PIMFA
What is Artificial Intelligence?
A recent Financial Conduct Authority (FCA) discussion paper, DP22/4: Artificial Intelligence, offered the following definition of Artificial Intelligence (AI):
‘It is generally accepted that AI is the simulation of human intelligence by machines, including the use of computer systems, which have the ability to perform tasks that demonstrate learning, decision-making, problem solving, and other tasks which previously required human intelligence. Machine learning is a sub-branch of AI.
AI, a branch of computer science, is complex and evolving in terms of its precise definition. It is broadly seen as part of a spectrum of computational and mathematical methodologies that include innovative data analytics and data modelling techniques.’
- WHAT DO FIRMS NEED TO CONSIDER?
Many PIMFA members are already using AI systems and tools in their everyday operations, and it is likely that the adoption of AI in financial services will increase rapidly over the next few years.
PIMFA firms already use AI tools for several purposes. For example, they analyse large volumes of data quickly, easily, and accurately, which enables their employees to spend more time working with and for their clients.
There are concerns that as AI becomes more advanced, it could introduce new risks, for example:
system develops biases in its decision making
leading firms to make bad decisions
rESULTING IN Poor outcomes for their clients
This is why it is essential that firms deploying AI systems have a suitably robust control framework around their AI components to keep a careful check on what they are doing.
As with any innovation, AI has the potential to make fundamental and far ranging improvements in how firms can serve their clients. However, we must ensure it is continually monitored and checked regularly to manage the risk and maximise the benefit.
- What are regulators doing?
A number of government departments are asking regulators such as the Financial Conduct Authority (FCA), Bank of England (BoE), Information Commissioners Office (ICO) and Competition and Markets Authority (CMA) to publish an update on their strategic approach to AI and the steps they are taking according to the White Paper. The Secretary of State is asking for this update by 30 April 2024.
On 13 March 2024, the EU Parliament approved the EU Artificial Intelligence Act. The EU AI Act sets out a comprehensive legal framework governing AI, establishing EU-wide rules on data quality, transparency, human oversight and accountability. It features some challenging requirements, has a broad extraterritorial effect and potentially huge fines for non-compliance.
Maria Fritzsche
Senior Policy Adviser - Operational Policy, Regulation and Innovation Lead
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latest news
CTP regime: industry needs next steps for formal designation process
Read PIMFA’s article in the Financial Times on the CTP regime
PIMFA WealthTech and Morningstar have launched a new AI Tech Sprint inviting fintech providers to apply to showcase their AI-driven solutions. The selected winner will present their technology to an audience of industry peers and decision-makers at the Morningstar Investment Conference UK on 7 May 2026.
The AI Tech Sprint will examine:
“AI in wealth and advice – from experimentation to ROI: how can firms turn their application of AI into measurable business impact?”
and fintech firms can discover further information and register to take part.
If you are a fintech firm and can demonstrate how your product can benefit the industry with the specific criteria in mind, please click the link below to enter the AI Tech Sprint.
Entries will close on 16 March 2026 at 5pm.
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AI: Evolution, Revolution or Devastation? Read the new Leading Lights Report
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Read here an article from the PIMFA Journal #32 by Alexander Blayney, Global Partnerships & Enterprise Sales at Id-pal, looking at how, with the increasing prevalence of identity fraud, AI can help revolutionise business growth when applied to identity reverification