Strategic Adaptation of Traditional Banks to FinTech Disruption in Saudi Arabia: A Comprehensive Model for Navigating Digital Transformation and Future Challenges

This Feature Paper presents a groundbreaking analysis of how traditional banks in an emerging market navigate FinTech disruption, offering a novel framework that integrates multi-dimensional drivers and their interplay. It investigates the strategic adaptation of traditional Saudi banks to the disruptive pressures of FinTech, set against the backdrop of the Kingdom's ambitious Vision 2030 digital transformation goals. While FinTech presents significant challenges to conventional banking models, it simultaneously offers pathways for innovation and enhanced competitiveness. Our research develops and empirically tests a comprehensive conceptual framework that goes beyond simple technology adoption to examine the interplay of internal organizational capabilities and external environmental factors. Utilizing Partial Least Squares Structural Equation Modeling (PLS-SEM) on data collected from 420 participants (bank employees and customers), we analyze the direct and indirect impacts of Technological Adoption (TA) and Customer Satisfaction (CS) on Bank Performance (BP), considering the mediating role of Innovation Capacity (IC) and the moderating influences of Digital Readiness (DR), Digital Leadership (DL), Digital Culture (DC), Cybersecurity Infrastructure (CI), and Regulatory Support (RS). Findings confirm TA as a key driver of BP, with IC partially mediating this relationship, highlighting the critical importance of innovation capability. Furthermore, the effectiveness of TA in building IC and impacting BP is significantly enhanced by strong DR, DL, DC, CI, and RS. This underscores that successful strategic adaptation is contingent not only on adopting technology but also on cultivating a supportive internal digital ecosystem and operating within a conducive regulatory environment. These results offer valuable insights for bank strategists, policymakers, and researchers navigating the complexities of digital transformation in emerging market financial sectors. This study transcends conventional analyses by offering a multi-faceted, empirically validated framework that is specifically calibrated to the unique socio-economic, regulatory, and strategic landscape of Saudi Arabia under Vision 2030, providing a nuanced roadmap for strategic adaptation with significant potential for high impact.