EY: European Banks Struggle with Gen AI Adoption

European financial institutions are struggling to implement generative artificial intelligence (Gen AI) – machine learning systems that can create content from existing data – despite plans to increase investment in the technology over the next year.

A study by EY, the professional services firm, covering 106 European financial institutions with €880bn (US$922bn) in market capitalisation reveals that while 90% have integrated AI into their operations, only 9% consider themselves ahead of their competitors in adoption. Just 31% believe they are on track with overall AI integration.

Omar Ali, Global Financial Services Leader at EY, says: “Gen AI continues to sit high on the agenda for financial services leadership teams, promising well-acknowledged new levels of productivity gain. 

“There is little doubt within the sector that harnessing AI – and increasingly Gen AI – is game-changing, but the implementation of an evolving technology, to budget, within risk appetite and across an entire workforce, is hugely complex and challenging.”

Skills Gap Threatens Progress

The research highlights a mismatch between ambition and execution. While 72% of firms plan to increase Gen AI investment in the next 12 months, down from 75% in 2023, 78% acknowledge their workforce lacks experience with the technology. 

Only 25% have established training programmes to address this gap, with 43% reporting plans still in early stages and 29% having no training programmes at all.

Data science and innovation departments show the highest demand for AI expertise, with 54% of respondents citing this as their priority area. 

Back-office operations rank second at 46%, up from 14% in 2023, while information technology departments place third at 40%, up from 24% last year.

In recruitment, firms prioritise specific attributes for an AI-enabled workforce. The ability to adapt and flex ranks highest at 77%, followed by innovative and experimental mindset at 70%, and collaboration skills at 44%. Technical proficiency ranks lower at 34%.

Workforce and Implementation Challenges

The impact on employment could be substantial, with 66% of executives expecting AI to affect up to a quarter of current European financial services roles within a year. 

Additionally, 93% of executives indicate up to 10% of roles could become redundant. Only 24% of firms plan to restructure junior positions, and 25% plan to integrate AI training within their graduate programmes - down from 35% in 2023. 

The proportion of firms taking no action to offset impacts on junior staff has increased to 35% from 28% in 2023.

Ayman Awada, EMEIA Financial Services Banking Technology and Gen AI Leader at EY, adds: “Many banks, insurers and asset managers across Europe still have some way to go to reach the next level of AI-enablement. Raising the bar on regulatory readiness, and upskilling new and current staff to embrace Gen AI now and in the future will be the key to unlocking deeper adoption.”

Limited understanding of applications emerges as the top concern at 56%, with regulatory uncertainty ranking second at 38%, up from 29% in 2023. 

Ethical issues have dropped from third place to eighth, replaced by concerns about implementation speed at 35% and cost considerations at 26%.

The implementation of the EU AI Act, which will regulate artificial intelligence systems based on their risk level, presents a significant challenge. 

Only 11% of surveyed institutions report being prepared for incoming regulation, while 15% operate without an AI risk framework. A further 70% say their firm is only partially prepared.

Quality control remains central to Gen AI implementation, with output quality being the primary concern for firms. Transparency concerns rank second at 54% and data privacy third at 53%. Only 14% of firms have implemented an AI ethics framework, with 31% in early development stages.

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