LONDON, Jan 27, 2026, 17:17 GMT
- UK watchdog launches a long-term review into advanced AI in retail finance, led by executive director Sheldon Mills
- FCA seeks industry and consumer input by Feb. 24; recommendations due to its board in summer 2026
- Lawyers say UK firms are still cautious on customer-facing AI, but interest is rising
Britain’s Financial Conduct Authority has opened a long-term review into how advanced artificial intelligence could reshape retail finance and affect consumers, with recommendations due to the regulator’s board in summer 2026. Source
The FCA is trying to get ahead of a fast shift in the tools firms use to sell, price and service products, from chatbots to systems that can take actions with minimal human input. The watchdog is also watching for spillovers into competition, as bigger firms and technology providers scale faster than smaller rivals.
The move lands as UK lawmakers push regulators to set clearer expectations on AI in financial services, and as firms weigh how much their senior managers need to understand the systems they sign off. A parliamentary report last week urged regulators to move away from a “wait and see” stance and publish guidance this year on how consumer protection rules apply to AI, a Reuters report showed. Source
The review will look to 2030 and beyond and asks for views on four themes: how AI could evolve, how it could change markets and competition, how it could affect consumers, and how regulators may need to adjust. The FCA set a Feb. 24 deadline for feedback and said it expects to publish an external report after its board has considered the recommendations.
“AI is already shaping financial services, but its longer-term effects may be more far-reaching,” Mills said, as the FCA framed the work as a forward look rather than a rule-making exercise. He said the review aimed to support innovation while promoting “safe and trusted” use of AI in retail finance.
Mills has also flagged the breadth of technologies the FCA wants to keep on its radar, from “agentic AI systems” — software that can plan and execute tasks for a user — to neuromorphic computing, which uses brain-inspired chips, and potential quantum capabilities. He linked that to the wider push into digital finance such as blockchain-based “smart contracts” and tokenisation, where real-world assets are turned into digital tokens.
The FCA has so far resisted writing AI-specific rules and is leaning on its existing framework instead, including the Consumer Duty — a set of standards requiring firms to deliver good outcomes for retail customers — plus operational resilience rules and the Senior Managers and Certification Regime, which assigns personal accountability for key decisions. Source
That approach will be tested by practical risks the watchdog has highlighted, including AI-enabled fraud and financial crime. Deepfakes and “synthetic identities” — fake personas built from stitched-together data — could make impersonation and account takeover harder to spot, while automated systems could scale bad decisions quickly.
The FCA is also probing whether market power could drift away from financial firms toward large technology and AI providers, and what “good outcomes” should mean if consumers increasingly delegate choices — from budgeting to borrowing — to AI agents.
So far, AI use in customer-facing retail finance in the UK has been “limited,” Tom Callaby, a partner at law firm CMS, said in comments cited by Reuters. But he said firms are looking harder at new use cases and warned the FCA against shutting the door on changes to its approach, arguing that a lack of tailored guidance in some areas has held firms back.
But the review is a long game. It may not settle the immediate question some firms want answered — what supervisors will treat as acceptable practice when AI systems influence eligibility, pricing or product design — and the FCA’s decision not to introduce AI-specific rules could leave uneven expectations across the market.
For now, the clock is on the consultation, with responses due by Feb. 24 and a report to the FCA board in summer 2026. The key watchpoint is whether the process nudges the FCA toward more detailed guidance on how existing consumer and governance rules apply when “the system” is doing more of the deciding.
