From AI to digital ID, data-driven technologies are transforming financial services. And how we harness these technologies is key to delivering the Government’s mission on growth.
But innovation only succeeds when it’s underpinned by confidence to try new ideas, trust, and a joined-up regulatory approach even where it is challenging to provide clarity with the frontiers of technology moving fast.
That’s why the FCA and ICO are working closely together to support firms navigating data protection and financial regulation in a way that helps them innovate confidently.
Regulation as a bridge, not a barrier
Done right, regulation isn’t a brake on innovation. It’s a bridge, connecting creativity with public trust. With the right approach, regulation becomes an enabler: providing the certainty firms need to invest, experiment, and grow responsibly.
The FCA and ICO frequently collaborate to make it easier for firms to navigate UK financial and data protection regulations.
In 2023, we clarified[1] that data protection rules don't prevent banks from telling customers about better savings deals. Since then, firms have significantly ramped up their communications, with over 100 million savings messages sent out. A small change, but a big impact.
Similarly, we engaged firms to bust myths about barriers to sharing data[2] between organisations and sectors in order to prevent, detect and investigate scams and fraud. More regulatory clarity, more people protected.
Our cooperation extends to the services that we provide to innovators – ensuring that whether firms enter the FCA's AI Lab[3] or the ICO's Regulatory Sandbox[4], they can have confidence that they are getting joined-up regulatory positions.
Through the Digital Regulation Cooperation Forum (DRCF), our partnership continues to grow – for example, through the pilot of the AI and Digital Hub[5] alongside Ofcom and the Competition and Markets Authority. The DRCF is actively reviewing the pilot project and developing its refreshed offer for innovators.
Listening to the sector
When we are made aware of challenges firms face, we look to take action. The FCA’s latest joint AI survey with the Bank of England showed 85% of the 118 financial services firms surveyed were currently using or planning to use AI. 33% of firms cited data protection as a constraint on AI adoption and 20% cited FCA regulations.
That’s why we hosted a roundtable on May 9 2025 with industry leaders to better understand the challenges firms face when deploying AI, and to explore how we can support responsible innovation and personal information use.
Supporting putting regulatory principles into practice
What came through was very little about specific regulations standing in the way of innovation.
Rather, firms understand the broad rules, but many – especially smaller ones – want clearer examples of ‘what good looks like’ in practice and more opportunities for engagement to build confidence in trying new technologies.
So what are we doing about it? The ICO has already published extensive guidance[6] on AI. To support good practice into the future we will be developing a statutory code of practice for organisations developing or deploying AI and automated decision-making – enabling innovation while safeguarding privacy. We will also be helping firms to develop, test, and evaluate AI as part of the FCA’s AI Lab.[7]
The FCA plans to host a roundtable with smaller firms later this year to better understand challenges around AI adoption. The new DRCF workplan[8] also commits regulators to develop our collective understanding of how one another’s regulatory regimes might apply to AI – including agentic AI systems – and work to identify and resolve any points of conflict.
Liability and the supply chain
Firms are concerned about who holds responsibility when AI tools are developed by third parties, particularly when they make automated decisions that impact their customers or when things go wrong. This can lead to reluctance, especially under the Senior Managers and Certification Regime[9].
As part of the ICO’s consultation series on generative AI, the ICO published detailed analysis on allocating controllership across the generative AI supply chain[10]. The FCA has also provided information[11] on the responsibility of firms when seeking to adopt generative AI.
We know some firms have been able to move forward with confidence in line with their risk appetite, while others find these to be complex issues. We will continue to work together and with other regulators in the DRCF to explain our expectations, while recognising many choices are about firms’ own risk appetites and choices.
Awareness of support
Some firms simply aren’t aware of the tools and services already available, including the Digital Sandbox, Supercharged Sandbox and AI Live Testing within the FCA's Innovation Hub[12]. The ICO also offers the Innovation Advice Service, Regulatory Sandbox and Innovation Hub under its Innovation Services[13].
We’re increasing visibility of these services and signposting practical help.
The DRCF workplan[8] also notes how we will be cooperating over the coming year to support regulatory clarity for financial services firms. This includes continued engagement on the Consumer Duty and its intersections with data protection, supporting the development of open finance data sharing, sharing insights on scams and fraud mitigation efforts and convening a DRCF symposium on digital ID.
Looking ahead
The message from industry was clear: regulation is not the main blocker to innovation, but uncertainty and lack of familiarity are. We want to reduce that uncertainty. We can support in building familiarity, while firms themselves are also developing their capabilities. All this means being clearer, more joined-up, and more visible with the support we offer.
But this isn’t something regulators can do alone. We need firms and trade bodies to keep talking to us – not just when there’s a problem, real or perceived, but earlier in the innovation journey.
We can help firms do things differently. But we need their insight to do things better.
With regulatory agility and confidence to innovate and invest in new technologies, businesses will provide the UK with the fuel to power economic growth.