Moderating Role of Artificial Intelligence in Financial Process of Banking Industry: A Comparative Study of Islamic & Conventional Banks in Pakistan

Abstract

Banking industry is definitely the backbone of the economy of a country, performing a multitude of vital functions that drive sustainability, growth, stability, and financial inclusion. The study compares Islamic and conventional banks in Pakistan to investigate the moderating role of artificial intelligence (AI) in banking financial processes. The study looks into a number of theories on how these banks' market shares would be affected by AI-enhanced services. In particular, the research looks at how the market share of Islamic and conventional banks is impacted by the propagation of ATMs, favorable consumer’s behavior regarding mobile, internetand point-of-sale (POS) banking. The study resulted that both types of banks' financial operations are greatly improved by the use of AI technologies, which increases their market share. The analysis reveals that an increase in the number of ATMs by each banking system significantly enhances market share (p = 0.009). Positive behavior towards internet banking also shows a strong positive impact (p = 0.000), adoption of point-of-sale banking also show a significant impact (p = 0.005). Furthermore, the use of AI (chatbots)proves a highly significant positive effect on financial processes (p = 0.000). However, positive behavior towards mobile banking does not significantly affect market share (p = 0.303). These findings highlight the critical importance of latest technological innovations in driving the market share and financial efficiency of banks in Pakistan. The research makes recommendations for banks to participate in AI technologies, improve customer education on AI benefits, and guarantee supervisory compliance and ethical AI practices. Theactions are essential for obtaining AI based technologies to its full potential, to enhance the financial processes of Islamic and conventional banks in Pakistan to obtain more market share.