Fin-Tech Innovations and Financial Performance in the Pakistani Banking Sector: The Mediating Role of Knowledge Assets

Abstract

This research examines the influence of Fin-tech Innovation alongside the role of Knowledge Assets as mediators upon the Financial Performance of the banks in Pakistan. The banking environment is speedily evolving. Within this evolution, digital transformation has become an integral part of the workflows, marking it essential for boosting efficiency, encouraging profitability and competitiveness. This study comprises the data set of 13 banks over a period of 10 years, having a total of 130 observations. Earnings per share was used as a proxy for the dependent variable Financial Performance, while Digitalization Score was used as a proxy of independent variable Fin-tech Innovation. Quantitative approaches were applied in order to test our hypotheses results. The finding revealed that Fin-tech innovations have a statistically significant and positive impact on Financial Performance in the banking industry. Additionally, the mediation analysis results portrayed a partial mediation where Knowledge Assets partially mediated the relation between Fin-tech Innovation and Financial Performance of the banks. Hence, the study concludes that through strengthening Fin-tech adoption and developing strategies along with utilizing the Knowledge Assets, the Pakistani banking sector can sustain growth and gain competitive advantage in the fast paced and evolving markets.

References

Abbas, N., & Khan, H. G. M. (2024). The role of financial literacy and technology savviness on FinTech adoption in traditional banking: The mediating role of trust in technology. Pakistan Journal of Humanities and Social Sciences, 12(4), 3183–3191.

Ahmad, M., & Ahmed, N. (2016). Testing the relationship between intellectual capital and a firm's performance: An empirical investigation regarding financial industries of Pakistan. International Journal of Learning and Intellectual Capital, 13(4), 250–266. https://doi.org/10.1504/IJLIC.2016.080303  

Ahmed, N., Ahmad, M., & Ahmed, M. (2015). Knowledge management and firm performance: An empirical investigation of banking sector of Pakistan. Journal of Management Sciences, 2(2), 146–162.

Alhassan, A. L., & Asare, N. (2016). Intellectual capital and bank productivity in emerging markets: Evidence from Ghana. Management Decision, 54(3), 655–676. https://doi.org/10.1108/MD-01-2015-0025

Aslam, E., Rehman, A., & Iqbal, A. (2023). The mediating role of intellectual capital in corporate governance and financial efficiency in Islamic banks. Corporate Governance: The International Journal of Business in Society, 24(1), 1–19. https://doi.org/10.1108/CG-05-2023-0212

Asutay, M., & Ubaidillah. (2023). Examining the impact of intellectual capital performance on financial performance in Islamic banks. Journal of the Knowledge Economy, 15, 1–26. https://doi.org/10.1007/s13132-023-01373-4

Awan, A., & Parveen, J. (2023). Relationship between financial innovations and the performance of commercial banks. Journal of Financial Services Marketing, 29(3), 1002–1016. https://doi.org/10.1057/s41264-023-00239-8

Baig, M. H., Xu, J., Shahzad, F., & Ali, R. (2024). Revealing the potential of FinTech innovation through knowledge assets: A study of firm financial performance. International Journal of Innovation Science, 17(3), 650–682. https://doi.org/10.1108/IJIS-08-2023-0165

Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120. https://doi.org/10.1177/014920639101700108

Bontis, N., Bart, C. K., Nazari, J. A., & Herremans, I. M. (2007). Extended VAIC model: Measuring intellectual capital components. Journal of Intellectual Capital, 8(4), 595–609. https://doi.org/10.1108/14691930710830774

Bosworth, D., & Rogers, M. (1998). Research and development, intangible assets and the performance of large Australian companies (Melbourne Institute Working Paper No. 2/98). Melbourne Institute of Applied Economic and Social Research.

Chhaidar, A., Abdelhedi, M., & Abdelkafi, I. (2023). The effect of financial technology investment level on European banks' profitability. Journal of the Knowledge Economy, 14(3), 2959–2981. https://doi.org/10.1007/s13132-022-00987-5

Çilingir Kara, C. (2025). The effect of R&D intensity and financial slack on firm performance: A study on the companies with the highest R&D expenditures in Türkiye. Ekonomi Politika ve Finans Araştırmaları Dergisi, 10(4), 1366–1381.

