Artificial Intelligence (AI) and Generative AI (GenAI) are becoming increasingly embedded in the operations of European financial services firms, with the potential to enhance productivity and efficiency across the sector. However, despite this growing interest, the majority of firms remain in the early, experimental stages of adoption, particularly with GenAI. According to the second EY European Financial Services AI Survey, only 9% of firms believe they are ahead of the curve in AI integration, while 28% have accelerated their AI adoption over the past year.
Optimism Amidst Slow Integration
While 90% of financial services firms have incorporated AI to some extent, with plans to increase investments annually, many remain at the initial stages of adoption. A significant number of firms report a lack of in-house expertise in GenAI, with 29% of executives feeling they are lagging behind their peers. Despite these challenges, there is a strong intent to boost GenAI spending, with 72% of firms planning to increase their GenAI investments in the coming year. Additionally, 69% of respondents expect GenAI to significantly enhance productivity.
Key obstacles hindering AI adoption include a shortage of skilled talent, regulatory uncertainties, and the rapid pace of technological change. The survey reveals disparities across financial sectors: while 40% of banking respondents and 36% of wealth and asset management firms feel they are behind their peers, only 17% of insurers express similar concerns. Notably, 17% of banks consider themselves ahead in AI adoption, a higher percentage than in other sectors.
Focus on Back-Office Efficiency, Limited Customer-Facing Innovation
AI’s current application in financial services is largely focused on enhancing back-office operations. Nearly half (48%) of AI use cases are deployed in back-office functions, with a significant portion dedicated to data science, innovation, and product services. However, there is a clear gap in AI adoption for customer-facing roles, with just 21% of applications focused on client interactions, such as customer service, sales, marketing, and front-office operations.
Despite the potential for AI to transform these customer-facing functions, firms have largely restricted their AI initiatives to back-office efficiencies. The next 12 months are expected to see continued prioritization of back-office operations, leaving other areas—such as customer service and front-office functions—largely untapped. Only 7% of firms aspire to lead in GenAI adoption, with many preferring a cautious approach to integration. Document processing remains the most significant GenAI use case, with 66% of firms focusing on this area.
Impact on Productivity and Workforce
The survey highlights the significant impact that GenAI could have on productivity, with 64% of banks, 74% of insurers, and 73% of wealth managers expecting substantial productivity gains. However, the integration of AI also raises concerns about job displacement. A substantial 93% of respondents anticipate that up to 10% of roles could be made redundant due to AI automation, with some firms projecting job reductions of 10-20%. This underscores the need for strategic workforce planning and reskilling initiatives to manage the evolving landscape.
Regulatory and Ethical Concerns
The two main concerns for AI adoption in the financial sector are limited understanding of GenAI technologies and regulatory uncertainty. Ethical issues, which were once ranked third, have fallen to eighth place in terms of priority. However, concerns about the quality of AI output, transparency, privacy, and potential bias remain prominent. Only 14% of firms have a fully functional AI ethics framework, with 31% still in the early stages of development and 49% yet to establish one.
With the rapid evolution of AI technologies, firms are also concerned about the pace at which they can integrate these innovations. Cost of implementation and establishing control frameworks are additional barriers that need to be addressed to ensure a smooth transition towards AI integration.
Recommendations for Financial Services Firms
As financial services firms navigate the challenges of AI adoption, they must focus on several key areas to maximize the potential of AI and GenAI technologies:
Invest in Workforce Training and Upskilling
With 78% of firms acknowledging a lack of in-house expertise in GenAI, training and upskilling should be a top priority. Firms must invest in comprehensive training programs that not only address technical skills but also focus on ethical considerations and regulatory compliance. By building a skilled workforce, firms can better leverage AI technologies and foster innovation.
Develop a Balanced AI Deployment Strategy
To harness the full potential of AI, financial services firms must broaden their focus beyond back-office efficiencies to include customer-facing functions and strategic areas. This involves rethinking AI deployment strategies to enhance client interactions, improve customer satisfaction, and drive overall business growth. Firms should aim for a more holistic AI strategy that touches all areas of the business.
Establish Robust Governance and Ethical Frameworks
Regulatory uncertainty and ethical challenges are major barriers to AI adoption. Financial services firms must proactively develop governance frameworks that address these concerns, focusing on transparency, privacy, and bias prevention. A well-defined AI ethics strategy will help firms navigate the regulatory landscape and build trust with stakeholders.
The Road Ahead
To fully capitalize on AI and GenAI, financial services firms must align their AI initiatives with business objectives, invest in talent development, and establish comprehensive governance frameworks. Although the journey may be complex, the long-term benefits of AI-driven transformation make the investment worthwhile. By strategically integrating AI across their operations, firms can unlock significant productivity gains and strengthen their competitive position in the rapidly evolving financial landscape.
About the Survey
The EY 2024 European Financial Services AI Survey collected insights from 116 executives across 106 financial services firms in Europe, representing a combined market cap of nearly €880bn. The survey, conducted between September and November 2024, assessed the impact of AI and GenAI on productivity, talent, skills, capital allocation, and risk management within the sector. Participants included senior leaders from banks, insurers, wealth and asset managers, fintechs, and other financial institutions.
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