Most banking decision-makers now recognise AI as the next wave of digital transformation within financial services, set to transform software development and modernise legacy systems, while supercharging Know Your Customer (KYC) and Anti-Money Laundering (AML) processes.

According to the latest Digital Banking Experience Report from digital services consultancy Sopra Steria, genAI in particular is top of mind, although there is still some caution evident in decision-makers plans.

Among the operating areas banks believe will most benefit from AI tools are risk management (62%), updating legacy code (61%), and fraud management (59%).

On the customer-facing side, most banking technologists believe genAI can enhance KYC and AML checks (61%), deliver personalised experiences at scale (60%), and deliver better intelligence and customer service insights (55%).

The DBX report also shows that AI is reshaping financial inclusion by enabling alternative credit assessments to move beyond traditional criteria.

Sopra Steria’s research shows that 52% of banks are already taking steps to boost inclusion, using real-time data like income patterns and rent payments to better serve historically overlooked groups.

Looking to further capitalise on the promise of AI, banks are planning to invest heavily in the technology. Most decision-makers (61%) reported that their organisation expects to allocate budget increases of at least 10% to enhance their digital offerings, including in services like chatbots and AI assistants to enhance customer experiences.

British banks have reason to be optimistic in this area, with the DBX survey showing the UK leading its European rivals in digital satisfaction across the board. 

The UK outperformed Germany, its closest competitor, in key areas, including the range of digital products (87% vs 79%), ease of navigation (91% vs 82%), and availability of innovative features (82% vs 76%).

However, the path to AI-powered transformation isn’t entirely smooth. 

More than a third (38%) of decision-makers reported they’re concerned that the use of genAI will increase the risks of data breaches and fraud, while AI model bias and transparency issues present additional hurdles.

Nearly half (45%) of those polled said one of their top concerns is deploying AI in a way that’s fair, transparent, and understandable, with the spectre of ‘black box’ systems, where decisions are made without clear explanations, posing serious risks to both regulatory compliance and customer confidence.

Meanwhile, half (51%) cited compliance and security as a major challenge in using AI effectively, and around the same number (49%) said the complexity of integrating private genAI models with existing enterprise applications and APIs is a barrier.

Cost cannot be overlooked either, with 49% of banks agreeing developing and maintaining genAI models requires significant investment in hardware, software, and human resources.

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“These challenges, however, should not be viewed as roadblocks but as necessary stepping stones on the path to transformation,” wrote Mung Ki Woo COO for financial services at Sopra Steria, in a blog presenting the research. 

“By implementing robust governance frameworks and maintaining meaningful human oversight, banks can harness AI’s analytical power while ensuring decisions remain fair, ethical, and aligned with organisational values. 

“This approach is essential for building and maintaining customer trust, which remains a critical competitive advantage.”

The place of AI in financial services will be on the agenda at DIGIT’s FS Technology Summit, set to take place this Thursday (1st May) at Dynamic Earth, Edinburgh, where speakers will discuss how AI is shaping the future of the sector, and what might come next.

To take part, register for your free place at the event here.