Dichev, I. D., & Tang, V. W. (2009). Earnings volatility and earnings predictability. Journal of Accounting and Economics, 47(1–2), 160–181. https://doi.org/10.1016/j.jacceco.2008.09.005

Erdogan, M., & Yamaltdinova, A. (2019). A panel study of the impact of R&D on financial performance: Evidence from an emerging market. Procedia Computer Science, 158, 541–545. https://doi.org/10.1016/j.procs.2019.09.087

Frankel, R., & Litov, L. (2009). Earnings persistence. Journal of Accounting and Economics, 47(1–2), 182–190. https://doi.org/10.1016/j.jacceco.2008.11.008

Frost, J., Gambacorta, L., Huang, Y., Shin, H. S., & Zbinden, P. (2019). BigTech and the changing structure of financial intermediation. Economic Policy, 34(100), 761–799. https://doi.org/10.1093/epolic/eiaa003

Gomber, P., Kauffman, R. J., Parker, C., & Weber, B. W. (2018). On the FinTech revolution: Interpreting the forces of innovation, disruption, and transformation in financial services. Journal of Management Information Systems, 35(1), 220–265. https://doi.org/10.1080/07421222.2018.1440766

Haddad, C., & Hornuf, L. (2019). The emergence of the global FinTech market: Economic and technological determinants. Small Business Economics, 53(1), 81–105. https://doi.org/10.1007/s11187-018-9991-x

Hassan, M. S., Siddiqa, A., & Waseem, M. (2025). Impact of FinTech adoption, green innovation, and green finance on environmental performance: Evidence from Pakistani Islamic banks. Islamic Banking and Finance Review, 12(1), 18–42.

Hermuningsih, S., Sari, P., & Rahmawati, A. (2023). The moderating role of bank size: Influence of fintech and liquidity on financial performance. Jurnal Siasat Bisnis, 27(1), 106–117. https://doi.org/10.20885/jsb.vol27.iss1.art8

Isaac, O. I., Adeniran, A. A., & Omotayo, F. I. (2023). The effect of FinTech services on financial performance of Nigerian deposit money banks. International Journal of Research and Innovation in Social Science, 7(4), 1–15.

Khan, A., Asif, M. U., & Parveen, S. (2024). Impact of FinTech on the financial performance of the Pakistani banking sector: A comparative study of Islamic and conventional banks. Foundation University Journal of Business and Economics, 9(2), 1–18.

Kim, T. H., & White, H. (2004). On more robust estimation of skewness and kurtosis. Finance Research Letters, 1(1), 56–73. https://doi.org/10.1016/j.frl.2003.12.001

Kriebel, J., & Debener, J. (2019). The effect of digital transformation on bank performance. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3464960

Marr, B., & Schiuma, G. (2001). Measuring and managing intellectual capital and knowledge assets in new economy organisations. In D. Neely (Ed.), Handbook of performance measurement (pp. 1–10). Gee Publishing.

Najaf, K., Sinnadurai, P., Devi, K. S., & Dhiaf, M. M. (2022). Does electronic economics matter to financial technology firms? Electronic Commerce Research, 24, 393–426. https://doi.org/10.1007/s10660-022-09593-6

Ohlson, J. A., & Juettner-Nauroth, B. E. (2005). Expected EPS and EPS growth as determinants of value. Review of Accounting Studies, 10(2–3), 349–365. https://doi.org/10.1007/s11142-005-1535-3

Pulic, A. (2000). VAIC™: An accounting tool for intellectual capital management. International Journal of Technology Management, 20(5–8), 702–714. https://doi.org/10.1504/IJTM.2000.002891

Rahaman, M. M. (2011). Access to financing and firm growth. Journal of Banking & Finance, 35(3), 709–723. https://doi.org/10.1016/j.jbankfin.2010.09.005

Rahman, M. M., & Howlader, M. S. (2022). The impact of research and development expenditure on firm performance and firm value: Evidence from a South Asian emerging economy. Journal of Applied Accounting Research, 23(4), 836–856. https://doi.org/10.1108/JAAR-02-2021-0044

Rastogi, S. (2015). The financial crisis of 2008 and stock market volatility: Analysis and impact on emerging economies pre and post crisis. Afro-Asian Journal of Finance and Accounting, 4(4), 443–459. https://doi.org/10.1504/AAJFA.2015.074291

Raza, M., & Khan, A. B. (2024). Synergistical effects of knowledge management and FinTech adoption on sustainable performance of banks in Pakistan: Moderating role of digital literacy. Journal of Political Stability Archive, 3(1), 295–314.

