February 10, 2026
Financial Institutions Not Using AI Are (Almost) Extinct
The era of AI-free banking is effectively over, and it seems like the industry has crossed a point of no return. What began as cautious experimentation just a few years ago has transformed into an industry-wide revolution that’s fundamentally changing how financial institutions operate, compete, and serve customers.
According to Finastra’s Financial Services State of the Nation 2026 report, AI has shifted from experimental technology to essential infrastructure in record time. The research surveyed senior professionals at banks and financial institutions across eleven countries, including the United States, the United Kingdom, France, Germany, Japan, Singapore, Hong Kong, the UAE, Saudi Arabia, Mexico, and Vietnam.
Almost all (98%) of institutions have embraced AI in some form, with 43% now identifying it as their primary innovation driver. For the tiny minority still holding out, the question is no longer whether to adopt AI, but whether they can survive without it.
Competing Without AI Is No Longer an Option
Sixty percent of financial institutions enhanced their AI capabilities during the past year alone. While those institutions were upgrading their systems, the remaining handful were actively losing ground.
The competitive pressure is particularly acute in customer experience, where 38% of institutions report that improved service and personalised experiences now top their customers’ demand lists. Remarkably, only 4% of institutions globally offer no personalised services, a figure that closely mirrors the 2% with zero AI adoption, suggesting a direct correlation between AI capability and customer-facing innovation.
Financial institutions are deploying AI across four primary battlegrounds where competitive advantage is won or lost. Risk management and fraud detection lead at 71%, tied with data analysis and reporting at the same percentage. Customer service and support assistants come in at 69%, alongside document intelligence management, also at 69%. These figures represent institutions either actively running AI programmes or piloting them in these areas.
The Price of Staying Competitive
The rush to AI is driving unprecedented investment across the sector. Institutions anticipate increasing their security investments by an average of 40% throughout 2026, reflecting the reality that AI deployment brings new digital risks, tighter regulatory scrutiny, and deeper dependence on technology infrastructure.
Furthermore, 87% of respondents plan to invest in modernisation initiatives over the coming twelve months, motivated by the need to scale AI capabilities, strengthen operational resilience, and deliver superior customer experience. More than half of institutions (54%) are turning to fintech partnerships as their preferred route to AI adoption, recognising they can’t build these capabilities alone.
Cloud infrastructure has become the foundation for AI deployment, with 29% of respondents ranking cloud adoption among their top priorities. Without cloud capabilities, scaling AI across operations becomes prohibitively expensive and complex, another hurdle for the shrinking minority of AI holdouts.
Looking Ahead
Institutions prioritising three key AI initiatives: AI-driven personalisation to meet rising customer expectations, agentic AI for workflow automation to reduce costs and improve efficiency, and AI model governance and explainability to ensure responsible deployment amid increasing regulatory pressure.
For the 2% still operating without AI, each of these trends represents another area where they’ll fall further behind competitors who are already executing at scale.
Despite the rapid pace of change, optimism remains remarkably high among financial services leaders who’ve embraced the transformation. The research found that 87% of respondents expressed strong optimism about personal opportunities ahead, while 86% maintain a positive outlook for their institutions as technology and operating models continue to evolve.
“Technology decisions now sit at the centre of trust, resilience, and customer experience,” said Chris Walters, CEO at Finastra. “Institutions are expected to move quickly, but also responsibly, as regulatory scrutiny increases, and customers demand financial services that work reliably, securely, and personally every time.”
