Impact of Globalisation, AI Adoption, and FinTech Integration on Banking Sector Performance and Customer Satisfaction in Post-COVID Pakistan (Article)

This study aims to investigate the combined impact of Globalisation Index (GI), AI Adoption Rate (AIA), and FinTech Integration (FI) on the financial performance and customer satisfaction of major banks in post-COVID Pakistan. Grounded in Globalisation Theory, Technological Adoption Theory, and Financial Resilience Theory. Quantitative with panel data regression analysis. Major Banks in Pakistan over the period 2010-2023, including both Islamic and conventional banks. Secondary data from annual reports, globalisation indices, and regulatory reports. Descriptive statistics, normality tests, correlation analysis, heteroscedasticity tests, and panel data regression. Findings indicate that GI, AIA, and FI significantly influence both financial performance and customer satisfaction. Specifically, FI showed the strongest positive impact, followed by AIA and GI. The models for financial performance and customer satisfaction achieved R² values of 0.648 and 0.715 respectively, indicating substantial explanatory power. This study demonstrates that enhancing globalisation efforts, adopting AI technologies, and integrating FinTech solutions are crucial strategies for improving financial performance and customer satisfaction in Pakistan’s banking sector post-COVID. This study integrates theories of globalisation, technological adoption, and financial resilience to offer a comprehensive analysis of contemporary banking trends in Pakistan.

 Introduction

The global banking sector is undergoing significant transformations driven by the forces of globalisation, artificial intelligence (AI), and financial technology (FinTech). These changes have been particularly pronounced in the wake of the COVID-19 pandemic, which has accelerated the adoption of digital technologies and reshaped financial services globally. In Pakistan, these trends are redefining traditional banking paradigms, influencing financial performance, customer service strategies, and overall financial resilience.

Globalisation, characterised by increased interconnectedness and the integration of financial markets, has been a double-edged sword for Pakistani banks. On one hand, it has opened up new opportunities for growth by expanding access to international capital and markets. This has allowed banks to diversify their portfolios and tap into global financial resources, enhancing their capacity to support economic development (Smith, 2023).  On the other hand, globalisation has also exposed Pakistani banks to heightened risks, including economic volatility and regulatory challenges that necessitate adaptive strategies to ensure stability and compliance (Smith, 2023).

AI is transforming the banking sector by enhancing operational efficiencies, enabling data-driven decision-making, and personalising customer interactions. AI applications in banking range from predictive analytics, which helps in risk management and fraud detection, to chatbots that provide personalised customer service (Choudhury, et al. 2022). In Pakistan, banks are increasingly adopting AI technologies to streamline their operations, reduce costs, and improve customer satisfaction. AI-driven solutions are helping banks to better understand customer needs, offer tailored products and services, and maintain a competitive advantage in a rapidly evolving financial landscape (Choudhury, et al. 2022).

FinTech innovations, encompassing digital payment solutions, blockchain technology, and peer-to-peer lending platforms, are revolutionising service delivery models in the banking sector. In Pakistan, FinTech is playing a critical role in promoting financial inclusion by providing accessible financial services to unbanked and underbanked populations (Jones & Patel, 2021). Digital payment solutions are simplifying transactions, while blockchain technology is enhancing transparency and security in financial operations. Moreover, peer-to-peer lending platforms are offering alternative financing options, thereby expanding credit access and supporting entrepreneurial activities (Jones & Patel, 2021).

The COVID-19 pandemic has been a catalyst for digital transformation in the banking sector. In response to lockdowns and social distancing measures, banks in Pakistan rapidly pivoted towards digitalisation to maintain operational continuity and meet evolving customer expectations (Ali & Rahman, 2021). The pandemic underscored the importance of resilient digital infrastructures and highlighted the potential of digital banking solutions to enhance service delivery, even in times of crisis. As a result, many banks accelerated their investments in AI and FinTech, leveraging these technologies to enhance their digital capabilities and improve their responsiveness to customer needs (Ali & Rahman, 2021).

This study aims to explore the interplay of globalisation, AI, and FinTech in shaping the post-COVID banking landscape in Pakistan. The research addresses the following questions:

1. How has globalisation influenced financial performance and operational strategies in the post-COVID banking sector in Pakistan?
2. What specific roles does AI play in enhancing operational efficiency, risk management, and financial performance in Pakistani banks?
3. How is FinTech integration transforming customer service and contributing to financial resilience in Pakistani banks?
4. What are the combined effects of globalisation, AI, and FinTech on overall banking sector performance and customer satisfaction in Pakistan?

