European banks are targeting an enhanced standing in Artificial Intelligence (AI) development and adoption according to investment figures.
According to data from Evident, an AI benchmarking and intelligence platform, some of Europe’s biggest banks are upping investment in AI startups. These firms may be hoping to match the capabilities of North American counterparts.
AI has been taking the tech world by storm in recent years. Although its use in finance is longstanding, rapid acceleration of AI innovations of late have been a cause of significant excitement, although also some concern, for many stakeholders.
Evident’s latest Dispatch report found that European banks drove 45% of industry AI investments in 2023, the highest share for the continent on record. Of this funding, 66% went to AI startups, with 36% spread across other regions.
This trend has been noted by other leading business figures and in other reports. For example, just last week Stripe President John Collison told CNBC that AI startups are attracting significant investor interest. Earlier last week, the Payments Innovation Jury 2024 report projected that fintech investment would shift from payments towards AI.
Alexandra Mousavizadeh, Evident Co-Founder and CEO, said: “Startup investment is a risky business when viewed purely in terms of direct financial returns, however, our latest data shows that many banks are also investing in AI for strategic purposes – namely, to gain front-of-queue access to cutting-edge AI technologies, market intelligence and expertise.
“Backing innovative AI startups can help banks accelerate on the roadmap to AI maturity, and the European banks’ growing share of AI ventures is a positive sign for their long-term AI capabilities.”
According to Evident, there are three banks AI startups should look out for as keen funders of the technology – Citigroup, Morgan Stanley and BNP Paribas. Citigroup has been the most active of these three, accounting for 13% of all AI-focused investments.
Morgan Stanley subsequently accounted for 10% and BNP Paribas for 8%. Some banks appear to be focusing on smaller investments in line with strategic goals, with Capital One making 57% of these strategic investments followed by Citigroup at 49% and Wells Fargo at 48%.
Meanwhile, Goldman Sachs and First Citizens led the table in terms of AI-related deals between 2010-2023. Overall, Evident research suggests that Europe’s banks are eager to harness AI technology and also capitalise on its broader usage.
Europe is home to numerous AI startups, but North America and the Asia-Pacific region are arguably the geographic leaders in the technology’s development. European finance is now seeking to match this leadership spot.
Investment in AI-focused ventures from European banks has risen significantly from 10% in 2015 to 45% in 2023, which Evident noted is bringing the sector ‘on parity’ with its North American counterparts, although the latter still remain more committed at 54%.
There may also be another trend at play here, that being a desire by traditional European banks to match the competition posed by challenger and neobanks via technology investment diversification and adoption of new innovations.
“We shouldn’t expect changes overnight,” Mousavizadeh concluded. “The North American banks have built up a healthy lead over their European and UK rivals for AI startup investment over the past decade.
“Two out of the current three leading investors are US-based, while the US banks that have historically dominated the AI ventures field – such as Goldman Sachs and First Citizens – remain well-positioned.”
