The Bank of England and Financial Conduct Authority (FCA) have conducted a third survey of artificial intelligence and machine learning in UK financial services.

The Artificial Intelligence and Machine Learning Survey 2024, conducted among 118 firms from across the financial services sector including banking, insurance, and investments, shows that 75% of companies are already using AI, with a further 10% planning to adopt it over the next three years.

Those figures show a significant jump from just two years ago, when a similar study found that only 58% of financial service firms were using machine learning.

The insurance sector in particular has more firms using AI, at 95%, closely followed by international banks at 94%. Meanwhile, only 57% of data from financial market infrastructure firms currently use AI.

The majority of respondents (56% of those using AI) reported having ten or fewer use cases for the technology, with only 10% having more than fifty. However, looking ahead three years, 31% of firms say they will have ten or fewer use cases, while nearly a quarter expect to have over fifty.

This year’s survey found that 55% of all AI use cases across financial services involved some degree of automated decision-making, with 24% of those being semi-autonomous, but only 2% of use cases incorporated fully autonomous decision-making.

According to the data, financial services firms expect AI to improve their data and analytical insights, anti-money laundering efforts, allow them to more easily combat fraud, and assist with cybersecurity, however the areas expected to benefit most over the next three years are operational efficiency, productivity, and cost bases.

Of the top five current risks around AI, four are related to data, namely data privacy and protection, data quality, data security, and data bias, with the last risk being to financial firms’ cybersecurity. 

Conversely, the risks expected to increase the most over the next three years revolve around third-party dependencies, model complexity, and embedded, or ‘hidden’, models. 

Adding to concerns are the high numbers of financial services firms that still don’t have a good grasp of the underlying technology. 

Of the firms using or planning to use AI over the next three years, 46% reported having only ‘partial understanding’ of the AI technologies they use versus 34% of firms that said they have ‘complete understanding’, which the Bank of England attributes to the greater use of third-party models.

The survey also looked at what factors are curbing the greater adoption of AI in the sector, finding that concerns around safety, security, the robustness of AI models, and a lack of talent are causing firms the most problems.

Despite 84% reporting having an accountable person for their AI framework, accountability continues to be an issue, with 72% of firms reporting that responsibility for AI use cases are split among executive leadership, with most firms reporting three or more accountable persons or bodies.

Firms report using a combination of different governance frameworks, controls and processes specific to AI, over half of firms having nine or more such components.

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“While AI has many benefits, including improving operational efficiencies and providing customers with personalised services, it can also present challenges to the safety and soundness of firms, the fair treatment of consumers, and the stability of the financial system,” said the report.

Recently, the FCA has positioned itself as an technology hub for those working in financial services with the launch of an AI Lab aiming to help firms overcome challenges they face in implementing and building AI solutions.

The watchdog said that the lab will play a vital role in providing insights, debates, and case studies for using AI, providing a deeper understanding of the opportunities and risks currently at play.