AI Driving Digital Transformation in Financial Services

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As digital ecosystems evolve, banking and fintech trends point toward an increasingly interconnected future where embedded banking, digital payments, and the rise of super apps are reshaping the sector. Artificial intelligence is here to accelerate this profound transformation, with the AI for banking market size that rose from $19.9 billion in 2023 to $26.2 billion in 2024 and is predicted to hit $315.50 billion by 2033 - representing an annual growth rate of 31.83%.

The second edition of FIBE, Berlin's leading fintech and finance festival, provided a premier forum for exploring these transformative developments. Held at CityCube Berlin, the two-day event attracted more than 2,000 participants from 42 countries and featured 214 speakers from 19 countries.

Among the event's most anticipated sessions was the panel discussion titled "AI in Banking: Disrupting Finance for the Next Decade." Moderated by Veronica Breene, CEO and Founder at Vesta Insights, the panel featured Hélène Falchier, Partner at Portage Ventures, and Nancy Plaßmann, Board Member at Berliner Sparkasse, exploring how AI is revolutionizing financial services and the digital transformation in banking, while addressing the implementation challenges.

European Banks' AI Readiness in the Digital Transformation Journey

The conversation started with a frank assessment from Hélène Falchier, stating that European banks are not ready for the AI revolution, and explaining that the necessary infrastructure extends beyond B2B software solutions. Digital transformation in banking demands not only technological upgrades but a fundamental reimagining of how financial services are delivered. Although AI infrastructure spending has risen across Europe, the European Central Bank reports that private AI investment in the EU and UK combined, $11 billion in 2023, remains far below the US total of $67 billion over the same period.

Falchier seems particularly concerned about the state of client-facing AI solutions, which she believes are "not yet advanced enough, and it's the most difficult part." This gap represents a significant challenge for European financial institutions in their digital transformation journey, as customer-facing applications often require more sophisticated AI capabilities than what is needed for back-office automation.

AI's Impact on Banking Workforce

On the workforce front, Falchier observed that AI employees are still underdeveloped while suggesting that financial institutions could potentially reduce the tech workforce by 60%, by using multiple AI LLMs to code and to complete other technical work. This observation points to the talent gap and efficiency opportunities that AI presents for financial institutions.

The implications for workforce development are significant. "Training is key when hiring new people," Falchier emphasized. As a General Partner at Portage, a global fintech and financial services investment platform with $4B in assets under management, she's leading by example. The firm has taken concrete steps - appointing a head of AI and supporting its portfolio companies. She also emphasized that it is essential for talent to develop critical thinking skills related to AI, suggesting that technical skills alone are not enough to meet the challenges ahead. This aligns with industry research showing that while 78% of European financial firms acknowledge their workforce lacks experience with GenAI, only 25% have established new training and comprehensive upskilling programs.

The Human Element in Digital Financial Services

Despite the push toward automation, Nancy Plaßmann, Board Member at Berliner Sparkasse, a publicly owned savings bank founded in 1818, headquartered in Berlin-Mitte, serving around 1.6 million private and corporate customers, emphasized that AI gives them the possibility to have more time to spend talking with customers. This perspective frames AI not as a replacement for human interaction but as an enhancement that allows financial professionals to focus on relationship-building within hybrid digital ecosystems.

Plaßmann further challenged the assumption that younger generations prefer fully digital experiences: "People trust people, and people like to talk to other people also when coming to financial services. Especially young people like to talk to people." This insight suggests that even as banking consumer experiences become increasingly digital, human connection remains fundamental to successful banking and fintech innovation.

She suggested that Berliner Sparkasse is exploring AI applications while maintaining this human-centered approach, emphasizing the careful balance as well between innovation and security that will define the future of fintech and banking. Berliner Sparkasse has now created its own AI assistant, and hundreds of people are currently testing it before the public launch, as data security is critical to the bank.

A Closer Look: Inside the Sparkasse AI Approach

To explore these ideas further, we followed up with Nancy Plaßmann, Board Member at Berliner Sparkasse, who also joined the FIBE panel on AI in banking this year. We asked her two key questions about the implementation of AI at a major European bank, and how innovation and security are being balanced in practice.

You mentioned that people are internally testing Berliner Sparkasse’s brand-new AI assistant. Could you share more about its intended role and capabilities? For example, how will it collaborate with branch advisors and digital channels to enhance customer service and efficiency?

NP: We are using the AI assistant to help bring our employees along on the path of digital transformation. The assistant is designed to support daily customer interactions and, for example, link internal knowledge databases for staff. This way, employees can familiarize themselves with new technologies, experiment, and develop their skills for the future.

You emphasized the need to balance cutting-edge innovation with rigorous security and a human-first approach. How does Berliner Sparkasse put that into practice? What governance measures and data protection safeguards are embedded in your AI initiatives to maintain compliance and client confidence while still enabling personalization?

NP: Here, a statement from our central service provider, Finanz Informatik, is especially relevant:

'We are committed to our digital sovereignty and operate large-scale, dedicated data centers in Germany for the Sparkassen-Finanzgruppe. Data protection and information security are top priorities for FI. That’s why we rely on our own AI platform and generative AI models – including open-source models such as Mistral (France). Our AI platform is now deeply integrated into our financial platform for the Sparkassen and increasingly connected with the Sparkassen’s knowledge and data. By the end of this year, it will be in use across all 190,000 Sparkasse workstations.

Is this path easy or convenient? Certainly not. But FI and the Sparkassen are pursuing it deliberately, to ensure digital sovereignty. There are enormous opportunities here for European companies and IT providers.'

AI and a Balanced Digital Transformation in Financial Services

The FIBE panel discussion revealed multiple dimensions of AI's impact on European financial services. Both panelists also emphasized the increasing importance of the EU's digital sovereignty in the AI era, suggesting that European independence in the fintech and financial services industry was always important, but became critical with the current geopolitical shifts. The conversation further highlighted the importance of diversity in AI development, warning about potential bias issues if AI systems are mainly developed by "tech bros" in Silicon Valley.

Looking forward, both EU-level initiatives and private-sector efforts are essential to address infrastructure gaps, invest in workforce training, and maintain robust data security - and financial institutions that will be able to combine advanced AI capabilities and human-centered service will lead the next decade of fintech innovation.