FCA Roundtable on AI and the Future of Financial Services
The recent SFE and Capco roundtable with FCA Chief Executive Nikhil Rathi, hosted by Morgan Stanley, provided a useful insight into how both the regulator and industry leaders are thinking about the next phase of artificial intelligence in financial services.
While discussion was anchored around the recently published Mills Report, the conversation ranged more broadly across regulation, resilience, competition and the future operating model of financial services.
The overarching message was clear: AI is developing significantly faster than the regulatory and governance frameworks designed to oversee it. The challenge for both regulators and firms is no longer whether AI will transform financial services, but how quickly they can adapt to ensure innovation is accompanied by appropriate safeguards.
Key takeaways
1. Agentic AI is moving from theory to strategic planning
Much of the discussion centred on the emergence of agentic AI and its potential to fundamentally reshape retail financial services over the next decade. Participants explored a future in which AI agents increasingly support - or even make - consumer decisions on investments, pensions, mortgages and financial planning.
This represents more than a technology shift. It raises fundamental questions about market structure, customer relationships and the role of regulated firms when advice or recommendations originate outside the traditional financial services ecosystem.
2. Regulation will need to evolve more quickly
A consistent theme was the widening gap between the pace of technological development and the speed of regulatory change.
The FCA acknowledged this challenge and reiterated its preference for a principles-based regulatory approach rather than introducing extensive new rules. Instead, firms will be expected to demonstrate strong governance, sound judgement and effective risk management while continuing to innovate.
The regulator also signalled that publishing examples of good and poor practice may become an increasingly important supervisory tool.
3. Resilience is becoming as important as innovation
Operational resilience emerged as one of the FCA's principal concerns.
Alongside the opportunities AI presents, there is growing focus on cyber security, dependency on third-party AI providers, concentration risk and firms' ability to maintain critical services during disruption.
As AI models become more complex and less explainable, expectations around governance, testing and resilience are likely to increase significantly.
4. Accountability remains unresolved
One of the most significant strategic questions discussed was accountability.
If consumers increasingly rely on AI-generated recommendations before engaging with regulated firms, where does responsibility sit when outcomes are poor?
This remains an unresolved issue and is likely to become one of the defining regulatory debates over the coming years. Maintaining consumer trust, transparency and fairness will be critical as AI becomes embedded across customer journeys.
5. AI is already delivering tangible benefits
Despite the focus on risk, there was broad consensus that firms are already realising significant value from AI.
Current use cases include operational automation, customer support, financial crime detection, complaints management and risk monitoring. The expectation is that adoption will accelerate rapidly as firms become more confident deploying AI across core business functions.
6. Skills and capability will determine success
Technology alone will not deliver competitive advantage.
Participants repeatedly highlighted the importance of investing in AI literacy, technical capability and leadership understanding. Firms that combine strong governance with organisational capability are likely to be best placed to realise AI's benefits while managing emerging risks.
Strategic implications
Three themes emerged from the discussion.
First, AI should increasingly be viewed as a strategic business transformation rather than simply a technology programme.
Second, governance, resilience and accountability are becoming competitive differentiators, not just regulatory requirements.
Finally, collaboration between industry, regulators and technology providers will be essential if the UK is to maintain its position as a leading financial centre while ensuring innovation continues to support good consumer outcomes.
Overall, the discussion reinforced that AI is likely to become one of the defining issues for financial services over the next decade. The firms that succeed will be those that can balance innovation with robust governance, invest in organisational capability and retain customer trust as AI becomes embedded across every aspect of financial services.