FCA Picks Barclays, UBS Among Eight Firms for AI Testing Round

The Financial Conduct Authority just named eight firms for its second round of AI Live Testing. Barclays and UBS made the cut. So did Experian and Lloyds Banking Group.

The announcement came during UK FinTech Week, and it’s pretty clear the regulator wants AI rolled out safely. The firms will test different AI tools across various sectors—some customer-facing, others business-to-business. Investment support, credit scoring insights, anti-money laundering detection, Know Your Customer protocols. All of it’s on the table. The FCA’s working with Advai, a London-based AI assurance specialist, to run the tests. Advai brings automated testing and assurance capabilities, which means participating firms can deploy AI solutions with more confidence. The partnership reflects the FCA’s push to balance innovation with regulatory oversight, a tricky line to walk when tech moves this fast.

Applications opened in January 2026.

Testing kicked off in April, and firms have until year-end to wrap things up. An evaluation report’s due in the first quarter of 2027. The FCA plans to publish a separate report later in 2026 detailing good and poor practices in AI for financial services. That report will draw on insights from the AI Live Testing initiative, giving firms guidance on responsible AI adoption. The regulator wants to share what works and what doesn’t, helping other firms navigate the complexities of deploying AI.

What the FCA Says About Innovation

Jessica Rusu, the FCA’s chief data, information, and intelligence officer, talked about the regulator’s commitment to supporting AI development. The initiative fits into ongoing efforts to keep pace with rapid technological change without sacrificing safety or regulatory compliance. Rusu didn’t mince words—the FCA sees AI as a major opportunity for financial services, but only if it’s done right. The regulator’s approach focuses on leveraging existing frameworks rather than introducing new rules that could slow innovation. It’s a pragmatic stance, one that acknowledges the speed at which AI is evolving.

The FCA’s Strategy 2025–2030 lays out a broader vision. Evidence-led policy, strengthened regulatory engagement, earlier collaboration with firms. The Regulatory Sandbox and Innovation Pathways are key tools here, designed to accelerate the integration of AI technologies while keeping consumer protection front and center. The strategy reflects a shift in how the FCA thinks about innovation—not as something to control, but as something to enable responsibly.

The Bigger Picture on AI Regulation

In January 2026, the FCA kicked off a review led by Sheldon Mills. The review looks at how advanced AI affects consumers and retail financial markets. It’s digging into regulatory frameworks and market dynamics, trying to figure out how AI changes the game. Mills’ review aims to inform the FCA’s approach to AI oversight, exploring how these technologies impact market operations and what that means for regulation. The findings will likely shape future policy decisions, especially as AI becomes more embedded in financial services.

The FCA’s Innovation Insights report came out alongside the second cohort announcement. The report shows a 49% increase in regulatory sandbox applications, a sign that fintech innovations are booming in the UK. Areas like AI are particularly hot right now, and the demand for the FCA’s innovation services reflects that. The report underscores how closely fintech market activity is tied to regulatory support—firms want guidance, and they want it fast.

Back in September 2025, the FCA released a Feedback Statement on AI Live Testing. That statement set the stage for the current cohort, emphasizing the importance of working within existing regulatory frameworks. The FCA made it clear then that fostering innovation and ensuring consumer protection aren’t mutually exclusive. The Feedback Statement addressed potential benefits and challenges, giving firms a sense of what to expect from the testing process.

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The FCA’s approach to AI regulation is deliberate. No rush to create new rules. Instead, the regulator’s leaning on existing frameworks, adapting them as needed. It’s a careful balancing act—encourage innovation, but don’t let things get out of hand. The AI Live Testing initiative is a practical way to do that, giving firms a controlled environment to test AI applications while the FCA watches and learns.

What Comes Next for AI Testing

The eight firms will spend the rest of 2026 testing their AI applications. Barclays, UBS, Experian, Lloyds Banking Group—each has its own focus, its own use case. The diversity of applications is deliberate. The FCA wants to see how AI performs across different sectors and scenarios. Customer-facing tools, back-office processes, compliance functions. All of it matters.

Advai’s role is critical here. The firm’s expertise in AI assurance means participating firms can test their systems rigorously, identifying weaknesses before deployment. It’s not just about getting AI to work—it’s about making sure it works safely, responsibly, consistently. The FCA’s partnership with Advai reflects a broader recognition that AI assurance is a specialized field, one that requires technical depth and regulatory understanding.

The evaluation report due in Q1 2027 will be closely watched. It’ll detail what worked, what didn’t, and what lessons the FCA learned from the testing process. That report will likely influence future cohorts and shape the FCA’s broader approach to AI regulation. Firms outside the testing program will be watching too, looking for signals on how the regulator thinks about AI risk and compliance.

The FCA’s AI Live Testing initiative is part of a broader push to enhance digital innovation within the financial sector. The regulator’s Strategy 2025–2030 emphasizes evidence-led policy and strengthened regulatory engagement, and the AI testing program fits squarely into that vision. By working with firms through the Regulatory Sandbox and Innovation Pathways, the FCA aims to accelerate the integration of AI technologies while ensuring consumer protection remains paramount.

The Innovation Insights report highlights how fintech innovations are aligning with demand for regulatory guidance. The 49% increase in sandbox applications isn’t random—it reflects the pace of change in financial services and the need for regulatory support. AI is at the center of that change, and the FCA’s response is to engage early, test rigorously, and share insights widely.

The report on good and poor practices in AI, expected later in 2026, will be another key deliverable. That report will draw on findings from the AI Live Testing initiative, providing firms with practical guidance on responsible AI adoption. The FCA’s goal is to help firms avoid common pitfalls and adopt best practices, reducing the risk of AI-related failures or consumer harm.

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The FCA’s approach to AI regulation is evolving, but the core principles remain constant: innovation, safety, consumer protection. The AI Live Testing initiative is a tangible expression of those principles, giving firms a path to test AI applications in a controlled, supervised environment. The regulator’s commitment to publishing insights and best practices reflects a broader strategy of transparency and collaboration.

Mills’ review on advanced AI, launched in January, will add another layer of understanding. The review’s focus on consumers and retail financial markets means the FCA is thinking hard about how AI affects everyday users, not just institutions. That consumer-centric approach is likely to shape future policy decisions, especially as AI becomes more prevalent in financial services.

The second cohort of AI Live Testing represents a step forward in the FCA’s efforts to support responsible AI innovation. With testing underway and reports on the horizon, the regulator is positioning itself as a facilitator of innovation rather than a barrier. The firms participating in the program have a unique opportunity to shape the future of AI regulation in the UK, and the insights they generate will benefit the entire industry.