The shadow chancellor John McDonnell has welcomed the “substantial” impact of big data and artificial intelligence (AI), but warned that effective regulation would be needed to realise the benefits.

Speaking at Bloomberg’s new European headquarters yesterday, he cited the Bank of England’s last stress tests, which estimated that existing banks could take a £1 billion hit to their profits as a result of FinTech innovation.

“The longer-term impact for the sector and for society more generally could be far wider,” he commented. “Mark Carney has suggested that existing banks could shift to become something more like utilities companies – largely unseen by customers, but providing an essential service.”

McDonnell argued potential gains for all sides - the sector and consumers - will only be realised with effective governance and regulation.

“Perhaps the greatest single lesson of the last decade in finance is that deregulation of complex and essential activities like financial services will not lead to the best result for society,” he stated. “The market, left to its own devices, will not always produce the best possible outcome.”

McDonnell noted the potential for large tech firms to move into the banking sector, pointing to Amazon already offering loans to small businesses. He suggested that the combination of big data and finance will force new kinds of ethical questions for regulators, businesses and wider society.

“Alongside the gains for efficiency and the creation of new financial products, the new forms of systemic risk associated with AI and machine learning in finance have been highlighted by the Financial Stability Board,” said the Labour number two.

“So we will work alongside you, yes in developing the regulation, but in forging the new relationship with finance that will ultimately be needed secure the public’s confidence,” he pledged to the gathered finance industry.

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