The UK’s Financial Conduct Authority (FCA) released two reports, one on bigtech competition that summarizes consultative feedback and the regulator’s existing approach and plans over the next year for artificial intelligence (AI) in financial services.
In the bigtech discussion paper, the FCA looked at the plausible scenarios for bigtech entry in financial services, with a focus on payments, deposits, consumer credit, and insurance. The regulator presented itis initial understanding of potential benefits from increased competitive pressure from bigtech firms as well as scenarios where competition may evolve in ways that create competition risks.
Based on our analysis on these four retail financial services sectors, there are some common themes emerging: further growth and expansion likely from strong complementarities; in the short term, partnerships are preferred; organic growth and acquisitions signals being watched; and opportunities for positive competitive pressures.
In an AI update, the FCA detailed how its existing approach aligns with UK government AI principles, namely: safety, security, robustness; appropriate transparency and explainability; fairness; accountability and governance; and contestability and redress.
In continuing to further understand AI deployment in UK financial markets, the FCA wrote that “We want to make sure that any potential future regulatory adaptations are proportionate to the risks, whilst creating a framework for beneficial innovation. This requires us to work from a strong empirical basis.”
The first priority therefore is to continue to build an in-depth understanding of how AI is deployed in UK financial markets, which aims to ensure that any potential future regulatory interventions are not only effective but also proportionate and pro-innovation and that the FCA can respond promptly from a supervisory perspective to any emerging issues at specific firms.
“The FCA is currently involved in diagnostic work on the deployment of AI across UK financial markets. We are also re-running a third edition of the machine learning survey, jointly with the Bank of England, as well as collaborating with the Payment Services Regulator (PSR) to consider AI across systems areas. Being proactive in gaining insights and intelligence on the impact AI is having on UK financial markets allows us to respond to developments with speed and agility,” the regulator wrote.