No New AI Rules Needed, Just Better Guidance, Says Innovate Finance
Seventy-five per cent of UK financial services firms are already using AI, up from 58 per cent just two years ago. Despite this growth, uncertainty about compliance is slowing progress, according to a new policy paper from Innovate Finance.
Another 10 per cent of firms plan to adopt AI within the next three years, signalling a quick rise in usage. Common applications include fraud detection, anti-money laundering, cybersecurity, and back-office automation. Around 41 per cent of firms use AI to streamline internal processes, 37 per cent focus on cybersecurity, and 33 per cent on improving fraud detection. Adoption is strongest in operations and IT, followed by retail banking and insurance.
Growing Interest in Advanced AI Models
The paper highlights increasing use of advanced “foundation models,” which now make up 17 per cent of AI use cases. This is a significant jump in a short time. While technical capabilities are improving, many firms—especially smaller ones—seek clearer guidance on regulatory boundaries, particularly when AI is deployed in customer-facing roles.
Instead of calling for new AI-specific regulations, Innovate Finance supports the Financial Conduct Authority’s current approach, which applies existing frameworks like the Consumer Duty to AI use.
Calls for Practical Support From Regulators
Innovate Finance urges regulators to provide more practical assistance, including:
- Clearer examples of compliant AI use
- More visible support for innovation
- Better signposting of resources such as the Digital Regulation Cooperation Forum’s AI Hub
The paper also recommends broader policy measures, like developing a full UK financial tech stack. This would cover smart data infrastructure, digital ID, blockchain regulation, and data-sharing for fraud prevention—key elements to support AI deployment across the sector.
Real-World AI Use Cases
Case studies from Innovate Finance members such as Starling Bank, YouLend, and Bonsai illustrate practical AI applications. They include AI-powered financial planning, embedded lending, and conversational finance tools.
But the paper warns that without faster action to build confidence among the industry and public, the UK risks falling behind international competitors investing heavily in ready-to-deploy AI frameworks.
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