THE INFLUENCE OF FINANCIAL TECHNOLOGY ON THE ECONOMIC CAPITAL EFFICACY CONCERNING BANKING RISK IN PAKISTAN, CONSIDERING THE MEDIATING FUNCTIONS OF COMPETITIVE DYNAMICS

Abstract

This research examines the influence of the adoption of financial technology (FinTech) on the economic capital performance of banking institutions within Pakistan, emphasizing the mediating functions of competitive dynamics. In contemporary times, the financial sector of Pakistan has experienced substantial digital metamorphosis, propelled by advancements including mobile banking, electronic wallets, and state-supported payment mechanisms such as RAAST. Financial technology instruments present an array of prospects for financial institutions to augment operational efficacy, mitigate risks, and bolster profitability. Nevertheless, financial institutions are required to traverse a markedly competitive landscape influenced by the emergence of novel market participants, including FinTech startups, as well as the dynamic expectations of consumers. Through the strategic utilization of secondary data obtained from banking reports, industry periodicals, and regulatory bodies, this study employs multiple regression analysis and structural equation modeling (SEM) to investigate the intricate relationships between FinTech adoption, competitive dynamics, and economic performance. The construct of competitiveness is analyzed in its dual capacity as a mediator, which impacts the robustness of the relationship between FinTech and performance, and as a mediator, facilitating the translation of the advantages associated with digital adoption into improved outcomes. The results are anticipated to demonstrate that the adoption of FinTech has a favorable effect on the performance of economic capital, especially within competitive contexts in which financial institutions are motivated to pursue innovation. Moreover, the research endeavor will elucidate the mechanisms through which competitive dynamics function as a conduit for FinTech to enhance financial performance, thereby assisting banking institutions in formulating resilient strategies for digital metamorphosis. This e xamination advances the conversation regarding financial innovation and supplies concrete advice for policymakers and financial establishments in Pakistan to drive growth and secure stability in a rapidly evolving market.