FinTech adoption, Innovation, and performance in Saudi financial institutions

Anas Aljohani; Bilel Jarraya; Anas Aljohani; Bilel Jarraya

doi:10.3934/QFE.2026026

Quantitative Finance and Economics

2026, Volume 10, Issue 4: 665-696. doi: 10.3934/QFE.2026026

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Research article

FinTech adoption, Innovation, and performance in Saudi financial institutions

Anas Aljohani ¹,
Bilel Jarraya ^{2
,
,}

1.
Al-Hait Technical College, Technical and Vocational Training Corporation (TVTC), Al-Hait, 57911, Saudi Arabia
2.
Department of Accounting, College of Business and Economics, Qassim University, Buraidah, 52571, Saudi Arabia

Received: 24 June 2026 Revised: 13 September 2026 Accepted: 27 September 2026 Published: 28 October 2026
JEL Codes: G20, O33, O31, L25, G32

In this study, we examined the relationship between FinTech adoption, Innovation, and firm outcomes in the Saudi financial sector over the period 2018–2023, using a balanced panel of 39 financial institutions, including banks, insurance companies, and other financial service providers, yielding 234 firm-year observations. FinTech adoption was measured using a disclosure-based textual proxy derived from firms' annual reports, while Innovation was captured using an accounting-based proxy combining research and development expenditures and intangible assets. The empirical analysis combined partial least squares structural equation modeling (PLS-SEM) with two-way fixed-effects panel estimation. PLS-SEM was used to examine the hypothesized structural and indirect associations, while fixed-effects estimation provided a more conservative longitudinal assessment by exploiting within-firm variation and accounting for time-invariant firm heterogeneity and common year effects. The results indicated positive associations between FinTech adoption and Innovation, financial performance, and market valuation, with the contemporaneous FinTech associations also supported by the fixed-effects estimates. However, the Innovation-to-outcome relationships identified in PLS-SEM were not statistically significant in the fixed-effects specifications, indicating that the evidence regarding the Innovation-related pathway is sensitive to model specification. Overall, the findings provide stronger support for contemporaneous FinTech-related associations than for a robust Innovation-related intermediary pathway or persistent intertemporal relationships. The results therefore highlight the importance of cautious longitudinal evaluation of FinTech-related activities and firm outcomes in an emerging financial market undergoing rapid digital transformation.
- financial technology (FinTech),
- innovation,
- firm performance,
- PLS-SEM,
- Saudi financial institutions
Citation: Anas Aljohani, Bilel Jarraya. FinTech adoption, Innovation, and performance in Saudi financial institutions[J]. Quantitative Finance and Economics, 2026, 10(4): 665-696. doi: 10.3934/QFE.2026026

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Abstract

In this study, we examined the relationship between FinTech adoption, Innovation, and firm outcomes in the Saudi financial sector over the period 2018–2023, using a balanced panel of 39 financial institutions, including banks, insurance companies, and other financial service providers, yielding 234 firm-year observations. FinTech adoption was measured using a disclosure-based textual proxy derived from firms' annual reports, while Innovation was captured using an accounting-based proxy combining research and development expenditures and intangible assets. The empirical analysis combined partial least squares structural equation modeling (PLS-SEM) with two-way fixed-effects panel estimation. PLS-SEM was used to examine the hypothesized structural and indirect associations, while fixed-effects estimation provided a more conservative longitudinal assessment by exploiting within-firm variation and accounting for time-invariant firm heterogeneity and common year effects. The results indicated positive associations between FinTech adoption and Innovation, financial performance, and market valuation, with the contemporaneous FinTech associations also supported by the fixed-effects estimates. However, the Innovation-to-outcome relationships identified in PLS-SEM were not statistically significant in the fixed-effects specifications, indicating that the evidence regarding the Innovation-related pathway is sensitive to model specification. Overall, the findings provide stronger support for contemporaneous FinTech-related associations than for a robust Innovation-related intermediary pathway or persistent intertemporal relationships. The results therefore highlight the importance of cautious longitudinal evaluation of FinTech-related activities and firm outcomes in an emerging financial market undergoing rapid digital transformation.

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