AI Adoption and FinTech Integration in Dual Banking Systems: Impacts on Cross-Border Financial Intermediation and POS Infrastructure

• Presents a dual-index framework (AI Adoption Index and FinTech Integration Index) to measure digital transformation in banking. • Demonstrates statistically significant impacts of AI and FinTech adoption on cross-border financial intermediation and point-of-sale integration (p < 0.01). • Exposes the mediating roles of customer satisfaction and digital customer inclusion in enhancing financial innovation. • Identifies banking type (Islamic vs. conventional) as a significant moderator, showing adoption disparities in dual banking systems. • Provides a novel Shari’ah-compliant model for responsible AI and FinTech integration in Islamic banking. The rapid integration of Artificial Intelligence (AI) and FinTech is transforming banking systems globally, yet Islamic banks face ethical and regulatory constraints under Shari’ah law. This uneven adoption creates challenges for cross-border financial intermediation (CBFI) and point-of-sale integration (POSI). This study investigates the impact of the AI Adoption Index (AIAI) and FinTech Integration Index (FTI) on CBFI and POSI. It further examines the mediating roles of Customer Satisfaction (CS) and Digital Customer Inclusion (DCI), and the moderating effect of Banking Type (BT) in dual banking systems. Banking data from (2010-2024) were analyzed using Python-based advanced analytics, including PCA, LASSO, XGBoost, and ANOVA. Mediating and moderating effects were estimated to provide a robust statistical assessment. AIAI and FTI significantly enhanced CBFI and POSI (p < 0.01). CS and DCI were strong mediators (p < 0.01), amplifying digital adoption effects. Bank Size (BS) and GDP growth showed modest but significant impacts (p < 0.05). BT was a significant moderator (p < 0.01), highlighting adoption disparities between Islamic and conventional banks. Islamic banks can innovate responsibly, adopting AI and FinTech without compromising Shari’ah compliance. The study offers a statistically validated framework that integrates AI, FinTech, and Shari’ah compliance, contributing novel insights into digital transformation in dual banking ecosystems.