FCA Studying Impact of AI on Financial Services
The UK Financial Conduct Authority (FCA) has initiated the Mills review and a call for input regarding the long-term impact of advanced AI on retail financial services, focusing on the years leading to 2030 and beyond.
Engagement Themes
The engagement paper categorizes questions into four key themes:
- The evolution of AI technologies (including increasingly autonomous, agentic systems)
- Potential effects on firms and market structure
- Expected consumer trends
- The future regulatory approach (including the viability of Consumer Duty and the SMCR)
While wholesale markets are not included in this scope, relevant spill-overs to retail may be considered. Feedback is invited by late February 2026, with recommendations to the FCA Board and a public report anticipated in the summer.
Appointment of Financial Services AI Champions
In a separate development, the Government has appointed two Financial Services AI Champions – Harriet Rees from Starling Bank and Dr Rohit Dhawan from Lloyds Banking Group. Their role is to advise HM Treasury on high-impact use cases and to engage with regulators, providing practical insights for the Mills review and any SMCR guidance on AI governance. These appointments are set to run until September 30, 2026, subject to extension.
Current Regulatory Landscape
As of now, the FCA has not proposed specific rules addressing AI, and the UK Government has yet to implement comprehensive AI legislation. However, these developments could signify a shift in regulatory approach. In the interim, the direction aligns with stronger governance and accountability for AI in retail markets.
Firms should prepare for heightened scrutiny regarding systems and controls, model oversight, and testing where AI influences product design, distribution, eligibility, or customer redress.
Practical Steps for Firms
In the near term, practical steps for firms include:
- Mapping AI use cases
- Clarifying senior manager responsibilities
- Evidencing challenges and testing
- Aligning consumer outcomes with the spirit of the Consumer Duty
This approach reflects a broader trend toward robust, evidence-based governance and clear, defensible disclosures when technology materially impacts customer outcomes. Although the review primarily focuses on retail markets, firms in wholesale markets should ensure they maintain robust governance regarding AI usage.
In conclusion, as the FCA progresses with the Mills review and the appointment of AI Champions, the financial services landscape is poised for significant transformation, driven by AI advancements and regulatory adaptations.
