Over 75 percent of financial services firms in the UK have integrated artificial intelligence (AI) into their operations, with insurers and international banks leading in adoption. This trend raises significant concerns regarding consumer safety and financial stability, as highlighted in a recent inquiry by the UK Treasury. Economic Secretary Lucy Rigby is set to receive ongoing updates from selected AI champions tasked with ensuring the responsible use of AI technologies across the sector.
The inquiry identified critical issues, including transparency deficits in AI-driven credit and insurance decisions, which may result in financial exclusion for vulnerable customers. Additionally, the report pointed to a troubling dependence on a small number of US tech firms for AI and cloud services, creating a concentration risk. To address these vulnerabilities, the committee has recommended classifying essential AI and cloud providers under the Critical Third Parties Regime to enhance regulatory oversight.
Despite the outlined risks, the report acknowledged the advantages of AI, such as improved consumer services and enhanced cyber defenses. It urged the Financial Conduct Authority to provide practical guidance on AI by year-end, focusing on consumer protection rules and accountability for AI-related harm. The committee also suggested conducting targeted stress tests to assess the financial system's resilience against AI-induced market disruptions.