European spending on artificial intelligence (AI) is estimated to reach more than US$7 billion in 2019 and to almost triple over the next four years, growing at a 32% CAGR. European AI spending is forecast to reach over US$21 billion in 2023, according to the IDC.
Banking, retail, and discrete manufacturing will be the industries with the highest spending in AI systems by 2023, absorbing 39% of spending. Healthcare remains an attractive market for AI and although many hospitals are piloting projects and have not started full implementation, increasing investments in AI-enabled diagnosis and treatment systems will support fast growth in spending, which will accelerate at a 38% five-year CAGR across the health sector.
Investments in AI are largely fueled by increasing efforts around customer experience and digital transformation, as companies are focusing on providing empathy at scale while using intelligent approaches to scale production and processes and allocate attention among employees.
Product recommendation is expected to be one of the three fastest-growing use cases through 2023, showing that European companies have acknowledged the importance of embedding customer centricity and AI into their business models. In particular, retailers are moving away from traditional product recommendation and are adopting customer-centric intelligent approaches that enable them to gather insight into customers and provide personalized recommendations based on individual preferences.
IDC's data estimates that more than half of the spending on AI by 2023 will be driven by the UK, Germany, and France, while almost a third of the same spending will be driven by the rest of Western Europe (including Austria, Belgium, Denmark, Finland, Greece, Ireland, the Netherlands, Norway, Portugal, Sweden, and Switzerland). Italy and Spain only account for a small portion of the spending.
The UK, Germany, and France have AI-focused start-up hubs in London, Berlin, and Paris, and will account for a large proportion of future investments, especially in fintech, health tech, and marketing and advertising. These countries also have large AI investors that provide incentives and accelerated growth for start-ups and bigger tech companies hoping to digitally transform and disrupt the market using AI.
Even if Central and Eastern Europe (CEE) has a relatively small market share in terms of AI spending within Europe as a whole (6.5% in 2018), organizations are increasingly adopting AI as it becomes a key part of their digital transformation. The biggest spenders for AI systems are banking and manufacturing. The main AI projects in finance involve automation of customer service, fraud protection, and optimization of processes. Improving production and quality control and performing preventative maintenance are driving AI investments in manufacturing in CEE.
