AI and the future of retail financial services: what does the FCA Mills Review mean for firms?

he report highlights the key risks associated with increasing levels of AI autonomy, and what this means for customer journeys, competition, firm operations and financial crime.

While the FCA concludes that the existing regulatory framework remains broadly fit for purpose, the Mills Review indicates that firms should be preparing for increased scrutiny around governance, accountability, consumer outcomes and the management of AI-related risks.

In our videos, our specialists unpack the key themes, findings and recommendations from the Mills Review. We discuss what firms should expect as AI adoption accelerates, how consumer journeys may evolve, and the wider implications for competition, governance and supervision over the coming years.

Key takeaways

The FCA expects AI to become increasingly embedded across retail financial services, influencing how firms design products, serve customers, manage risk and evidence good outcomes. The AI autonomy spectrum is a central concept of the review, illustrating the progression from human-led decision-making to increasingly autonomous AI-driven actions.

Governance, model oversight, accountability and third-party risk management are expected to become increasingly important as firms deploy more advanced AI solutions and rely on external providers.

Consumer financial journeys are expected to become increasingly AI-assisted and, over time, potentially agent-led, creating both opportunities for improved customer outcomes and new risks around trust, oversight and accountability.

The review highlights the potential for AI to transform competition, lower barriers to entry and improve consumer access to financial services, while also creating new forms of market concentration and dependency.

Financial crime and cyber threats are expected to become more sophisticated and scalable as AI capabilities evolve, requiring firms to strengthen both preventative and detective controls.

The FCA believes the current regulatory framework, including the Consumer Duty, Senior Managers & Certification Regime and Operational Resilience requirements, remains broadly appropriate. Firms will need to consider how these obligations apply as AI adoption increases and the FCA releases further guidance.

The review sets out seven strategic recommendations for the FCA, including adapting the regulatory perimeter, strengthening the FCA’s system-wide oversight capabilities, expanding its work through the AI Lab, and developing an accessible AI capability to provide consumers with reliable information.