By Phoebe Seers LONDON, April 21 (Reuters) - Lloyds Banking Group has become the first UK lender to introduce an artificial intelligence tool to help customers make investment decisions, even as AI's
Lloyds pilots AI investment guidance tool as UK regulator studies impact
By Phoebe Seers
AI Adoption in UK Banking and Regulatory Scrutiny
LONDON, April 21 (Reuters) - Lloyds Banking Group has become the first UK lender to introduce an artificial intelligence tool to help customers make investment decisions, even as AI's impact on the tightly regulated financial advice industry comes under scrutiny.
Lloyds' AI Investment Guidance Pilot
The British bank told Reuters it was piloting the AI‑powered tool with a small group of customers through its Scottish Widows pensions and investments arm, offering what it describes as investment “guidance” rather than advice. The product is expected to be widened later this year.
The move to harness AI is the latest initiative in efforts by British lenders to compete against specialist wealth managers that dominate the financial advice market.
Competition Among UK Banks
HSBC, Barclays and Lloyds have all increased investment in this sector, looking to win market share and expand their fee-based business as lending income is hit by low interest rates.
How the AI Tool Works
Scottish Widows Chief Executive Chira Barua said the tool would act “like a satnav for investments”, helping customers to navigate options without making decisions for them.
Guidance vs. Advice
The distinction matters. Guidance is broad and generic while financial advice must be tailored to an individual and is subject to far stricter regulatory requirements.
Risks and Regulatory Oversight
Experts say the use of AI to provide advice is not without risk and raises concerns that algorithms could amplify mistakes, mis‑sell products and leave companies unable to explain advice to customers or supervisors. The Bank of England is also closely watching how AI technology is rolled out.
FCA's AI Live Testing
Separately, the Financial Conduct Authority (FCA) said on Tuesday that Lloyds was among eight institutions, including Barclays, UBS and Experian, that will live test AI applications with it. As part of that, Lloyds, via Scottish Widows, will test AI-enabled "targeted support".
Targeted Support Explained
Targeted support is a newly created regulated activity that offers a deliberately lighter touch than full advice and is central to the regulator’s efforts to close an advice gap in which a growing number of people are unable to afford or access personalised financial advice.
Other Banks and the Future of AI in Finance
Lloyds is not the only big British bank exploring the potential of such tools.
HSBC told Reuters it is also studying the potential for AI applications within wealth management under the FCA’s new framework.
Potential Benefits for Customers
"This could be very effective for customers with, say, £20,000 to £50,000 in liquid assets, nudging them to put their savings to work through, for example, topping up ISAs," said Jose Carvalho, head of retail banking and wealth at HSBC UK.
An ISA is a UK tax-free savings and investment wrapper.
FCA's Review of AI in Financial Services
The FCA has launched a review into how AI could reshape financial services. As part of that review, it is studying the extent to which AI could shift market power away from regulated financial firms and towards technology companies that control consumer interfaces and data.
(Reporting by Phoebe Seers and Lawrence WhiteEditing by Tommy Reggiori Wilkes and David Goodman)
