With the potential to help close the “advice gap” for investors and deliver other fundamental innovations, AI tools are poised to become a defining feature of the retail financial services business in the coming years, according to a new report from the U.K.’s Financial Conduct Authority (FCA).
In a paper detailing the results of a review led by Sheldon Mills, executive director of the FCA, the regulator said that it expects AI to, “become a defining force in retail financial services, transforming how firms operate, how consumers make financial decisions and how markets function.”
“The central shift is from human-led, episodic financial activity towards services that are AI-enabled, continuous and delegated,” the report said. “It will affect how products are designed, distributed, monitored and governed.”
The report highlighted the potential for AI tools to, “address longstanding weaknesses in retail financial markets.” That includes the inability of consumers to obtain a bank account or traditional financial advice, the shortage of households with adequate insurance and poor saving behaviours.
“It can help consumers make better decisions, access more suitable products and manage their finances more effectively, bringing both personal and economy-wide benefits, since financial security, capability and access to capital are the bedrock of a modern economy,” the report said.
The review is based on consultations with the financial industry, trade groups, tech firms and “international stakeholders,” along with a survey of more than 5,000 financial services consumers and focus groups led by the regulator.
Among other things, that research found that there is an appetite from retail investors for agentic AI.
Already, about 26% of investors trust public AI tools, such as ChatGPT, Claude or Gemini for financial advice, the report noted. But there is little understanding that traditional investor protections don’t apply for this sort of advice, it said.
Looking ahead, it found that 20% of consumers said they “are likely to use AI that can act autonomously” within pre-set parameters.
At the same time, the report noted that retail investors have concerns about trust and AI oversight — and it said that the technology could amplify a variety of risks, including conduct risks, concentration risks and cyber risks.
“Our consumer research found that trust, control and access are what must be right before consumers adopt AI finance agents,” the report said.
For the industry, as firms roll out tools with greater autonomy, the role of industry personnel is expected to evolve too, the report said — with the human function expected to shift, “from operators close to each decision, towards collaborators, approvers and, eventually, observers who monitor outcomes and step in when systems move outside agreed parameters.”
At the firm level, increasingly powerful AI “could lower barriers to entry, enable new distribution channels and allow digital-native firms to scale rapidly,” the report said.
At the same time, control of AI-driven customer relationships “may become a major source of market power,” it noted. “As consumers rely on agents to search, compare and transact, the owner of that AI layer may influence which products are visible, how choices are ranked and where value is captured, shifting the customer relationship away from financial services providers.”
Against that backdrop, the report makes a series of recommendations to the FCA to enable the regulator to cope with the looming AI revolution.
Among other things, it calls for the regulator to “enable the foundations for agentic finance,” to build an AI-enabled agentic supervisory model, and to develop an AI-enabled service for enhancing financial capabilities.
“Artificial intelligence will transform financial services by 2030,” Mills said in a release. “This report sets out a roadmap for how industry regulators and government can prepare for the next phase of AI-driven change in our world-leading financial services sector.”