The Financial Conduct Authority’s (FCA’s) Mills Review on the impact of AI on financial services said that if customers could use agentic AI to search and compare the market with less effort, the information gap between firms, intermediaries and customers may narrow.
This could mean that firms will need to present product information and regulatory communications in ways that are understandable to both those systems and humans, while in the context of regulations.
The FCA said AI could also make it more attractive for providers to serve customers directly. However, the regulator said trust was a key driver of intermediation and customers would prefer to talk to a human when going through a complex and high-value process, such as a mortgage.
Its research shows that “customers trust AI more readily for lower-value financial services, or where the consequences of mistakes are lower”.
The regulator said people would also continue to go to advisers, as this was the way things had always been done and they would prefer the whole-of-market offering from intermediaries.
Aldermore Insights with Jon Cooper: Edition 9 – Why lending strategy is becoming more central in buy to let
Sponsored by Aldermore
“AI delegation may not remove intermediation so much as relocate it: from brokers, comparison tools or product providers towards AI agents, platforms and data access layers that shape what consumers see and can act on,” the report said.
The report found that of the 6% of the consumers who responded to the report had shopped for or used a mortgage or other property finance in the last 12 months. Of those, 18% had used AI during the process.
Regulation needs to be adapted to AI growth and risk
The Mills Review said the FCA should “proactively adapt” regulation to enable “safe, trusted and innovative AI adoption by firms and consumers, while mitigating emerging risks”.
It said AI brought system-wide risks, and the pressure of these would change as the use and adoption of agentic AI increases.
The report said the FCA should review how consumers use AI, considering the implications for competition, innovation and growth while looking at the risk of consumer harm.
The regulator should also consider if it needs to amend its guidance or recommend perimeter changes to the government.
The report said the FCA should consider monitoring the move towards more autonomous AI and adapt regulatory frameworks to clarify how accountability, governance and consumer protection frameworks apply.
Further, the regulator should scale up its AI Lab to support innovation in financial services and allow the FCA to develop an independent understanding of AI models.
“It would also support the UK’s financial services industry as a leader in global AI compliance, assurance and innovation,” the report said.
The Mills Review also said the FCA should consider leading a trusted framework for AI agent use in financial services to determine how these can be authorised, identified and held accountable.
The Mills Review was produced by Sheldon Mills, executive director at the FCA.
Ashley Alder, chair of the FCA, said: “The board is enormously grateful to Sheldon for the rich, comprehensive report he’s delivered. His work anticipates the fundamental change agentic AI will bring to financial services. It highlights how consumers and firms can reap significant potential benefits as well how risks can be managed.
“As is clear in the report, we need to keep pace with a rapidly changing environment and the principles-based, outcomes-focused approach we’ve taken on AI – relying on the Consumer Duty and Senior Managers Regime – has been critical to us doing so. The recommendations build on work the FCA has been doing – not least allowing firms to test their use of AI with us – and our own use of AI to be a smarter regulator, more efficient and effective.”
