AI-Driven Financial Innovation and Sustainable Performance: The Mediating Role of Customer Trust and Moderating Effect of Regulatory Governance

Abstract

This research aimed that how AI-based financial innovation can affect sustainable financial performance and in this context focuses on the mediating variables of customer trust and the moderating variables of regulatory governance in the financial sector of Pakistan. Based on the resource-based view, the stakeholder theory, and the institutional theory, a three-wave time-lagged survey was performed on 450 bank and fintech organizations participants. The results show that AI-based financial innovation is a powerful boost in customer confidence, which leads to sustainable financial performance. In addition, the regulatory governance enhances the relationship between the customer trust and performance. The findings point out that technology capabilities are not sufficient, trust and institutional backing are very important in achieving sustainable results. The present work offers theoretical and practical implications on how to develop credible and robust digital financial ecosystems.