From readiness to performance: examining blockchain integration in financial services and its effects on transparency and efficiency

1 Introduction

Blockchain is among those emerging technology platforms that have garnered a lot of interest for what it can do with regard to security, clarity, tracking and overall efficiency in transactions conducted by financial institutions (Casino et al., 2019; Schär, 2021). The most recent research on this topic suggests that many financial organizations are looking at blockchain-based solutions for use in payment systems, trade financing, digital identity verification, regulatory compliance and tokenized asset management as part of their larger digital transformation initiatives (Deloitte, 2023).

Blockchain adoption in finance was not so much a technology use case as it was the entrance into an organizational governance framework that aligned technological enablers with the needs of financial services and regulatory frameworks. Using the Technology-Organization-Environment (TOE) theoretical framework, these adoption dynamics can be appropriately defined. According to this theory, technological innovation comes from the combination of technological sophistication, organizational features and external environmental forces (Tornatzky and Fleischer, 1990; Baker, 2012) It has been shown that the adoption of digital innovations in financial institutions is influenced by information technology maturity and regulatory clarity at the top level (Agarwal et al., 2022; Queiroz and Wamba, 2019).

Technological readiness involves all manner of conditions an organization must meet in order to operate a digital infrastructure, including IT skills, system networking and cyber capabilities. The greater maturity a financial institution displays in their digital infrastructure, so too is their ability to adopt blockchain solutions (Kouhizadeh and Sarkis, 2018; Centobelli et al., 2021). It serves as a catalyst for digital transformation, as organizational governance establishes mechanisms of accountability, risk management, and ongoing strategy oversight (Ardito et al., 2021). The establishment of a good governance framework that clarifies roles and responsibilities and decision processes helps ensure more effective implementation of these emerging technologies. The regulated nature of the financial services industry is also a classic example in which regulatory support plays a major role. The availability of clear regulatory guidelines and sandbox arrangements as well as a supportive legal environment impact critically on blockchain experimentation and deployment (Zetzsche et al., 2020; World Bank, 2022).

The expected results of Blockchain Integration go far beyond Tech Modernization One of the primary benefits promised by blockchain is greater financial transparency due to immutable audit trails, enhanced reporting and verifiable transaction histories (Schär, 2021). Increased transparency reduces fraud risk, increases compliance efficiency and builds stakeholder trust (Casino et al., 2019). In addition, smart contracts facilitate blockchain-enabled automation that enhances operational workflows reduction in reconciliation processes and reduction of transaction costs (Centobelli et al., 2021; Agarwal et al., 2022) suggesting improvements concerning operational efficiency.

Even though there is a large amount of research about Blockchain, important theoretical and empirical gaps exist. Most previous studies focused on Blockchain’s technical architecture, cryptocurrency ecosystems or user’s intention to adopt Blockchain, whereas very few studies examined Blockchain as an organizational capability in regulated financial institutions. In fact many of the previous studies analyzed technology, organization or regulation separately and therefore provided only a partial view of the organizational conditions that allow for the successful integration of Blockchain. Although both transparency and operational efficiency are stated to be two main advantages of using Blockchain technology, empirical evidence to validate these statements at the organizational level is still limited especially in emerging economies, where the institutional and regulatory environment can vary significantly compared to developed economies.

Theoretically, the Technology-Organization-Environment (TOE) framework has been used extensively to analyze the factors associated with technology adoption, however, it was primarily used to explain the determinants of adoption intentions rather than the actual integration of Blockchain technology as an organizational capability and the impact on performance. As such, there is not sufficient empirical evidence available to understand how technological preparedness, organizational governance, and regulatory support collectively contribute to the integration of Blockchain as an organizational capability and how the integration of Blockchain as an organizational capability leads to improvements in financial transparency and operational efficiency. The development of this additional layer of analysis expands upon the existing explanatory power of the TOE framework from explaining technology acceptance to understanding technology based organizational performance.

Therefore, this paper develops and empirically tests an integrated TOE-based framework that considers the integration of Blockchain as an organizational capability that links technological, organizational, and environmental resources with organizational performance outcomes. Utilizing data from the Jordanian banking sector, this study provides evidence that the integration of Blockchain serves as the means through which technological preparedness, governance quality, and regulatory support lead to improved levels of financial transparency and operational efficiency. Thus, this study contributes in addition to demonstrating evidence from an understudied emerging economy by expanding the extant TOE literature by connecting the organizational precursors to measureable institutional performance outcomes in Blockchain enabled financial services.

