SMEs hit AI adoption wall as scaling lags despite strong uptake

An AWS study showed firms struggle with integration, governance and operationalisation of AI.

About three in four small and medium enterprises (SMEs) in the financial services sector are using artificial intelligence (AI), but fewer than a third of adopters have reached more advanced use, according to research commissioned by Amazon Web Services (AWS).

The “Unlocking Singapore’s AI Potential” report, conducted by Strand Partners, also found adoption rates of 61% in healthcare and 57% in manufacturing. Amongst adopters, 29% in financial services, 23% in manufacturing, and 16% in healthcare reported more advanced use, such as combining multiple tools or building their own systems.

“Singapore's SMEs have moved decisively on AI,” said Priscilla Chong, Managing Director for Singapore at AWS. “The next step is making that investment sustainable by integrating AI across functions so it shifts from a point solution to a core part of how the businesses run.”

The report points to different bottlenecks by sector. In financial services, 38% of SMEs cited internal approval and sign-off as the longest stage, compared with 30% in healthcare. In manufacturing, 37% pointed to systems integration with existing workflows.

“These are different pressure points, but they signal progress. Businesses have moved past the starting line. Now the work is about shaping the culture and processes to match the ambition,” Chong said.

At least half of SMEs said humans retain or share final decision-making with AI systems. However, about 30% reported having a clearly defined person responsible for AI accuracy.

Six in ten SMEs said they would face moderate or significant disruption if that person left whilst about 10% said their AI initiatives would likely stop.

“The companies getting this right tend to share a common approach: a dual strategy,” Chong said, describing separate environments for experimentation and for production use with stricter controls.

AI use is also extending beyond IT teams to functions such as marketing, human resources, and operations. At the same time, under 40% of SMEs said they do not have a formal process for escalating AI outputs that employees question.

“The opportunity is clear. Businesses that build clear, simple escalation routes… will move faster and get more from their AI investments,” Chong said.

Around two-thirds of SMEs that used industry-specific guidance said they had to adapt it significantly. Only 20% of healthcare SMEs, 17% in financial services, and 13% in manufacturing said the guidance was directly applicable.

“A financial services SME navigating internal approval bottlenecks needs a different playbook from a manufacturer working through systems integration,” Chong said.

SME AI adoption is already being buoyed by industry players with DBS Bank launching its Spark GenAI programme, aimed at supporting these businesses. Participating firms will receive advisory and training support based on their level of readiness, including workshops by the Infocomm Media Development Authority (IMDA).

Firms will also be able to access more than 16,000 AI solution providers through Infocomm Media Development Authority’s (IMDA) Open Innovation Platform and tap a pre-approved list of AI-enabled solutions. Eligible SMEs can receive grant support of up to 50% of qualifying costs from Enterprise Singapore.

DBS said it has also introduced an “Implementing AI for Impact” playbook, alongside financing options including cyber protection coverage, to support deployment.