European fintechs slow AI adoption amid regulatory and quality concerns

Europe's fintech sector is rethinking its enthusiasm for generative AI as companies acknowledge the technology's limitations in financial services. Despite attracting nearly €2bn in VC funding for AI agent startups, including those specializing in financial services, a shift in attitude is underway.

Klarna's AI Backtrack

Klarna CEO Sebastian Siemiatkowski admitted the company over-relied on automation, leading to lower-quality customer service. While Klarna denies dialing down AI use, it now emphasizes the importance of human support for complex cases.

Regulatory Challenges

Fintechs face unique hurdles in AI adoption due to strict financial regulations. Starling Bank CIO Harriet Rees stresses maintaining human-run customer service, stating: "We won't compromise on that." The UK's Financial Conduct Authority requires fintechs to prove they're delivering "good outcomes" for customers.

Cost vs. Quality

Investor Elina Rayberg notes AI isn't reducing costs but shifting them to infrastructure and compliance. An IBM survey found only 25% of AI initiatives delivered expected ROI. Starling CFO Declan Ferguson warns: "You can't cost cut your way to growth."

Cautious Product Development

Fintechs are still developing AI tools but at a slower pace:

• Starling launched Spending Intelligence for financial queries
• Bunq and Lunar rolled out AI financial assistants
• Revolut is hiring for AI solutions

Primer CEO Gabriel Le Roux emphasizes careful testing: "Trust takes years to build, and seconds to lose."

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