Effects of Fintech Adoption on Banks’ Financial Performance : A Case of Pakistan

Abstract

This research aims to analyze the effects of fintech adoption on the financial performance of banks (conventional and Islamic) in Pakistan. It focuses on three key dimensions: profitability, operational efficiency and credit risk management of a bank. As the banking sector undergoes a technological and digital transformation, fintech tools such as digital payment systems (mobile banking apps and Raast Pakistan’s instant payment system), digital wallets and branchless banking platforms, QR based payments, internet/mobile banking, and automated credit assessment systems are increasingly reshaping and redefining the traditional banking operations and practices. Studying the annual reports of all major Pakistani commercial banks (Islamic and conventional) over the period 2014–2024, this research uses quantitative methods to analyze the relationship between fintech adoption and core performance indicators, including Return on Assets (ROA), Return on Equity (ROE), operating efficiency (operating expenses divided by operating income), and non-performing loan (NPL) ratios. The results reveal that fintech adoption contributes positively to banks’ profitability and operational efficiency. It also enhancing their ability to manage credit risk through advanced data analytics and faster decision-making processes. Statistical findings, however, show positive impact of fintech adoption on ROE only. The study provides valuable insights for bank managers, policymakers, and regulators on how to leverage fintech as a strategic tool to strengthen institutional (bank) performance and efficiency. Furthermore, it adds to the growing body of literature on fintech’s transformative role in emerging economies, particularly within the context of Pakistan’s evolving financial ecosystem.