Artificial Intelligence enabled sustainable banking sector ecosystem in Kingdom of Bahrain

Abstract

The research explores the transformational potential by Artificial Intelligence (AI) within the ecosystem of the kingdom of Bahrain’s banking sector, focusing on how AI reshapes strategic decision-making and drives ecosystem-wide innovation. The research synthesizes insights from various data analysis and conceptual modelling to highlight the AI's role in advancing efficiency, customer, and client satisfaction experiences, and reaching competitive advantages. The research aligns research questions with key outcomes, providing actionable policy recommendations for the relevant stakeholders such as policymakers, financial advisors, AI experts, cybersecurity expert, Fintech expert, and banking management. By conceptualizing the banking sector as an interconnected system of institutions, technologies, and regulatory bodies, the research examines AI’s role in enhancing dynamic capabilities, improving operational efficiency, and achieving sustained competitive advantage. Theoretical contributions are evaluated using (Whitten (1989) criteria, emphasizing “AI’s impact on organizational change and dynamic capabilities”. The research underscores AI's significance in decision-making and organizational change to achieve competitive advantages through deploying dynamic capabilities. As the dynamic capability stated by Teece (2018), sensing new customer and client needs and reshaping new business direction, identifying, and seizing new resources and partnership network, and transforming channels and customers’ relationship to be developed for a business model to reach competitive advantage. Moreover, it addresses limited existing literature by conceptualizing AI implementation in the banking sector and expanding AI impact into organizational change and efficiency. A mixed-methods approach was employed, integrating qualitative interviews with industry experts and quantitative data analysis. Conceptual modelling and thematic coding guided the development of a framework aligned with Dynamic Capability Theory by Teece (2018), emphasizing the "sense–seize–transform" paradigm. This addresses how AI supports ecosystem actors in identifying market shifts, seizing new partnership opportunities, and transforming business models to remain competitive. The research contributes to theory by bridging firm-level change with ecosystem-level transformation, highlighting AI’s role in shaping collaborative capabilities, strategic realignment, and technological integration across the banking sector’s ecosystem. The updated framework for AI-enabled sustainable banking offers a practical roadmap towards the relevant stakeholders for AI implementation, emphasizes empirical validation, ethical considerations, and technological specificity. The theoretical framework contains three components sense, seize, and transform that provide approach for AI integration, addressing challenges, and leveraging significant opportunities. As the impact of AI in banking sector drives from perspective of achieving competitive advantages, which leads to organizational change and business model, through considering the theoretical propositions, which AI technology will support sensing, seizing and reconfiguring capabilities and resources. The practical implications offer actionable insights for stakeholders, policymakers, financial regulators, AI developers, and banking leadership on ethical AI governance, workforce upskilling, and the advancement of public–private partnerships to support systemic AI adoption. Future research should explore cross-sectoral comparisons, longitudinal impacts of AI integration, and the evolving nature of ecosystem-wide collaboration in digital transformation, particularly focusing on sustainable and ethical AI deployment at scale. The thesis demonstrates AI's transformative role in Bahrain’s banking sector, highlights the necessity for strategic adoption plan, robust governance roadmap, and continuous advanced innovation. Future efforts shall focus on holistic integration, customer-centric strategies, and fostering partnerships to achieve AI's benefits through addressing ethical considerations and stakeholder collaboration. The AI advancement has brought substantial transformational effects across varied sectors, particularly in financial sector. The banking sector has reached intellectual adjustments driven through AI integration and foundation for regulatory frameworks. Taking into consideration its central role in financial operations and services, AI has become a key technological management system.