The Financial Conduct Authority (FCA) has launched a new AI live testing service to help firms deploy artificial intelligence in real market conditions under regulatory supervision. The move is part of a wider effort to balance innovation with consumer protection in the UK financial sector.

Set to begin formal testing by October 2025, the initiative builds on the FCA’s AI Lab and follows a six-week consultation earlier this year. It complements the Supercharged Sandbox—launched in partnership with NVIDIA in September—which provides access to advanced tools for early-stage AI development. While the sandbox supports prototyping, the live testing service is focused on deployment readiness and regulatory compliance.

The FCA sees the new service as a natural extension of its innovation ecosystem, which includes the long-running Innovation Hub and regulatory sandbox. These frameworks have helped fintech firms secure investment and scale responsibly. AI live testing aims to address specific challenges in AI adoption, particularly around regulatory uncertainty and public trust.

Concerns are well documented. A joint survey by the FCA and Bank of England in 2024 found that more than half of firms view data protection and privacy as major barriers to AI adoption, while 13% cited uncertainty around consumer duty rules. A July 2025 report by Innovate Finance highlighted media scrutiny and the absence of clear ethical guidance as additional obstacles.

Through AI live testing, firms will be able to trial systems in a supervised setting, with potential waivers or modifications to existing regulations. The FCA will monitor risks including bias, lack of explainability and data drift—where real-world inputs diverge from training data, affecting performance.

Notably, the FCA has chosen not to introduce new AI-specific rules, opting instead for a “same activity, same risk, same rule” approach. This contrasts with the EU’s incoming AI Act, which imposes detailed obligations on AI use. The UK government’s own AI bill is expected in 2026 and will address safety and copyright issues more broadly.

Adoption of AI in UK financial services is growing fast. AWS reports a 33% increase in AI use among UK businesses in the past year, while a Moneypenny survey found that 73% of finance companies are exploring or deploying AI to improve efficiency and decision-making.

However, skills shortages and regulatory ambiguity remain challenges. Lawyers advising firms will play a key role in navigating the AI live testing process, ensuring robust governance, clear documentation and compliance with consumer duty requirements.

The FCA’s AI Lab—including the live testing service and sandbox—positions the UK as a leader in responsible AI for financial services. By combining innovation support with regulatory oversight, the FCA is creating an environment where AI can thrive without compromising trust or market integrity.

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