The Financial Conduct Authority (FCA) has called on the government to bolster its regulatory powers to safeguard consumers from the potential risks of artificial intelligence (AI) in financial services. The demand comes from a landmark review led by FCA executive director Sheldon Mills, which examined how AI will reshape the sector by 2030.
Shift from Human-Led to AI-Enabled Services
The Mills review found that financial firms are already pivoting from human-led interactions towards AI-enabled services for everyday consumers. While this shift could improve access to financial advice for lower-income households, it also amplifies risks such as fraud, cyber threats, and consumer harm.
“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,” the FCA stated. “While AI has the potential to improve access, personalisation and efficiency, it could also amplify risks associated with fraud, cybersecurity, consumer harm and market concentration.”
Recommendations for Enhanced Powers
The report recommends that the FCA adopt its own AI-enabled model to supervise firms and asks the government to expand the regulator’s existing powers. This includes extending authority over “critical third parties” such as AI firms and cloud providers, and granting “direct powers” to regulate tech companies to prevent digital monopolies, boost competition, and protect consumers.
Mills told the Financial Times that regulators must embrace AI internally to keep pace with change, enabling them to “monitor, detect and tackle the risks.” He described the situation as “an arms race.”
Consumer Readiness and Risks
The review found that a fifth of UK adults – approximately 11 million people – are open to using AI for financial decisions, including savings and borrowing. However, AI models are not scrutinised by financial regulators, and consumers will not be compensated if they lose money. Mills’ report recommends a further review within six months to examine potential harm to consumers using AI for personal finance, as well as risks from unregulated financial services powered by AI.
Context of AI Developments
The review coincides with growing debate over Anthropic’s AI model, Mythos, which poses serious cybersecurity threats. The FCA will now deliberate on how to respond to the Mills review’s recommendations.
