DFSA Co-Leads Report on AI’s Transformative Impact on Consumers in Financial Services
Artificial intelligence (AI) is rapidly transforming financial services, offering tailored solutions that promise to improve efficiency, accessibility, and consumer experiences. In fact, the Dubai Financial Services Authority (DFSA) has announced the publication of a new GFIN artificial intelligence (AI) report, which they have co-led with the UK’s Financial Conduct Authority (FCA) on behalf of the Global Financial Innovation Network (GFIN).
The GFIN AI report, titled Key insights on the use of consumer-facing AI in global financial services, outlines key topics such as the transformative role of AI and machine learning (ML), with a focus on their application within risk management, customer service, fraud detection, and investment strategies.
As a founding member of the GFIN, a global network of more than 90 regulators and organisations committed to supporting financial innovation, the DFSA has played a leading role in the GFIN AI project.
According to the report, AI is unlocking opportunities in consumer-facing financial services such as robo-advisors, personalized finance, and consumer education. However, its integration brings challenges that require global regulatory cooperation.
The Rise of AI in Finance
AI’s ability to analyze vast amounts of data and make personalized recommendations has positioned it as a game-changer in finance. The report highlights three key areas where AI is making significant strides:
1. Robo-Advisors
AI-powered robo-advisors are revolutionizing financial planning by offering 24/7, cost-effective investment and financial advice. Unlike traditional advisors, these platforms use machine learning (ML) algorithms to provide personalized recommendations based on consumer data.
• Market Presence: Investment in robo-advisory services is expected to surge, with AI potentially expanding into areas like financial management and insurance advice.
• Inclusion: Robo-advisors are particularly valuable for underserved groups, offering financial services to remote communities and lower-income populations. AI-enabled platforms can deliver advice in local languages, improving accessibility and inclusion.
2. Personalized Finance
AI tools are enhancing financial health by consolidating data to create customized financial strategies. Open finance and smart data services provide consumers with an integrated view of their finances, driving better decision-making.
• Current Adoption: Nearly 75% of firms in the UK financial sector are already using AI, with 10% planning to adopt it in the next three years.
• Risks: While personalized services are promising, concerns over data privacy and the potential for AI “hallucinations”—false or misleading outputs—pose challenges.
3. Consumer Education
AI is simplifying complex financial information, making it more digestible for consumers with limited financial knowledge. Some firms are leveraging AI to create interactive educational tools, including quizzes and videos, to improve financial literacy.
The Risks and Regulatory Challenges
Despite its advantages, the report notes several risks:
• Data Privacy: Protecting consumer data remains a critical concern, especially in regions with limited governance frameworks.
• Algorithmic Bias: AI systems may unintentionally reinforce biases, leading to unfair outcomes.
• Emotional AI: The use of AI to detect consumer emotions introduces ethical dilemmas, particularly around manipulation and cultural sensitivity.
Additionally, 27% of firms surveyed in Dubai reported having no governance framework for AI, with such gaps most prevalent in fintech. In Canada, regulators highlighted risks like market manipulation, intellectual property concerns, and “shadow AI,” where unsanctioned AI systems operate without oversight.
Global Collaboration: A Path Forward
The GFIN, which includes over 90 regulators worldwide, emphasizes international collaboration to address these challenges. Notable initiatives include:
• FCA AI Lab (UK): The Financial Conduct Authority launched the AI Lab in 2024, featuring programs like the AI Spotlight, AI Sprints, and a Supercharged Sandbox to test and refine AI applications.
• Dubai’s AI Governance: The Dubai Financial Services Authority (DFSA) surveyed firms in the region, finding that 54% expect their use of AI to grow in the next three years, with a focus on improving operational efficiency.
• Canada’s CSA Guidance: The Canadian Securities Administrators (CSA) issued Staff Notice 11-348 to ensure transparency and ethical AI use in capital markets, aligning with international standards.
The Numbers That Matter
• Consumer Reach: AI-powered tools are expanding financial inclusion, catering to “unbanked” populations and creating financial footprints for underserved communities.
• Autonomous Decisions: In the UK, 55% of AI use cases involve some level of autonomous decision-making, while only 2% are fully autonomous, reflecting the emphasis on human oversight.
• AI Adoption: Globally, firms are leveraging AI for purposes like fraud detection, risk management, and client onboarding, but high costs and data access remain barriers.
AI is set to redefine financial services, offering more personalized and efficient solutions while expanding access to underserved markets. However, achieving these benefits requires balancing innovation with robust safeguards.
The report highlights the need for global collaboration, ethical governance, and proactive regulation to ensure that AI serves as a tool for financial inclusion and trust.
It all goes down to one conclusion: as AI continues to shape the future of finance, regulators and innovators must work together to build a resilient, consumer-focused ecosystem that harnesses its full potential.
