Outgoing FCA Executive Director Sheldon Mills warned that artificial intelligence in financial services could cause "cognitive erosion," turning consumers into passive observers of their own money. Mills, in a final interview with Fairer Finance, said this shift risks undermining the very consumer capability that underpins economic growth.
Data shows 45% of consumers with debt problems have already turned to AI for assistance, and 34% use AI for investment advice. These figures highlight that the most vulnerable are often the earliest adopters of automated financial tools.
Cognitive erosion and the passive consumer
Mills compared the effect to how GPS navigation has weakened people's natural sense of direction. "Cognitive erosion" describes the process where automated decision-making reduces a person's understanding of their own finances. The risk is that consumers become observers rather than active participants, unaware of the terms, conditions, and pricing that shape their financial health. The risk of cognitive erosion from AI tools is a growing concern in AI for Finance.
Under the FCA's Consumer Duty framework, firms must ensure customers remain engaged and informed. Without that, Mills warned, the industry faces a systemic crisis of accountability.
Consumer protection as an engine for growth
Mills reframed the tension between regulation and economic expansion, arguing that consumer financial capability is a primary engine for growth. Healthy micro-level decisions by families and small businesses, he said, create a more resilient and productive economy. "True growth requires conscious consumers, not automated observers," Mills said, according to the interview.
Ensuring fair savings rates and transparent access to credit, he added, allows regulators to foster sustainable and inclusive growth. This approach ties directly to the Consumer Duty mandate, which demands firms put customers' needs first.
Why debt-stressed consumers are leading AI adoption
AI adoption is not being driven by wealthy investors but by those in financial distress. Mills noted that 45% of people with debt problems use AI, compared to 34% for investment advice. This pattern requires regulators to look across the entire market, not just at high-net-worth tools. Protecting those without the "privilege of worry" regarding investments is a core part of the Consumer Duty.
Why this matters for finance professionals
Mills' departure marks a turning point for the FCA, but his warning on AI should resonate across the C-suite. If AI erodes consumers' ability to manage their own risk, the industry faces a systemic crisis of accountability. The market stability concerns raised by Mills are a core part of the AI for Executives & Strategy discussion. For finance leaders, the message is clear: sustainable growth depends on conscious consumers, not passive observers.
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