75% of UK financial firms now using AI, regulatory survey reveals
AI is taking over finance in the UK! About 75% of firms already use it for tasks like fraud detection and risk management. Insurance companies lead with 95% adoption. But there's a catch—many firms rely on third parties and don’t fully understand the tech. Big benefits, but big risks too.
1/ AI adoption in the UK’s financial sector is booming! 75% of firms use AI today, compared to 58% in 2022. In three years, 85% are expected to integrate AI further into their operations. A seismic shift!
2/ Insurance leads the pack with a staggering 95% adoption rate, followed by international banks at 94%. Financial market infrastructure firms lag, with only 57% utilizing AI.
3/ Why insurance? The sector heavily uses AI for pricing, claims management, and underwriting, areas ripe for automation and efficiency.
4/ Firms are increasingly reliant on third-party AI systems, which account for 33% of all AI applications, up from 17% in 2022. This shift raises concerns about dependencies on external providers.
5/ Top third-party providers dominate the market:
Cloud services: 73%
AI models: 44%
Data services: 33%
This centralization could lead to systemic risks.
6/ Human resources leads in outsourcing, with 65% of its AI cases handled externally. Risk and compliance departments follow closely at 64%. Operations and IT show 56% reliance on third parties.
7/ Foundation models—large-scale machine learning systems—are becoming mainstream. They represent 17% of AI use cases, with the highest usage in IT operations, legal, and HR.
8/ In three years, the average AI use cases per firm are projected to double from 9 to 21, indicating the rapid scaling of technology across financial operations.
9/ Governance is crucial. 84% of firms have designated accountable teams for AI oversight. Leadership is directly involved in 72% of cases, ensuring top-down management of risks.
10/ However, knowledge gaps persist. 46% of firms admit to only partially understanding the AI systems they use, especially third-party tools. This highlights a pressing need for education and transparency.
11/ Automated decision-making is becoming standard, used in 55% of AI applications. Fully autonomous systems, however, are rare (2%). Most applications include human oversight.
12/ AI boosts efficiency and reduces costs but introduces risks:
Data privacy concerns
Systemic dependencies
Complexities in third-party models
Cybersecurity remains the top risk as reliance on AI grows.
14/ The FCA and Bank of England aim to foster innovation while ensuring safety. Initiatives like the Regulatory Sandbox and TechSprints encourage firms to explore AI responsibly.
15/ Interesting stat: 62% of AI applications are low-impact, meaning they don’t drastically alter business operations. High-impact cases (16%) are concentrated in insurance, retail banking, and compliance.
16/ AI-driven benefits include fraud detection, anti-money laundering, and improved customer experiences. Risks, however, need mitigation through frameworks and better oversight.
17/ Firms must act fast. The lack of formal governance, seen in 46% of firms, could lead to regulatory setbacks. The FCA’s push for AI committees is a step in the right direction.
18/ Regulatory bodies are also tackling AI's potential for bias, especially in high-stakes applications like credit underwriting and hiring. Ethical AI is non-negotiable moving forward.
19/ Key takeaway: AI is reshaping UK financial services. To thrive, firms need a balance of innovation, oversight, and adaptability to emerging risks.
20/ What are your thoughts on AI’s role in finance? Does its transformative potential outweigh the risks?