• ·      MPs have launched an inquiry into AI’s role in financial services, assessing both its benefits and risks, including financial stability, cybersecurity, and consumer protection. The Treasury Committee is gathering input to determine if additional regulations are necessary.
• ·      AI is already widely used in financial services, with 75% of firms utilizing it and another 10% planning adoption. It plays a key role in fraud detection, credit assessment, customer service, and investment management, but concerns remain about its rapid development and potential unintended consequences.
• ·      Experts are divided on AI’s impact, with some believing it could bridge the financial advice gap by providing affordable guidance, while others argue it lacks the human understanding needed for effective financial planning.
• ·      Some industry leaders warn against excessive rules that could hinder innovation. The Treasury Committee’s findings, due after the March 17 submission deadline, may influence future policies on AI in financial services.

MPs have launched an inquiry into the role of artificial intelligence (AI) in financial services as the technology becomes increasingly embedded in the sector.

The Treasury Committee aims to assess both the benefits and risks associated with AI, particularly its potential impact on financial stability, cybersecurity, and consumer protection.

Recent data from the Bank of England shows that 75% of financial firms already use AI, with another 10% planning to implement it within the next three years.

AI is already widely used in financial services, from fraud detection and credit assessment to customer service chatbots and investment portfolio management.

While AI has the potential to enhance efficiency and accessibility, regulators are concerned about the rapid pace of development and the potential for unforeseen consequences.

Dame Meg Hillier, chair of the Treasury Committee, emphasized the importance of balancing innovation with appropriate safeguards.

“It’s critically important the City can capitalize on innovations in AI and continue to be a world leader in finance. We must, though, also be mindful of ensuring there are adequate safeguards in place to mitigate the associated risks, particularly for customers. This piece of work will allow us to see the full picture,” she has been reported as saying.

One major area of concern is the extent to which AI could compromise financial stability. With the launch of DeepSeek and its impact on the Magnificent 7 stocks last week, MPs are questioning how unpredictable AI-driven market shifts could affect the wider economy.

There are also fears that AI could increase cybersecurity risks, making financial institutions more vulnerable to fraud and hacking attempts.

The committee is seeking input from industry experts on whether additional regulations are necessary to protect consumers, particularly vulnerable individuals who may be at risk of AI-driven bias.

AI is already transforming the financial sector in significant ways. The Bank of England reports that the insurance industry has the highest AI adoption rate, with 95% of firms utilizing the technology.

 Many consumers have interacted with AI without realizing it, whether through automated customer service systems or financial planning tools that analyze spending patterns and recommend savings strategies.

Supporters argue that AI could help bridge the financial advice gap by providing affordable guidance to individuals who cannot afford traditional financial advisers.

Holly Mackay, founder of Boring Money, believes AI could improve consumer outcomes, particularly for those with straightforward financial needs. “We are some way off having wholesale confidence in AI’s ability to handle more complex financial situations, but we can see how it might be used to provide better guidance to consumers,” she said.

However, not everyone is convinced that AI can replace human advisers. Wealth manager Joshua Gerstler warns that AI lacks the emotional intelligence required for financial planning.

“AI cannot understand your fears and concerns, your dreams and goals, like a human can. It cannot tell when you say one thing and mean something else,” he said.

Despite AI’s potential, concerns remain over its reliability. While regulation may seem like an obvious solution, some industry experts caution against overly rigid rules that could stifle innovation.

Mackay argues that AI could fall under the broader Consumer Duty framework, which ensures financial firms act in the best interests of their clients, rather than requiring a separate set of regulations.

As the AI landscape continues to evolve, the Treasury Committee’s inquiry will provide insight into how financial institutions, regulators, and consumers can navigate this rapidly changing environment.

The deadline for submissions is March 17, and the findings could shape future policies on AI in financial services.

MPs have launched an inquiry into AI’s growing role in financial services, aiming to assess its benefits and risks, particularly regarding financial stability, cybersecurity, and consumer protection.

The Bank of England reports that 75% of financial firms already use AI, with another 10% planning adoption within three years.

The Treasury Committee is seeking industry input on whether additional regulations are necessary, especially to protect vulnerable consumers from AI-driven bias.