The Financial Conduct Authority (FCA) has embarked on a review of the long-term impact of AI on retail financial services.

The ‘Mills Review’ will examine the potential effects of AI on consumers and markets, as well as the role that regulation should play as the capacity and deployment of the technology develops.

Like so many sectors, the use of AI in financial services is growing. In his speech announcing the review, Sheldon Mills cited a survey by Lloyds which found that a third of customers use AI weekly to manage their money. There is no reason to think that this number will not grow, particularly as AI agents emerge, reducing administrative burdens and cutting costs. But, as the FCA points out, these opportunities do not come without risks, including bias, discrimination, exclusion, opaque decision-making, misleading or hallucinatory advice, and the erosion of consumer trust.

The Review will not depart from the FCA’s existing ‘outcomes-based’ and ‘technology-neutral’ regulatory approach. Instead, it will seek to understand “how AI could reshape consumers’ lives, how markets might reorganise, and how regulation can stay effective in a world moving faster than any of us have known”.

It will do so by focusing on four themes:

This includes considering the development of agentic AI and other technologies that are likely to emerge before the end of the decade.

The FCA will consider the impact AI is likely to have on market concentration and competition; the changing landscape for consumers; and whether AI systems could provide services “functionally equivalent to regulated activities such as advice or intermediation, while remaining outside the regulatory perimeter”.

The Review will ask how consumers are likely to benefit from AI-enabled retail finance and changes to products and services. Equally, it will examine the risks of a reduction in financial literacy and consumer understanding as decisions are delegated to AI.

Finally, the Review will consider the extent to which the FCA can evolve to manage the risks of AI while supporting growth and innovation and enabling firms to take advantage of the technology.

The author of the Review will report to the FCA Board this summer.

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