The Financial Conduct Authority (FCA) has called on UK ministers to expand its powers to address growing risks from artificial intelligence in financial services.
A landmark review led by FCA Executive Director Sheldon Mills warns that companies are rapidly adopting AI-driven applications for retail banking and financial products.
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"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 could improve accessibility for lower-income households, the regulator cautioned that unsupervised deployment may harm the public.
"AI has the potential to improve access, personalisation and efficiency, but it could also amplify risks associated with fraud, cybersecurity, consumer harm and market concentration," the FCA said.
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The review advises the government to grant the watchdog direct authority over technology firms and cloud providers to curb digital monopolies and protect competition.
These "critical third parties" would be brought under standard financial scrutiny, the FCA noted.
FCA leadership emphasized that internal integration of advanced technologies is necessary for regulators to keep pace with industry shifts.
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"It is an arms race," said Sheldon Mills.
The findings indicate that roughly 11 million British citizens are open to allowing automated systems to handle their savings and borrowing.
"Artificial intelligence will transform financial services by 2030," Mills added.
The regulator plans a secondary assessment within six months to evaluate financial dangers from unregulated tools.
"It creates significant opportunities for consumers, firms and the wider economy.
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This report sets out a roadmap for how industry regulators and government can prepare for the next phase of AI-driven change," Mills said.
