AI will transform financial services by 2030 and beyond – with around 11 million UK adults being likely to use artificial intelligence that can make decisions for them within pre-set goals, according to a landmark review.
But while AI technology will create significant opportunities, it is also likely to amplify cyber risks and make scams even harder for people to spot – meaning the fraud fightback will need to keep pace, it found.
The review into how AI could reshape retail financial services by 2030 and beyond was led by Financial Conduct Authority (FCA) executive director Sheldon Mills.
In the review, Mr Mills said AI offers a “once-in-a-generation chance to close the information asymmetries and frictions that have long left people making poor financial decisions”.
The Mills Review found that AI could help tackle “longstanding weaknesses” in retail financial markets and assist people to manage their finances more effectively, bringing bringing both personal and economy-wide benefits, “since financial security, capability and access to capital are the bedrock of a modern economy.”
This includes addressing the advice gap (only 9% of consumers use traditional advice), the protection gap (just 30% hold life or income protection), low switching levels, financial exclusion and suboptimal saving, with around £300 billion sitting in low interest paying accounts.
As part of the review, Yonder Consulting carried out a survey of more than 5,000 UK retail financial services consumers in April, defined as people holding a day-to-day bank account, such as a current or savings account.
A fifth (20%) of people – equivalent to 11 million UK adults – are likely to use AI that can act autonomously within pre-set goals, research indicated.
One in six (16%) people engaged in personal finance activities said they currently use AI to support personal finance, rising to nearly a quarter (23%) among those already using AI elsewhere.
Of the 69% of people who had shopped for or used a financial product in the previous 12 months, 17% used AI to assist them.
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Current use is mainly “assistive” with people using AI to summarise, explain, simplify and compare information, rather than delegate decisions outright, the survey found.
Use is higher for products and services such as investing, debt management and tax planning – areas where consumers traditionally have sought advice, the research indicated.
Some people are already willing to give AI deeper access – with 13% of people saying they would be willing to give AI real-time access to banking and financial data.
More than half (55%) of people identify at least one possible benefit from AI in day-to-day money management – but 24% said nothing would persuade them to use AI in financial services.
The survey indicated that the potential misuse of personal and financial data, a lack of protection if something goes wrong, and concentration ofpower among large financial services firms are among people’s concerns.
The review, which also drew on drew on written submissions and expertise from across financial services, academia and consumer groups, found that AI is likely to become a defining force in retail financial services, transforming how firms operate and how markets function.
AI could also lower barriers to entry in the market and allow “digitalnative” firms to scale rapidly, the review said.
But it also indicated that while AI has the potential to improve access, personalisation and efficiency, it could also amplify risks associated with fraud, cyber security, consumer harm and market concentration.
Mr Mills, who was asked to carry out the review by the FCA Board, said: “Artificial intelligence will transform financial services by 2030.
“It creates significant opportunities for consumers, firms and the wider economy.
“This report sets out a road-map for how industry regulators and government can prepare for the next phase of AI-driven change in our world-leading financial services sector.”
The review said that people will need to be able to oversee, understand and challenge AI-driven decisions, “especially when things go wrong.”
It added: “Unequal access to high-quality applications risks widening inclusion gaps – but well designed AI systems also present an opportunity to radically improve outcomes for those who need more support.”
Threats and defences could also accelerate. By 2030, AI is likely to amplify fraud and cyber risks, making attacks faster, cheaper, more scalable and more persuasive – and at the same time harder to spot and stop, the review found.
It said: “Deepfakes, synthetic identities and personalised social engineering are taking fraud and cyber risks into a new era and changing how fraud and cyber-attacks are conducted.
“Existing weaknesses can be exploited far more quickly than before, and defenders will need to keep pace.”
The same technologies used to attack the system can help protect it – which will mean firms, regulators and their partners need access to many of the same AI capabilities as those used by attackers – the review said.
It added that they will also need to share the right information with those best placed to act, when it matters and before harm escalates.
The Mills Review also outlined recommendations for the FCA Board and Executive to consider, including developing a trusted public-interest AI-enabled financial capability service and strengthening system-wide coordination and oversight.
Ashley Alder, chair of the FCA, said: “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.”
The FCA said it will launch an AI good and poor practice publication later this year and it has engaged with firms to find out what is working well, where firms are facing challenges, and where further clarity would help.