AI in Europe heats up as banks increase investment
– Despite a global fall off in AI-focused dealmaking by major banking institutions, European banks increased their share of deal flow to 45%
– Goldman Sachs leads in overall deal flow, accounting for 17% of all AI-focused banking investments made over the past decade
– New Evident research highlights Citigroup, Morgan Stanley, and BNP Paribas as the banks to watch for AI startup investment
European banks are playing a growing role in driving AI startup investment, according to new data from AI benchmarking and intelligence platform Evident.
Evident’s latest Dispatch shows that the world’s biggest banks made 92 new investments in AI startups in 2023.
While the number of bank investments into AI startups declined by 37% year-on-year, reflecting a wider downturn in overall venture capital activity, Evident’s data reveals that European banks drove 45% of the industry’s AI investments in 2023, the region’s highest share on record. The majority of this funding (66%) went to AI startups headquartered in the region, compared to just 36% across other regions.
The Evident Dispatch leverages the data behind the Evident AI Index – the go-to benchmark for AI in banking – to surface monthly analysis tracking “need to know” changes across the industry.
According to the new AI Ventures Dispatch, while European banks represented less than 10% of AI-focused investments as recently as 2015, the 45% share of AI venture investments in 2023 brings them close to parity with their North American peers (54%). While European bank deal flow did decline year-over-year (-25%), it did not slide as significantly as observed in North America (-42%).
In both 2022 and 2023, five European or UK banks were represented among the Top 10 banks in terms of AI investments, up from only three banks in 2021. Of these, BNP Paribas leads the way, ranking 3rd overall by deal flow and fuelling Mistral AI, Europe’s biggest competitor to Open AI.
Citigroup, Morgan Stanley and BNP Paribas take the lead
Evident’s Dispatch shows the leading banks have significantly increased their venture investments into AI startups over the past decade, with 48 of the 50 banks (96%) tracked in the Evident AI Index investing or acquiring at least one AI-related startup between 2010 and 2023 – a total of 800+ AI venture investments.
By contrast, just 60% of the banks made AI venture investments in 2023, down from 34 in 2022. Of these, nearly two-thirds (19 banks) were either flat or down in terms of new deal flow, with the average number of investments declining from 4.3 deals to 3.1 deals per bank – less severe than the wider deal flow decline in venture capital markets, but consistent with the overall trend.
Against this backdrop, Citigroup took the lead in AI venture activity in 2023, accounting for 13% of all AI-focused investments, followed by Morgan Stanley (10%) and BNP Paribas (8%).
While Goldman Sachs and First Citizens dominate in terms of the overall number of AI-related deals between 2010-2023, other banks have focused on a smaller number of investments that appear to be strategically aligned to their ongoing operations. Capital One leads this sub-category, making 57% of strategic AI investments over the past decade, followed by Citigroup (49%), and Wells Fargo (48%).
Notably, all three banks have a dedicated venture arm, a startup accelerator, or a limited partnership with a venture and growth equity investment firm – attributes that strongly imply centralised AI planning, processes, and decision-making at an organisational level.
Alexandra Mousavizadeh, Evident Co-Founder and CEO, comments: “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.
“We shouldn’t expect changes overnight. 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.”
About the Evident Dispatch
The Evident Dispatch is a monthly product prepared exclusively for members of Evident’s benchmarking and intelligence platform.
Leveraging the data that drives the Evident AI Index, the Dispatch surfaces monthly analysis on a specific sub-pillar of the index, highlighting “need to know” changes, including:
– Emerging banking industry AI trends
– Individual banks that deviate from their historical performance on key metrics
– Shifts that could ultimately contribute to changes in the annual Evident AI Index ranking
Evident is a benchmarking and intelligence platform that aims to provide the most authoritative source of data-driven insights on how companies are adopting AI.
Beginning with banking, Evident has created the first independent benchmark for tracking industry-wide AI adoption and readiness. Drawing from millions of public data points, the Evident AI Index assesses 50 of the world’s largest banks across four main areas of AI capability: talent (capability & development), innovation (research, patents, ventures, ecosystem), leadership (in public communications and strategy), and responsible AI (including principles, people, publications and partnerships).
Evident also provides a wealth of ongoing research, data insights and events – including its annual AI Symposium – to deep-dive into banking sector AI progress, track trends, and explore how the world’s biggest financial institutions are approaching AI adoption, identifying use cases and measuring outcomes, impact and ROI – providing vital lessons for business leaders, investors and the financial services ecosystem at large.