The research addresses the following objectives:

1. To analyse the impact of globalisation on financial performance and operational strategies in the post-COVID banking sector in Pakistan.
2. To examine the role of AI in improving operational efficiency, risk management, and financial performance in Pakistani banks.
3. To investigate the effects of FinTech integration on customer service and financial resilience in the banking sector.
4. To identify the combined impact of globalisation, AI, and FinTech on overall banking sector performance and customer satisfaction.

This study focuses on major banks in Pakistan, analysing data from 2019 to 2023. It examines the influence of globalisation indices, AI adoption rates, and FinTech integration on financial performance metrics and customer satisfaction levels. The study employs quantitative methods, including regression analysis and hypothesis testing, to provide robust insights into these dynamics.

The integration of Pakistani banks into the global financial system has brought about significant changes in how these institutions manage risk and seize opportunities. Global financial networks have expanded the reach of Pakistani banks, enabling them to access international markets and diversify their investment portfolios (Smith, 2023). However, this integration also requires banks to adopt robust risk management practices to mitigate the effects of global economic volatility and comply with international regulatory standards. Effective risk management is crucial for maintaining financial stability and building resilience against external shocks.

Globalisation has facilitated increased capital flows into Pakistan’s banking sector, providing banks with additional resources to support economic growth. These capital inflows have allowed banks to finance large-scale infrastructure projects, support small and medium-sized enterprises (SMEs), and promote innovation in financial services (Smith, 2023). By leveraging global financial resources, Pakistani banks can enhance their competitiveness and contribute to the country’s economic development.

AI-powered predictive analytics tools are transforming risk management practices in the banking sector. These tools allow banks to analyse large volumes of data, identify patterns, and predict potential risks, thereby enhancing their ability to make informed decisions (Choudhury, et al. 2022). In Pakistan, banks are adopting AI-driven analytics to improve credit risk assessment, detect fraud, and optimise investment strategies. By leveraging AI, banks can enhance their risk management capabilities and improve their financial performance.

AI-powered chatbots are revolutionising customer service in the banking sector by providing personalised and efficient interactions. Chatbots can handle a wide range of customer inquiries, from account balance checks to transaction queries, offering 24/7 support and reducing the need for human intervention (Choudhury, et al. 2022). In Pakistan, banks are increasingly deploying chatbots to enhance customer service, improve response times, and provide tailored financial advice. The use of AI in customer service not only improves customer satisfaction but also allows banks to allocate their resources more effectively.

FinTech innovations are driving the adoption of digital payment solutions in Pakistan, making financial transactions more convenient and accessible. Mobile payment platforms, digital wallets, and online banking services are enabling individuals and businesses to conduct transactions seamlessly, reducing the reliance on cash and traditional banking channels (Jones & Patel, 2021). These digital payment solutions promote financial inclusion by providing access to financial services for underserved populations, including those in remote and rural areas.

Blockchain technology is enhancing transparency and security in financial transactions, addressing issues such as fraud and data manipulation. In Pakistan, banks are exploring the use of blockchain to streamline processes, reduce operational costs, and improve the integrity of financial records (Jones & Patel, 2021). By adopting blockchain technology, banks can enhance their operational efficiency and build trust with their customers.

Peer-to-peer (P2P) lending platforms are offering alternative financing options, providing borrowers with access to credit without relying on traditional banks. These platforms connect borrowers directly with lenders, facilitating loans at competitive interest rates and expanding credit access for individuals and SMEs (Jones & Patel, 2021). In Pakistan, P2P lending is gaining traction as a viable financing solution, supporting entrepreneurial activities and fostering economic growth.

The COVID-19 pandemic has underscored the importance of digitalisation in the banking sector. As physical branches faced restrictions due to lockdowns and social distancing measures, banks in Pakistan rapidly adopted digital solutions to ensure operational continuity and meet customer needs (Ali & Rahman, 2021). Online banking services, mobile banking apps, and digital payment platforms became essential tools for conducting financial transactions, highlighting the need for resilient digital infrastructures.

In response to the challenges posed by the pandemic, many banks accelerated their investments in digital technologies, including AI and FinTech solutions. By enhancing their digital capabilities, banks were able to provide uninterrupted services, improve customer experiences, and maintain business continuity (Ali & Rahman, 2021). The pandemic served as a catalyst for digital transformation, driving innovation and reshaping the future of banking in Pakistan.

