aware of the way AI tools can be used for fraud and other forms of Financial Crime, especially in terms of it’s ability to fabricate identities, documents and interactions.

In the same way the industry currently has to consider issues of financial literacy, it may be important to think about AI literacy in future – to what degree do customers understand the decisions that automated agents are making on their behalf?

“How Financial Regulators May Need to Evolve”

Finally, the FCA turns the looking glass on themselves. What is the future of regulation in relation to all of these possible developments?

It may not look drastically different to the current regulatory landscape. In the Call for Input, they state the intention of continuing to be “outcomes-based” and that they have no plans at present to “recommend major changes in regulation or law”. Their hope is that current frameworks such as SM&CR, the Critical Third Parties regime and Consumer Duty can be applied to the transformed, AI-powered Financial Services world of the future – they may need to be utilised differently but they believe that can be achieved without substantially altering these frameworks as they currently exist. One example they give is that SM&CR can be used to look at which senior managers within an organisation are responsible for their firm’s AI systems.

The FCA makes it clear that they want to encourage innovation, but they recognise the need to balance that with responses to the new AML risks and consumer protection challenges created by AI. This will need well-defined expectations around accountability and for business’s systems to be auditable.

There is also the question of how regulatory bodies themselves can use this technology. With the pace at which new threats emerge increasing, could automated systems on the side of the FCA, PRA or FOS be utilised to keep up with them?

All of these questions are currently under discussion. The Mills Report deadline for responses from the industry is set for February 24th, with the FCA’s recommendations published later in 2026.