He said the regulator is attempting to create an environment where companies can develop artificial intelligence, quantum and even digital currency products while managing the risks to consumers.

Speaking at Barclays’ Glasgow office on “Reimagining banking for the intelligent age”, as part of FinTech Scotland’s festival, he told attendees the UK faced significant opportunities and threats as AI becomes increasingly embedded in the economy. He predicted that 2027 will be the year AI agents go mainstream.

He said: “I think the UK has got the most amazing opportunity ahead of it. But it’s also got the biggest threats. We did miss the boat in AI. We gave away a lot of our crown jewels. We’ve got an amazing capacity to generate original ideas in the UK. We’re fantastic at it.

Colin Payne

“And the financial services sector is so incredibly strong. And the fintech sector punches way above its weight. I think about the Scottish fintech scene, the quality of engineering here, the quality of tech capability, the depth of knowledge in professional services. It’s second to none, which is why we do so well.”

Mr Payne said the opportunity lay in combining those strengths with a regulatory environment based on trust. “What the UK has is very special. That trusted capability in fintech and financial services.”

He said the UK should seek to establish “the best trust frameworks” around AI and financial services, arguing that trusted regulation could become a competitive advantage. He claimed the FCA had created a “world-leading environment”, adding: “Trusted regulation is a really important part of that.”

The FCA executive defended the UK’s principles-based approach to regulation, contrasting it with more prescriptive regimes elsewhere. He said the UK has fewer rules, which allows companies to innovate.

“We have a principles-based architecture, so we’re not going to apply new rules. That gives us a great runway to allow you guys to run and develop new ideas and propositions.”

Mr Payne said the FCA’s AI Lab and regulatory sandbox were central to its approach, creating a “world-class environment for people to come in and experiment with”.

“We had to build something that was genuinely world class,” he said. He went as far as to call it “the best lab for any AI developer, from any regulator, anywhere in the world”.

“I would challenge any of my friends around the world to come in and show me what they’re doing in the same quality.”

The lab provides firms with access to technology, mentoring and synthetic data, which can be used to test products without exposing real customers.

He added: “We’ve got some of the most developed and, I would say, deep synthetic data sets available to anyone. It’s a really good way of testing without concern about harming customers. This is an open space. It’s a safe space to come in and work with us.”

Mr Payne said he is using his division within the FCA to feed innovation into future policy, rather than waiting for regulation to catch up with rapidly changing technology.

“What I’ve brought, which is slightly different, is a kind of policy link to innovation mentality,” he said. “Policy then makes the decision as to whether it’s going to get rules or not.”

Mr Payne is also chair of the Global Finance and Technology Network (GFTN). He said that since taking over the running of the cross-border network, he had moved it to become more hands-on, and revealed it was launching an AI observatory, which the UK was leading.

He said: “It’s going to be on our platform, available completely free to anyone around the world. It’s going to allow any of you [in the fintech] space, if you come to us. It is a little bit challenging to get through the barrier because we are pretty hard in our judgement. That is one thing we don’t apologise for. We will be robust, we will challenge you. We want to really focus on the best of the best. But when you get through that, you’ll be featured as one of our observed AI fintechs, which leads to a lot of potential globally, because we’ve got 100 members now in GFTN.

“And I think that’s pretty weighty when you want to look at new international opportunities, whether it’s Hong Kong, Dubai, India. There are a lot of great territories for you to get a foothold in, and I feel really proud of that, because actually it’s our job to do that. Let’s open the door to you.

“Let’s showcase your activity. Let’s showcase the best of what we do. And then take it forward. And by the way, we are doing a bit of work to test that assumption, that having a high bar to participate is good for your customers. It’s also good for your businesses as well.

“We’re proud of that. We’re not going to run away from that either. We’re a regulator, but we’re focused on growth as well.”

It is understood that firms coming through the service have raised around £1.5bn.

The regulator is also preparing for a shift towards AI agents that could increasingly act on behalf of consumers. Mr Payne predicted 2027 will be the “year of the agent”, with consumers giving AI systems authority to manage parts of their financial lives, such as tax, savings, subscriptions and investments.

He said: “I think most of us will have multiple agents running our own lives, because I think that’s something we would benefit from.”