To capitalise on the opportunities presented by globalisation, Pakistani banks must adopt strategic initiatives that enhance their global competitiveness. This includes expanding their presence in international markets, forging strategic partnerships, and adopting best practices in risk management and compliance (Smith, 2023). By leveraging globalisation, banks can access new growth opportunities and strengthen their position in the global financial landscape.

AI presents significant opportunities for banks to enhance their operational efficiency and improve decision-making. By investing in AI-driven solutions, banks can streamline processes, reduce operational costs, and offer personalised services that meet customer needs (Choudhury, et al. 2022). Embracing AI technologies will allow banks to stay competitive and adapt to the evolving financial environment.

The integration of FinTech solutions is crucial for driving innovation and improving financial inclusion in Pakistan. Banks should collaborate with FinTech firms to develop innovative products and services that cater to diverse customer segments (Jones & Patel, 2021). By fostering a culture of innovation, banks can enhance their service delivery models and contribute to the growth of the digital economy.

The convergence of globalisation, AI, and FinTech is revolutionising the banking sector in post-COVID Pakistan. These forces are reshaping traditional banking paradigms, driving operational efficiencies, and enhancing customer experiences. The COVID-19 pandemic has accelerated the adoption of digital technologies, highlighting the importance of resilient digital infrastructures and innovative financial solutions. This study aims to provide a comprehensive analysis of how globalisation, AI, and FinTech interact to transform the banking sector in Pakistan, offering insights into strategic imperatives for banks navigating a globalised, technology-driven economy.

The study’s originality lies in its comprehensive approach to examining the combined impact of globalisation, AI, and FinTech on Pakistan’s banking sector in the post-COVID era. While existing research has explored these factors separately, this study uniquely integrates them, providing a holistic view of how they interact to influence banking operations, financial performance, and customer service. This innovative approach fills a significant gap in the literature, particularly within the context of a developing country like Pakistan.

The significance of the study is evident in its potential to guide policymakers, banking professionals, and technology developers in understanding the strategic imperatives required for navigating a globalised, technology-driven banking environment. By analysing how these forces work together, the study offers actionable insights that can help banks improve their competitiveness, resilience, and customer satisfaction in an increasingly digital world.

The research problem addresses the underexplored intersection of globalisation, AI, and FinTech in shaping the future of banking in Pakistan. The rapid digital transformation triggered by the COVID-19 pandemic has created both challenges and opportunities for the banking sector. However, the lack of a comprehensive analysis of how these factors jointly influence banking performance and customer experiences leaves a critical gap in the current understanding.

The rationale of the study is grounded in the need to provide a more integrated perspective on the post-COVID banking landscape. As globalisation continues to expand the reach of Pakistani banks, the adoption of AI and FinTech becomes increasingly essential for maintaining competitiveness and ensuring financial resilience. This study aims to provide a clear roadmap for banks to leverage these forces effectively, ensuring their sustainability and success in a rapidly changing environment.

To identify the combined impact of globalisation, AI, and FinTech on the banking sector.

The banking sector in Pakistan faces unprecedented challenges and opportunities in the wake of the COVID-19 pandemic. Globalisation, AI, and FinTech are key drivers of change, yet their combined effects on banking operations, financial performance, and customer service remain underexplored. This study aims to fill this gap by providing a comprehensive analysis of how these factors interact to revolutionise the banking sector in post-COVID Pakistan.

The theoretical framework combines three key theories: Globalisation Theory, Technological Adoption Theory, and Financial Resilience Theory. Globalisation Theory helps explain how banks can capitalise on global economic integration to enhance market reach and diversify their portfolios. Technological Adoption Theory focuses on understanding the factors driving the adoption of AI and FinTech, such as perceived usefulness and organisational readiness. Financial Resilience Theory emphasises the importance of risk management and adaptability in ensuring long-term sustainability in the face of global economic volatility and technological disruption. Together, these theories provide a comprehensive lens through which to examine the complex dynamics at play in Pakistan’s post-COVID banking sector.

Research Gap and Objectives: existing studies on globalisation, AI, and FinTech often examine these factors separately, overlooking their combined impact on the banking sector’s financial performance and customer satisfaction, particularly in post-COVID Pakistan. This study addresses this gap by analysing their collective influence on financial resilience, operational efficiency, and service innovation in Pakistan’s banks. Key objectives include evaluating globalisation’s impact on financial strategies, AI’s role in enhancing operational performance, and FinTech’s contribution to financial inclusion.

Significance for Global Audiences: the findings offer strategic insights for global stakeholders, showcasing how emerging economies can leverage globalisation, AI, and FinTech to build resilient, customer-focused banking systems in a post-pandemic world.