Financial services firms are accelerating investment in artificial intelligence even as major gaps remain in oversight and safety controls, according to research from EY and Napier AI.

EY found that 26% of firms have no, or limited, controls for ensuring AI systems comply with regulations, while nearly a quarter lack adequate safeguards against unauthorised access. Despite this, more than half plan to increase AI spending in the next year, with nearly six in ten already using AI to automate routine tasks, and 62% deploying it to simplify complex ones.

The industry is also embracing high-profile partnerships and internal hubs. NatWest and OakNorth have partnered with OpenAI, while Lloyds has launched a Centre for Excellence and Advanced Analytics. The banking sector alone is projected to invest over £1.8bn in AI by 2030.

Preetham Peddanagari, EY’s UK financial services tech consulting leader, said: “Without robust oversight and governance frameworks, the sector risks leaving itself and its customers exposed to significant threats.”

Greg Watson, chief executive officer of Napier AI, added: “A lack of safe AI controls across financial services is creating serious vulnerabilities. As AI adoption accelerates, many firms are deploying AI at scale without the governance, transparency and oversight frameworks required to ensure it is both secure and accountable. This gap risks exposing institutions to regulatory breaches, operational failures and heightened financial crime threats, which can undermine customer trust.”

According to Napier AI's 2024-2025 AML Index, financial crime compliance cost UK financial institutions over £6.2bn in 2023. It suggests AI-driven solutions could save about £2.2bn a year.

The Financial Conduct Authority recently confirmed it will not introduce new AI rules. In June, the watchdog launched its Supercharged Sandbox with Nvidia to help firms test innovations safely.

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