ARTIFICIAL INTELLIGENCE-DRIVEN FINTECH INNOVATIONS AND CIRCULAR ECONOMY TRANSITION: BRIDGING INNOVATION, INCLUSION, AND SUSTAINABLE IMPACT FOR PEOPLE AND PLANET

Abstract

As the need for sustainable development has grown, developing new and innovative technologies that help the move from a linear to a circular economy has been enhanced. The application of Artificial Intelligence (AI) and Financial Technology (FinTech) has become a game-changer with great potential to optimize resources, boost sustainable finance, and to drive environmentally responsible consumer behaviours. This research explores the impact of Artificial Intelligence (AI) powered FinTech Innovations on Circular Economy Transition (CET) and assesses Sustainable Consumption Behaviour (SCB) as a mediator. This study is quantitative research that uses primary data obtained from a structured questionnaire by using 384 respondents. The statistical program used was SPSS and AMOS software for statistical analyses. To verify the proposed relationships, Pearson correlation analysis, multiple regression analysis, and mediation analysis via Structural Equation Modeling (SEM) were used.The results showed that the quantity of FinTech Innovation using AI and Circular Economy Transition has a strong positive correlation (r = 0.712, p < 0.001). The results of the regression analysis suggest that three factors are significant determinants for Circular Economy Transition: AI Capability (with a β-value of 0.392), Sustainable Financial Inclusion (with a β-value of 0.311), and Digital Trust & Transparency (with a β-value of 0.259); these factors account for 61.7% of the variation (R2 = 0.617) in the Circular Economy Transition. Out of the listed predictors, AI Capability was found to be the best predictor when it comes to the adoption of the Circular Economy approach. The results of the mediation analysis also support this and reveal that AI-driven FinTech Innovations have both direct and indirect impacts on Circular Economy Transition via Sustainable Consumption Behaviour, which serves as a mediated pathway. The model achieved good fitness statistics, supporting the theoretical model.The study makes a significant contribution to the existing literature by synthesizing AI, FinTech, and Circular Economy perspectives in a common framework. The insights have policy and implications for actors such as policymakers, financial institutions, technology developers, and business organizations who aim to harness digital innovations to drive sustainability, financial inclusion, and circular economic growth. The study's bottom line is that AI-powered FinTech innovations could act as a strategic enabler for developing a sustainable future for the planet and its people.