Sheldon Mills, executive director at the UK Financial Conduct Authority, warned regulators face an 'arms race' to keep up with artificial intelligence use in financial services, as millions use AI for personal finance decisions. Mills told the Financial Times the FCA needs greater powers to manage AI's rapid growth and urged authorities to review whether ChatGPT, Claude, Gemini and other large language models should fall under regulatory rules. The warning comes ahead of an FCA-commissioned report Mills authored on AI's impact in financial services, published on Monday, which recommends a review within three to six months examining risks from unregulated AI-based financial services and potential consumer harm.
FCA Report Identifies AI Benefits and Risks in Financial Services
Mills' report identifies both benefits and risks from increasing AI use in financial services. According to a summary seen by the Financial Times, the report states 'hyper-personalization could help better match products to needs, but also enable bias, opaque pricing, and personalized manipulation.' Speaking ahead of the report's publication, Mills said regulators would have to embrace AI themselves to keep up with the 'speed, pace, and scale of change' the technology brings to the sector and to help 'monitor, detect, and tackle the risks.'
Mills Recommends Regulatory Review Within Three to Six Months
The report recommends the FCA carries out a review in the next three to six months to examine risks of companies providing financial services outside the regulator's remit as well as 'consumer harm' from increasingly popular use of AI models for managing personal finances. Mills pointed out there are 'reasonably strict' rules for regulated companies giving similar recommendations, noting 'some firms have said to us that they feel that this could be an economically equivalent type of service that isn't regulated [and] sits outside of the regulatory perimeter.'
One Fifth of UK Adults Open to Using Unregulated AI for Financial Decisions
Research commissioned by Mills found one fifth of UK adults are already open to using AI models to make financial decisions for them, such as on savings or borrowing, even though these services are not covered by regulation and there is no recourse to compensation if things go wrong. The finding highlights the gap between consumer adoption of AI financial tools and the current regulatory framework covering such services.
FAQ
What did Sheldon Mills warn about regarding AI in financial services?
Sheldon Mills, executive director at the UK Financial Conduct Authority, warned that regulators face an 'arms race' to keep up with artificial intelligence use in financial services. He told the Financial Times the FCA needs greater powers to manage AI's rapid growth and urged UK authorities to review whether large language models like ChatGPT, Claude, and Gemini should be subject to regulatory rules.
How many UK adults are willing to use AI for financial decisions?
Research commissioned by Mills found one fifth of UK adults are already open to using AI models to make financial decisions for them, such as on savings or borrowing. These AI-based financial services are not currently covered by regulation, and users have no recourse to compensation if things go wrong.
What review did the FCA report recommend?
The FCA-commissioned report recommends the regulator carries out a review within the next three to six months to examine risks of companies providing financial services outside the regulator's remit and potential consumer harm from the increasingly popular use of AI models for managing personal finances.
