Artificial Intelligence, Financial Education, and Credit Risk: Evidence from European Banks

This paper investigates the impact of artificial intelligence (AI) adoption and financial education on credit risk, measured by non-performing loans ratio (NPL), using a panel of nine Systemically Important Banks in Europe. Textual data extracted from annual reports are used to construct proxies for AI intensity and financial education intensity targeted at clients. Employing a fixed-effects panel regression with bank and year controls, the results indicate that both AI adoption and client financial education are significantly associated with lower NPL ratios. These findings suggest that technological innovation and financial literacy initiatives complement each other in the association with credit risk reduction. The study contributes to the literature by highlighting the role of banks not only as adopters of advanced technologies but also as promoters of client financial capability, with implications for financial stability, financial inclusion, and risk management practices.