FCA review to consider how AI impacts financial services

The Financial Conduct Authority (FCA) has initiated a review into the impact of artificial intelligence (AI) on retail financial services.

Sheldon Mills, an outgoing FCA executive, will explore how AI could reshape markets and consumer behaviour. While AI may enhance financial management, Mills warned of potential risks, including biased decision-making and increased fraud.

AI is already embedded across financial services. Rapid advances in generative, agentic and emerging forms of AI mean the next phase of change could be profound, having the power to reshape markets, change the way firms compete and how consumers use retail financial services.

The FCA is seeking views on four interrelated themes:

• How AI could evolve in the future, including the development of more autonomous and agentic systems.
• How these developments could affect markets and firms, including changes to competition and market structure and UK competitiveness.
• The impact on consumers, including how consumers will be influenced by AI but also influence financial markets through new expectations.
• How financial regulators may need to evolve to continue ensuring that retail financial markets work well.

While wholesale markets and broader societal impacts are out of scope, the Review recognises that developments in these areas may indirectly influence retail financial services and will be considered where relevant. The FCA is also separately doing extensive work on the impact of AI in wholesale markets, in particular through its live testing partnership.

Sheldon Mills said “AI is already shaping financial services, but its longer-term effects may be more far-reaching. This review will consider how emerging uses of AI could influence consumers, markets and firms, looking towards 2030 and beyond.

“By taking a forward-looking view, the review will help the FCA continue to support innovation while promoting the safe and trusted adoption of AI in retail financial services.”

Richard Pinch, Senior Risk Director at Broadstone, said “The FCA’s Mills Review is a clear signal that regulators are looking beyond today’s use of AI and towards its long-term impact on retail financial services, consumer outcomes and financial stability.

“As AI becomes more embedded in customer interactions, decision-making and operational processes, the regulatory focus must by necessity shift to governance and accountability to protect consumer outcomes.

“The challenge across the market will be to demonstrate that AI-driven models and tools align with the ethos of Consumer Duty as they evolve. Those that build strong oversight frameworks now will be better placed to innovate with confidence while meeting the FCA’s expectations.”