The role of financial innovation in enhancing the efficiency of banking performance in the digital economy

Abstract

This study aimed to measure the role of financial innovation as a mediating variable in enhancing banking performance efficiency within the digital economy environment. To achieve this objective, the study adopted a descriptive-analytical approach and selected a purposive sample of seven private commercial banks operating in Baghdad that had maintained stable profitability over the past five years. The study population comprised 260 administrative and executive management employees, who were provided with a questionnaire as the primary data collection tool. Of these, 155 questionnaires were returned and deemed valid for statistical analysis. The study reached several conclusions, most notably the statistically significant impact of the digital economy on banking performance efficiency. This impact is significantly enhanced when financial innovation, in its various dimensions (liquidity, financing, investment, pricing, and risk management), mediates the process. The study concluded with several recommendations, the most important of which is the necessity for the surveyed banks to upgrade their digital infrastructure and continuously invest in innovative financial solutions to ensure the sustainability of their operational and financial efficiency and to meet the requirements of the transition to a digital economy.