Examining the Impact of Financial Innovation on Secure Transaction Management in Pakistan’s Banking Sector: A Case Study of Faisal Bank of Pakistan Using a PLS-SEM Approach

https://doi.org/10.5281/zenodo.18174314

Abstract

The rapid diffusion of financial innovation has fundamentally transformed transaction processing and service delivery in the banking sector, particularly in emerging economies such as Pakistan. While digital banking innovations enhance operational efficiency, accessibility, and customer convenience, they simultaneously introduce new challenges related to transaction security, data privacy, and fraud risk. This study examines the impact of financial innovation on secure transaction management within Pakistan’s banking sector, using Faisal Bank of Pakistan as an empirical case study. The research aims to provide robust evidence on how innovation-driven banking practices contribute to the effectiveness of secure transaction management mechanisms in a digitally evolving financial environment. Drawing on innovation diffusion theory and trust-based technology adoption perspectives, the study proposes a structural model in which financial innovation influences secure transaction management both directly and indirectly through digital trust. A quantitative research design was employed, and data were collected through a structured questionnaire administered to Faisal Bank customers actively using digital banking services. Partial Least Squares Structural Equation Modeling (PLS-SEM) was applied to assess the measurement and structural models due to its suitability for predictive analysis and theory development in complex, multivariate research settings. The results indicate that financial innovation has a significant and positive effect on secure transaction management, suggesting that the adoption of advanced digital banking technologies strengthens authentication procedures, fraud detection capabilities, transaction reliability, and data confidentiality. Furthermore, financial innovation was found to significantly enhance digital trust, which in turn positively influences secure transaction management. The mediation analysis confirms that digital trust partially mediates the relationship between financial innovation and secure transaction management, highlighting the critical role of customer confidence in the effectiveness of secure digital transactions. These findings contribute to the existing literature by offering empirical evidence from a developing country context, where secure digital banking adoption remains underexplored. From a practical perspective, the study provides valuable insights for banking managers and policymakers by emphasizing the need to align financial innovation strategies with robust security frameworks and trust-building mechanisms. The results suggest that sustained investment in innovative financial technologies, coupled with transparent security practices and regulatory compliance, can enhance transaction security and support the long-term stability of Pakistan’s digital banking ecosystem.