Artificial intelligence (AI) technology is used by all but 1% of UK financial services firms as the debate over its use in the sector comes to an end, according to a major annual study by Finastra.
In its Financial services state of the nation 2026 report, the IT supplier described AI as the “connective tissue” of the finance sector and revealed that the technology’s evolution is also driving up spending in other areas, such as security and cloud.
Finastra CEO Chris Walters said institutions are no longer debating whether to adopt AI, but are focused on where it delivers tangible value and how it can be deployed responsibly.
“Only 2% of [global] respondents say they are not using AI at all, which underscores how decisively the industry has crossed the threshold,” he said.
The report said: “AI now sits at the heart of financial innovation. No longer confined to back‑office automation, it is powering real‑time fraud detection, personalised product recommendations, intelligent underwriting and dynamic customer engagement.
AI is becoming the connective tissue of banking – the intelligence layer that links data, channels, and services into something coherent and responsive Finestra report
“[AI] reduces friction, accelerates decisions and tailors experiences in ways that feel intuitive to customers. It is becoming the connective tissue of banking – the intelligence layer that links data, channels and services into something coherent and responsive.”
The report revealed the top AI use cases finance firms are currently running or piloting. These include risk management and fraud detection (71%), data analysis and reporting (71%), customer service and support assistants (69%) and document intelligence management (69%). It said the top three priorities for the year ahead are AI-driven personalisation, agentic AI for workflow automation, and AI model governance and explainability.
Over 1,500 senior executives at large finance forms in 11 regions were questioned in the Finastra survey.
AI is also indirectly forcing banks to invest more heavily in other technologies in the year ahead. For example, spending on security is expected to rise by an average of 40% in 2026.
This is partly as a result of AI-related threats. The report said “escalating digital threats – particularly those linked to AI” are driving a projected 40% average increase in security spend over the next year.
A total of 43% of firms said constantly evolving risks are their biggest security challenge, while 40% said AI deployment itself was.
Modernise for AI
Another byproduct of AI investment is the need for finance firms to modernise technology. Nine out of 10 surveyed companies plan to invest in modernisation this year, partly to enable them to scale AI. The adoption of cloud technology is central to this effort, with 29% of respondents prioritising cloud adoption.
“Cloud is no longer a destination; it is the operating environment for modern finance, with 84% of respondents reporting that they are using some cloud solutions,” said the report.
Walters said: “Technology decisions now sit at the centre of trust, resilience and customer experience. 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.
“This year’s findings show a sector moving decisively beyond experimentation and into execution.”
Banks are seeing increasing returns on their AI investments. According to research by Lloyds Banking Group, 59% of firms reported AI-driven productivity gains in 2025, compared with 32% in 2024.
In its Financial institutions sentiment survey 2025, Lloyds found that 21% of respondents believe AI is directly driving business growth, compared with 8% in the 2024 survey.
Meanwhile, a third (33%) of respondents said AI is enhancing customer experiences, up from 14% in the previous survey. The same number said they have deeper customer insights through AI, compared with 18% the previous year.