Rehman, S. U., Ashfaq, K., Bresciani, S., Giacosa, E., & Mueller, J. (2021). Nexus among intellectual capital, interorganizational learning, industrial Internet of Things technology and innovation performance: A resource-based perspective. Journal of Intellectual Capital, 24(2), 509–534. https://doi.org/10.1108/JIC-09-2020-0328

Richard, P. J., Devinney, T. M., Yip, G. S., & Johnson, G. (2009). Measuring organizational performance: Towards methodological best practice. Journal of Management, 35(3), 718–804. https://doi.org/10.1177/0149206308330560

Rios-Vazquez, S., & Portela-Maseda, M. (2026). FinTech empirical studies: A state-of-the-art systematic literature review. Financial Innovation, 12(1), 1–31.

Romer, P. M. (1986). Increasing returns and long-run growth. Journal of Political Economy, 94(5), 1002–1037. https://doi.org/10.1086/261420

Saleem, Q., Ahmed, B., & Ahmad, T. (2024). The role of intellectual capital in firm's financial performance in Pakistan. Journal of Development and Social Sciences, 5(3), 54–63.

Sardo, F., & Serrasqueiro, Z. (2018). Intellectual capital, growth opportunities, and financial performance in European firms: Dynamic panel data analysis. Journal of Intellectual Capital, 19(4), 747–767. https://doi.org/10.1108/JIC-07-2017-0099

Smith, M. E. (2003). Another road to evaluating knowledge assets. Human Resource Development Review, 2(1), 6–25. https://doi.org/10.1177/1534484303251025

Stern, J. M. (1970). The case against maximizing earnings per share. Financial Analysts Journal, 26(5), 107–112. https://doi.org/10.2469/faj.v26.n5.107

Subhani, I., Iqbal, J., & Jamil, F. (2022). Relevance of earning metrics: A comparative analysis of EPS and CFO on the Pakistan Stock Exchange. Journal of Business and Economic Options, 5(4), 16–25.

Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18(7), 509–533.

Usman, M., Khan, Q. M., Fatima, K., & Khan, M. A. (2026). The moderating role of ESG scores on the relationship between FinTech adoption and financial performance: Evidence from Pakistani commercial banks. Qualitative Research Journal for Social Studies, 3(1), 483–492.

VanderPal, G. (2015). Impact of R&D expenses on corporate financial performance. Journal of Accounting and Finance, 15(7), 135–149.

Wang, J.-H., Wu, Y.-H., Yang, P.-Y., & Hsu, H.-Y. (2023). Sustainable innovation and firm performance driven by FinTech policies: Moderating effect of capital adequacy ratio. Sustainability, 15(11), 8572. https://doi.org/10.3390/su15118572

Wang, Y., Yu, X., Yao, Q., Lu, Y., Che, W., Jiang, J., & Chen, S. C.-I. (2024). Assessing the impact of financial technology innovations on the sustainable profitability of listed commercial banks in China. FinTech, 3(3), 337–348. https://doi.org/10.3390/fintech3030018

Xu, J., & Li, J. (2022). The impact of intellectual capital on firm performance: A study of Chinese listed companies. Journal of Intellectual Capital, 23(3), 523–542. https://doi.org/10.1108/JIC-09-2020-0322

Zhang, L., Yu, Q., Jin, Z., & Xu, J. (2021). Do intellectual capital elements spur firm performance? Evidence from the textile and apparel industry in China. Mathematical Problems in Engineering, 2021, Article 7332885. https://doi.org/10.1155/2021/7332885

Zhao, J., Li, X., Yu, C.-H., Chen, S., & Lee, C.-C. (2022). Riding the FinTech innovation wave: FinTech, patents, and bank performance. Journal of International Money and Finance, 122, 102552. https://doi.org/10.1016/j.jimonfin.2021.102552