Power of AI in Financial Services: AI for investment?

Aug 3rd '23

The realm of Artificial Intelligence (AI) is poised to revolutionise every aspect of our lives, Including AI for investment in the financial services sector. A notable indication of AI’s impact on the industry is the recent address by the Chief Executive of the Financial Conduct Authority (FCA), Nikhil Rathi. In this speech, he unveiled the regulator’s stance on ai, discussing both the potential advantages and the associated risks.


Mr. Rathi underscored the FCA’s commitment to aiding financial firms in harnessing the benefits of AI. The potential improvements in productivity are noteworthy, as ai can serve as a conversational tool for customer support, streamlining interactions. Financial institutions can also leverage ai to provide better advice to all customers and investors, democratising access to expert guidance.


Moreover, the application of generative AI and synthetic data has the potential to refine financial models and combat crime. AI tools offer a swifter and more accurate approach to tackling fraud and money laundering on a large scale, safeguarding the integrity of financial transactions.


Another exciting prospect lies in AI’s ability to “hyper-personalise” financial products and services. By finely tailoring insurance products and other offerings to individual needs, customers can experience a more bespoke and satisfactory experience.


However, Mr. Rathi emphasized the necessity of implementing appropriate safeguards to counteract AI-related risks within the financial services domain. An alarming concern is the dissemination of misinformation via social media platforms, which can drastically influence global markets. Instances like an AI-generated hoax image of an attack on the Pentagon causing market fluctuations serve as a cautionary tale.


Furthermore, the adoption of AI could intensify the sophistication and efficacy of cyber fraud, cyber attacks, and identity fraud. This calls for increased investment in fraud prevention and cyber resilience as AI becomes more prevalent in financial operations.


The FCA’s focus extends to Big Tech firms, acknowledging both the opportunities for collaboration and the potential risks they pose. Partnering with Big Tech could foster competition and innovation in the sector. Nevertheless, there are apprehensions about the concentration risk that arises when relying heavily on a few Big Tech entities. Additionally, concerns surround the information asymmetry concerning data sharing, with Big Tech firms acting as gatekeepers of valuable data and wielding significant power over the industry.


Manipulation of consumer biases and access to vast and comprehensive data sets by Big Tech firms further raise regulatory eyebrows. The FCA is actively evaluating whether these entities might introduce substantial risks to market functioning, and financial firms must be prepared to incorporate these considerations into their operational resilience planning.


While anticipating further AI-related regulations in the financial sector, Mr. Rathi highlighted the existing regulatory frameworks that firms must adhere to. Among these, the Consumer Duty mandates that products and services aim to secure positive consumer outcomes, including AI applications including AI in investment.


The Senior Managers & Certification Regime (SMCR) provides a clear framework to address AI innovations. With uncertainty surrounding accountability for AI-driven decisions, the SMCR reaffirms that senior managers bear ultimate responsibility for their firms’ activities. Parliament has proposed a bespoke SMCR-type regime for individuals managing AI systems, signaling its importance in future regulatory discussions.


To maintain compliance with evolving laws, financial firms must closely monitor the developments surrounding AI and financial services in the coming months and years. It is crucial that firms already undertake extensive planning and preparation to ensure a smooth transition into the AI-powered financial landscape.


Contact us to discuss how AI can impact your firm and what limits you should set in the development of AI in your business and procedures.


Call us on +44 (0) 20 8087 2377  or email us.


Contact us


About us

LS Consultancy are experts in Compliance, and work with a range of firms to assist with improving their documents, processes and systems to help mitigate risk.


Our range of innovative solutions can be tailored to suit your unique requirements, no matter whether you’re currently working from home, or are continuing to go into the office. Our services can be deployed individually or combined to form a broader solution to release your energies and focus on your clients.


Contact us today for a chat or send us an email to find out how we can support you in meeting your current and future compliance challenges with confidence.



Explore our full range today.


Need A Regulatory Marketing Compliance Consultant? A Bit More About Us


Contact us


Why Not Download our FREE Brochures! Click here.


Call Us Today on 020 8087 2377 or send us an email.



Connect with us via social media and drop us a message from there. We’d love to hear from you and discuss how we can help.


Instagram  LinkedIn  X (formally Twitter) YouTube


Contact us