Artificial intelligence (AI) will fundamentally reshape retail financial services by 2030, bringing significant opportunities for consumers and firms alongside heightened risks, according to a first-of-its-kind review by the Financial Conduct Authority (FCA).

The Mills Review, led by executive director Sheldon Mills, found growing consumer appetite for agentic AI, with research suggesting around one in five people, equivalent to 11 million UK adults, are likely to use AI capable of acting autonomously within predefined goals.

However, concerns remain over trust and control, as well as fraud, cyber crime and market concentration.

The FCA identified four "major AI-driven shifts" expected to transform the sector: changes to firms' operations, evolving consumer journeys, increased competition and market concentration, and greater fraud and cyber security risks. It also made seven recommendations, including adapting regulation, expanding the FCA's AI Lab and developing AI-enabled supervision.

Ashley Alder, chair of the FCA, said: "The Board is enormously grateful to Sheldon for the rich, comprehensive report he’s delivered. His work anticipates the fundamental change agentic AI will bring to financial services. It highlights how consumers and firms can reap significant potential benefits as well how risks can be managed.

"As is clear in the report, we need to keep pace with a rapidly changing environment and the principles-based, outcomes focussed approach we’ve taken on AI – relying on the Consumer Duty and Senior Managers Regime – has been critical to us doing so. The recommendations build on work the FCA has been doing – not least allowing firms to test their use of AI with us – and our own use of AI to be a smarter regulator, more efficient and effective.'

The review is said to be the first work of its kind initiated by a regulator globally.

Commenting on the report, David Brooks, head of policy at Broadstone, said: "As AI becomes more widely used, improving public understanding of its limitations will be just as important as improving the technology itself. Trust should be earned through accuracy and accountability, not assumed because an answer sounds convincing."

Brooks added: "Pensions are complex, long-term financial arrangements where mistakes can have lasting consequences. While AI has a role to play in improving engagement and understanding, consumers need to treat it as a starting point, not a substitute for professional guidance, scheme information or regulated advice.

"One of the FCA's biggest challenges may be protecting consumers from bad pension decisions driven by good-looking AI answers. Generative AI is excellent at sounding authoritative, but not always at being right. When retirement savings are involved, people need to understand that convenience is not the same thing as reliability."

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