FinTech Disruption and Transformation in Banking: Mediating Effect of Artificial Intelligence

Abstract

This study investigates the mediating role of Artificial Intelligence (AI) in the relationship between FinTech disruption and banking transformation within the context of emerging financial regions in Pakistan. As FinTech innovations increasingly challenge traditional banking systems, AI has emerged as a strategic enabler for institutions aiming to adapt and evolve. Utilizing a quantitative research design, data were collected from 350 banking professionals through a structured questionnaire. Statistical analyses, including correlation, regression, and mediation (via PROCESS Macro), revealed that both FinTech disruption and AI significantly contribute to banking transformation. More importantly, AI was found to positively mediate the relationship between FinTech disruption and banking transformation, indicating that banks can only fully leverage FinTech-driven innovation by adopting AI technologies. The study provides practical implications for financial institutions in underdeveloped areas, emphasizing the need for strategic investment in AI to remain competitive and agile in the face of technological disruption.

Keywords: FinTech Disruption, Artificial Intelligence, Banking Transformation, Mediation, Digital Banking, Emerging Markets, Financial Innovation