The UK Financial Conduct Authority is reviewing how general-purpose AI models should be regulated for retail financial services as consumers increasingly rely on tools like ChatGPT, Claude, and Gemini for financial decisions.

The Mills Review highlights four major AI impacts on finance: transformation of firms, new consumer journeys, a reshaped competition landscape, and amplified financial crime and cyber risk, with changes anticipated by 2030.

The FCA aims to be a pioneer in studying AI’s impact on financial services but notes it may not need to adopt Mills’ recommendations immediately.

Risks emphasized include amplified fraud and cyber threats, faster scalable attacks such as deepfakes and synthetic identities, and the challenge for defenders to keep pace with attacker capabilities.

Regulatory and industry responses include publishing a good/bad practice guide later in the year and ongoing engagement with firms to identify challenges and clarifications needed.

The report stresses balancing technological progress with consumer protection as essential for the next generation of the financial system, noting regulators worldwide face similar challenges.

Some argue the issue extends to systemic risk from shared AI models and infrastructure, which could cause market-wide technology failures during stress periods.

If AI agents can move funds rapidly, traditional payment systems may strain, putting tokenized deposits and stablecoins in focus as potential settlement mechanisms.

Stakeholders note rising competition and customer expectations driving investments in user experience, while legal experts warn AI has limits in high-stakes, nuanced decisions.

The FCA emphasizes a principles-based framework (Consumer Duty and Senior Managers & Certification Regime) and evolving it with technology rather than creating a separate technology-specific rulebook.

Findings suggest regulations may need to evolve as firms rely more on a few technology providers, potentially affecting system-wide resilience.

Policy implications include addressing advice and protection gaps, reducing financial exclusion, and the potential for digital-native firms to scale; AI could lower entry barriers but also concentrate power among large firms.