Sustainable Bank Performance Model: The Mediating Role of Green Finance in the Relationship between Economic Dimension and Fintech Innovation

Abstract

This study develops and tests a comprehensive model exploring the relationships between fintech innovation, the economic dimension, green finance, and sustainability bank performance in the context of sustainable digital banking transformation. The banking industry has experienced significant digital acceleration, particularly post-COVID-19, which has fostered the integration of sustainability practices. Fintech innovation is a key driver for operational efficiency, reduced transaction costs, and increased accessibility of financial services. Simultaneously, global environmental awareness has propelled the financial sector to develop green finance instruments to support environmentally friendly investments. While previous research has examined digitalization and sustainability in finance, there's a gap in understanding how fintech innovation and the economic dimension jointly impact green finance and banking sustainability performance. Using a quantitative approach with Structural Equation Modeling (SEM) and Partial Least Squares (PLS), this research analyzed data from 145 commercial bank employees and managers involved in fintech adoption or sustainability activities. The findings confirm that fintech innovation positively influences green finance and sustainability performance. The economic dimension also significantly impacts both green finance and sustainability performance, indicating that profitability remains a primary consideration. Crucially, green finance mediates the effect of both fintech innovation and the economic dimension on sustainability performance. This suggests that technology and economic considerations are more effective in enhancing sustainability outcomes when channeled through green finance products and services. This research provides a theoretical foundation for sustainable digital banking strategies and practical implications for bank management and policymakers in Indonesia.