As more financial institutions deploy artificial intelligence for key functions such as credit assessments, a group of UK lawmakers has raised concerns that the industry may be unprepared to withstand a major AI-related incident.
The lawmakers recently advised the Financial Conduct Authority and the Bank of England to implement AI‑focused stress tests that could help financial services firms navigate potential issues originating from the technology.
The committee also called on the UK to take a more proactive stance in addressing these risks. For example, it recommended that the FCA publish guidance clarifying how consumer protection rules apply to AI, as well as the extent to which senior financial services managers are expected to understand the AI components embedded in their systems.
Flaws and Risks
According to the report, these measures are increasingly necessary given the substantial risks posed by AI. Flaws often present in this nascent technology could lead to inaccurate credit decisions, elevated fraud risks, and the spread of misinformation.
The report further highlighted the concentration risks associated with major AI models, which are largely facilitated by leading U.S.-based tech giants. These centralized systems could skew consumer decision-making and foster herd behavior in financial markets.
What’s more, UK lawmakers stated that the emergence of agentic AI—and the rush to embrace agentic commerce—has created a potential inflection point for financial institutions. This sentiment was echoed by Experian, which noted that merchants and financial institutions currently lack the tools to differentiate between legitimate AI agents and malicious bots.
The Current Conundrum
Despite these concerns, the dynamic benefits of AI ensures it will remain a priority for financial institutions.
Data from FIS shows that over three-quarters of business and technology leaders believe AI has strengthened their organization’s fraud detection and risk management capabilities. Roughly half of respondents also said their organizations plan to ramp up AI investments over the next two years.
At the same time, a Bank of England official recently underscored that the UK financial industry isn’t fully utilizing data analytics for fraud detection. This highlights the central dilemma facing many FIs: leaders must create strategies that maximize AI’s benefits while mitigating its inherent risks.