Evaluating the Impact of FinTech Adoption on the Return on Equity and the Earnings Per Share: A Sustainability and Financial Inclusion Perspective in Pakistan’s Banking Sector

Abstract

In the industry of financial sectors in Pakistan, through the innovative technologies and the adoption of financial technology have rapidly changes the fundamentals of the services of the financial and the methods of the transactions, in which financial technologies have the greater and the positively impact on the financial positions of the banking sectors and as well as the individuals’ living standards. The analysis will be conducted between 2017 and 2024, which is an eight-year area strategically selected to represent major changes in the use of fintech in the banking sector. This period allows enough time series dimension to analyze the panel data and guarantee enough degrees of freedom in statistical estimation The sample size is eight commercial banks that were chosen according to three criteria: all available financial information throughout the study period; all available fintech-related metrics; a size-wise representation of the sample to make the findings applicable in general. The findings suggest that the Random Effects model is appropriate for both the return of equity, and the earnings per share. Digital transactions positively affect bank profitability and shareholder earnings. Therefore, it can be used directly in regression analysis without differencing, avoiding the risk of spurious results. The unit root test results indicate that Return on Equity is stationary at level, fluctuating around a constant mean with stable variance. The series shows mean-reverting behavior with no persistent upward or downward trend. Therefore, relationships estimated using ROE are likely to be valid and not spurious. The unit root test results indicate that the Number of ATMs is stationary at level, fluctuating around a stable means with constant variance. Future research should consider extending the scope to include other sectors, countries, and additional performance metrics to refine these conclusions further. The managerial implications regarding the significance impact on the regulatory banking compliance, the return on equity and the earning per share, and the extends the functionality of the financial technology and enhanced the financial performance, to develop the long-term strategies, to more enhanced the performance of the financial technology in the banking sectors in Pakistan. This study ensures robustness by confirming stationarity of all variables through unit root tests, validating their suitability for reliable regression analysis without spurious outcomes. The model selection is strengthened by Hausman test results, which consistently support the Random Effects specification for both ROE and EPS.