How Environmental, Social, and Governance Mediates the Impact of FinTech Investments on Bank Performance in Gulf Countries

Abstract

This study examines the FinTech factors affecting bank performance in Gulf countries. The study followed a causal research design employing data from 2010 to 2023. The study unit of analysis is twelve banks in  Kuwait, Qatar, the UAE, and Saudi Arabia. The study also uses PLS-SEM because of its advantage in examining mediating pathways that might be obscured in simpler regression analyses. According to the study’s findings, FinTech factors such as mobile banking applications (MBA) and GDP per capita variables have a negative, statistically significant effect on bank performance. On the other hand, GDP per capita has not statistically positively affected both ROA and ROE of bank performance. Moreover, both MBA and GDP per capita directly enhance environmental, social, and governance (ESG) performance. The ESG does affect ROE. Besides, ESG plays a mediating role by strengthening the relationship between MBA, GDP per capita, and ROE, as it enhances banks ESG performance.  The current study fills a gap in the body of literature since it considers previously overlooked factors that affect bank performance, i.e., FinTech variables and the mediating role of ESG on their effects on bank performance. The resulting policy implication is that banks in Gulf countries benefit most from investing in FinTech innovation since they can enhance operational efficiency and support sustainability efforts by driving better ESG performance, ultimately fostering long term stability and growth in the banking sector.