AI in Public Services: What Opportunities for Europe’s Regions?

Across Europe, regional authorities are at the forefront of delivering essential public services, from mobility and education to healthcare and environmental management. As governments continue their digital transformation, Artificial Intelligence (AI) is becoming the next frontier for regions seeking to make services more efficient, responsive, and citizen focused.

A new EU report, “Public Sector Services and the AI Opportunity,” highlights how regional and local administrations can harness AI responsibly while supporting the growth of regional innovation ecosystems.

AI for More Effective and Citizen-Centred Services

AI offers practical tools to help public administrations operate more efficiently by automating routine processes, providing advanced data analysis, and assisting with decision-making. The most successful applications happen when AI’s strengths are aligned with the real-world needs of the public sector and citizens.  

Examples across Europe show that AI is already making a difference at the local level:

• In Denmark, the chatbot Muni assists residents in 37 municipalities in finding answers to their questions about local services.
• In Verona, Italy, data from sensors at the busy Porta Nova intersection feed an AI system to better understand traffic patterns and manage congestion.
• In Estonia, the Kratt framework connects citizens to AI-powered public services through a single conversational interface.
• In Ireland, AI tools support urban planning and fraud detection in social protection systems.

These cases demonstrate how AI can help regional and municipal authorities deliver faster, more accurate, and more transparent services — provided the technology is introduced with clear objectives, robust infrastructure, and strong governance.

Balancing Innovation and Responsibility

For regions, the adoption of AI must strike a careful balance between innovation and responsibility. The report highlights key challenges that public authorities need to address:

• Data and infrastructure gaps: limited access to interoperable, high-quality data and computing resources.
• Skills shortages: a need for capacity-building among civil servants to manage and evaluate AI solutions.
• Ethical and legal considerations: ensuring fairness, transparency, and compliance with the EU’s AI Act.
• Fragmentation: local administrations often pilot promising tools that remain isolated rather than scaled across regions.

Addressing these issues is essential to ensure AI adoption strengthens public trust and supports inclusive regional development.

Strengthening the Regional GovTech Ecosystem

The report finds that Europe’s GovTech ecosystem, the startups and SMEs developing digital solutions for the public sector, is rapidly expanding. Half of all GovTech investment deals in 2024 were AI-related, showing strong investor confidence.

However, AI startup activity remains limited in some policy areas that matter most to regions, such as transport, environment, and public administration. Regional authorities can play a decisive role in closing this gap by creating favourable conditions for local innovators. This includes participating in testbeds and regulatory sandboxes, facilitating pilot projects, and linking regional innovation strategies to public sector challenges.

Innovation Procurement: A Key Tool for Regions

One of the most promising levers for regional authorities is innovation-oriented public procurement. Each year, public authorities in the EU spend around €2 trillion on goods and services, nearly 14% of the EU’s GDP.

By directing even a small part of this spending towards innovative and AI-enabled solutions, regional governments can both improve public service delivery and stimulate their local economies. The report highlights tools such as:

• Pre-Commercial Procurement (PCP): supporting R&D and testing of AI solutions still under development.
• Public Procurement of Innovative Solutions (PPI): scaling up technologies that are close to market readiness.

Using these mechanisms can help regions pilot responsible AI solutions while offering local startups a pathway to grow and collaborate with public institutions.

A Call to Action for Europe’s Regions

AI offers regional authorities a unique opportunity to modernise public services, strengthen data-driven policymaking, and support the competitiveness of local innovation ecosystems. To fully seize this potential, regions can:

• Invest in digital and data infrastructure,
• Build staff capacity and literacy around AI,
• Create partnerships with local innovators and research centres,
• Use procurement strategically to test and scale new solutionsm and
• Promote transparent, ethical, and human-centric AI applications.

By combining innovation with responsibility, Europe’s regions can help ensure that AI serves not only as a tool for efficiency but as an instrument for better governance and stronger communities.

Read the full report for more insights into what AI means for Europe’s public sector.

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Startup Europe Regions Network is part of the StepUpStartUps consortium. This initiative supports the European Commission with evidence-based reports on the key dynamics, challenges and opportunities within Europe’s startup ecosystem.