From Inclusive Finance to Efficiency: The Transformative Role of Artificial Intelligence in Pakistan's Fintech-Enabled Banks

Abstract

This study investigates the relationship between fintech-based inclusive finance (FBIF) and banking efficiency (BE) while assessing artificial intelligence (AI) as a mediating variable within the banks of Pakistan. A quantitative research design and a positivist philosophy were employed while collecting primary data through a structured questionnaire from banking employees, and then analyzed using partial least squares structural equation modelling (PLS-SEM). Our findings indicate that FBIF enhances BE, and that the relationship becomes stronger when AI is a mediating factor to assist in better decision-making while enhancing the customer experience and increasing risk management as a result of the resource-based view (RBV). The study is located within the banks of Pakistan, but provides implications for financial institutions, policy-makers, and formal financial and banking operations to promote AI as a means of maximizing decision-making across various aspects of inclusive finance while maximizing the overall performance of the financial sector. Finally, the authors are unaware of other empirical studies in this emerging economy context that have explored AI as both a mediating and moderating variable in its proposed relationship with FBIF and BE to show how digitalization enhances banking efficiency.