The City’s top regulator has opened the doors to its first-ever ‘AI live testing‘ scheme, giving major financial firms a controlled environment to trial AI without fear of tripping regulatory wires.
NatWest, Monzo, Santander, Scottish Widows, Gain Credit, Homeprotect and fintech Snorkl are among those in the inaugural cohort.
The FCA says the scheme is designed for firms already positioned to put AI into live markets, offering tailored oversight from its regulatory team and technical support from UK assurance specialist, Advai.
The idea is to fix governance before the algorithms start making high-stakes decisions.
Early tests are already probing evaluation frameworks and risk controls, which are the sort of back-end mechanics that tend to go unnoticed until it’s too late.
A shift in regulatory mood
Much of the action so far sits in retail financial services, with use cases ranging from AI-driven financial advice, complaints sorting and customer-engagement systems.
The hope is that better-tested AI can speed up decision-making while keeping consumers safe.
Jessica Rusu, the FCA’s chief data, information and intelligence officer, claimed the testing environment would help ensure AI is deployed “safely and responsibly in UK financial markets”.
She added that working closely with firms and Advai should help avoid the pitfalls seen in other jurisdictions grappling with fast-moving technology.
The move comes as the regulator leans heavily into digital innovation.
In recent months, FCA boss Nikhil Rathi has argued that traditional rule-making can’t keep pace with AI’s rapid development, promising a more collaborative approach with firms.
Crucially, she reassured the industry that the watchdog won’t “come after you every time something goes wrong”, only when failures are outright egregious.
The FCA also seems keen to understand how AI will reshape markets more broadly.
Insights from live testing will feed into its future regulatory approach and complement its “supercharged” sandbox launched with Nvidia earlier this year, aimed at firms still experimenting with early-stage models.
Applications for the second cohort of AI Live Testing open in January, with approved companies entering the controlled environment from April.
For a financial sector racing to modernise, and for a regulator trying to encourage growth while upholding consumer protection, the consensus seems to be to innovate, but do it properly.