Only 9% of European financial firms consider themselves leaders in AI adoption, highlighting the sector’s cautious approach to integrating advanced technologies like generative AI (GenAI). This finding comes from the EY European Financial Services AI report. It also found that while 28% of companies have accelerated AI implementation over the past year, most are still in the early, exploratory stages. The study, which gathered insights from over 100 firms with a combined market capitalisation of €880bn, points to regulatory uncertainty and workforce skill gaps as major hurdles to scaling AI initiatives.
“Generative AI remains a key item on the to-do list for managers in the financial services sector; in the medium term, it promises both productivity gains and the ability to tap into new growth potential,” said EY Switzerland financial services AI leader Roger Spichiger. “There is virtually no doubt that the use of AI (and increasingly GenAI) is pioneering. But implementing, and particularly scaling up, a rapidly developing technology is complex and challenging, not least due to limited risk appetite and a shortage of in-house expertise. Some companies have made major progress in introducing AI and are seeing real benefits, but many are still struggling to keep up.”
Limited preparedness for AI regulation
The EY survey highlights a significant lack of preparedness for the EU AI Act and other upcoming AI regulations. Only 11% of managers across Europe believe their organisations are fully prepared, while 70% assess their readiness as partial or minimal.
Regulatory uncertainty ranked as one of the top challenges for GenAI adoption, with 38% of managers identifying it as a key concern. However, the most commonly cited obstacle was a lack of internal expertise, flagged by 56% of respondents. Additionally, 35% of firms noted the speed of GenAI development outpacing their ability to integrate the technology effectively.
Meanwhile, 78% of managers reported insufficient AI expertise within their workforce, with only 25% of firms introducing training and development programmes to bridge the gap. Most companies (60%) remain in the planning phase, while 15% have taken no steps to upskill employees.
Entry-level positions are expected to see significant changes due to AI integration. 59% of managers believe new hire responsibilities will be reshaped by these technologies. Despite this, only 24% of firms have updated entry-level roles to align with AI advancements, and 25% have incorporated AI training into graduate programmes. 35% have yet to take any action to address the potential impact of AI on the younger workforce.
AI is expected to transform a substantial proportion of roles across the financial sector. 66% of managers anticipate that up to 25% of jobs will be impacted in the next year, while 93% foresee at least 10% of roles undergoing changes.
Demand for AI expertise remains concentrated in specific areas. Data science and innovation were identified as priority sectors by 54% of firms, followed by back-office operations (46%) and information technology (40%). These domains are expected to drive hiring and investment as companies expand their AI capabilities.
Ethical concerns surrounding AI and GenAI persist as significant challenges. 56% of respondents highlighted the quality of AI-generated results as an issue, while 54% cited transparency and traceability concerns. Data protection was noted by 53%, and 47% flagged risks related to discrimination and fairness.
Despite these challenges, only 14% of European firms have implemented comprehensive AI ethics frameworks. 31% are in the early stages of developing such policies, and 25% plan to introduce them. However, 24% reported no plans to address ethical considerations in their AI strategies.
Nevertheless, financial firms in Europe are ramping up their investments in AI. 72% of managers reported plans to raise spending on GenAI technologies over the next six to 12 months. However, only 31% of firms feel they are on track with their AI integration efforts, reflecting the challenges of workforce readiness, regulatory compliance, and ethical concerns.
In another part of the world, a recent survey underscored the ongoing struggle of the US banking industry to fully embrace automation in regulatory compliance. Despite the growing pressure for digital transformation, 42% of professionals in the sector still rely heavily on manual processes, according to Wolters Kluwer’s 2024 Regulatory & Risk Management Indicator survey. Additionally, 31% of respondents admitted to occasionally turning to traditional, labour-intensive methods to navigate the complex web of compliance requirements.
Read more: Automation adoption lags in US banking compliance, despite growing investments
