Innovation in Banking Sector of Pakistan and its Impact on Financial Performance: A Case Study of Banks in Khyber Pakhtunkhwa

Abstract

This study aims to examine the impact of various innovation factors on the financial performance of banking sector. The key innovation factors considered include process innovation, product innovation, digital financial innovation, marketing innovation, and organizational innovation. Data for the research were collected from 220 managerial-level employees working in banks, Khyber Pakhtunkhwa, Pakistan. The data were analyzed using Partial Least Squares–Structural Equation Modeling (PLS-SEM). The findings of the current study reveal that Process innovation, product innovation, digital financial innovation, marketing innovation and organization innovation play a crucial role in enhancing the financial performance of banks. Additionally, these all variables are significant contributors to improving a bank's financial outcomes/performance. The research offers several policy implications for commercial banks in Pakistan, emphasizing the importance of the mentioned innovations to improve financial performance.

Keywords: Process innovation, product innovation, marketing innovation, financial performance, Digital financial innovation, and organizational innovation.