2 Literature review

An outcome of digital technologies is transforming the financial services landscape and progressively digitizing more of traditional financial infrastructure. Of all the technologies, Blockchain is one of the most evangelized innovations owing to its capacity to usher in more transparency to financial transactions while preserving security and operational efficiency. Blockchain technology offers a method by which the recordkeeping can be secured via distributed ledgers rather than centralized intermediaries verifying and storing transactions on multiple nodes (Casino et al., 2019). Beyond cash, banks are using blockchain across cross-border payments, trade finance, KYC/AML functions and digital asset management solutions. This shift illustrates the increasing significance of integrating blockchain into banks’ wider digital transformation plans (Wang et al., 2019; Chang et al., 2020).

Blockchain Integration is a metric, which indicates the degree of adaption and optimization of cash flow infrastructure and operational processes in financial institutions. Governance: Rather than a decision to adopt, there is the ‘integration of the blockchain’ that’s incremental and is based uniquely per institution based on technological needs, sufficiency for existing organizations and regulatory conditions. Organizations will only be able to reap the full benefits of decentralized transaction systems if they restructure their relevant operations processes and information systems according to chosen blockchain technologies (Treiblmaier, 2018). Similarly, Pournader et al. (2020) point that the effective figurative presence of a commerce object on a blockchain platform requires aligned techno-organizational infrastructure, as well as organizational capabilities for distributed data management and autonomous transaction validation.

A significant aspect of measuring the adoption and application lifelines of blockchain technologies in financial institutions is technological preparedness. It is about providing the digital backbone, technical skills and IT capabilities required for new digital solutions. Wang et al. (2019) are investigating whether firms have better technological infrastructure than banks to collect big data and large scale experiments or integrate blockchain applications on existing financial systems. Ensuring that institutions feel prepared for the challenges of using blockchain technology and decreasing the risks associated with implementation while enhancing interoperability between contemporary finance infrastructures and blockchain systems.

Importance of internal organizational governance in Blockchain This guides how organizations manage their tech investments, coordinate innovation efforts, and align digital transformation initiatives with organizational objectives. Governance mechanisms enable financial firms to manage the risks associated with these technologies while maintaining responsibility and strategic oversight of their implementation process (AlNuaimi et al., 2022). Chang et al. (2020) state that leadership commitment and governance frameworks play a significant role in how efficient or inefficient the implementation of blockchain solutions is in financial institutions.

While the above organizational internal factors are capable of determining blockchain courses for integration into financial services, another dominant factor is regulatory support. Financial institutions are heavily regulated and the legal regimes and regulatory policies inform both organizational decision-making and the capacity for technological innovation. Providing regulatory clarity while lessening compliance uncertainty allows financial institutions to experiment with blockchain technologies (Kshetri, 2021). Fintech innovation strategies and regulatory sandboxes (and traditional or legal equivalents) have promoted the development of blockchain and crypto technology to allow experimentation in financial markets.

It can expect that financial institutions will realize huge operational savings from implementing blockchain technologies. A key outcome that has generated a lot of discussion is better financial transparency. According to the study of Casino et al. (2019), blockchain’s immutable and tamper-resistant property enables all stakeholders to access accurate verifiable transaction records, thus providing trusted financial information.

Besides that, advantage of blockchain integration is better operational efficiency. Traditional financial systems often rely on complex reconciliation and numerous intermediaries, resulting in increased costs and extended processing times. Blockchain, for instance, can facilitate these procedures with decentralized verification systems and automated financial transactions (Chang et al., 2020). Therefore, financial institutions boosting this system could achieve faster performance rate of transaction data and hence decreased in operational cost as well as enhanced service delivery time.

Although the blockchain technology has driven new interest, organizational-related studies of empirical data and operational influence of integration are limited. But the few attempts made to find arguments have been able to assess technical properties of blockchain systems, but they do not consider organizational or regulatory factors which impact technology application. This begs further research into how technological readiness, governance structures and regulatory backing interactively affect blockchain integration and how vice-versa integrates enhances transaction transparency and operational efficiency.

3 Research model and hypotheses

This article explores the factors that effects organizational phenomenon when integrating block-chain in financial services. As demonstrated in the research framework developed (Figure 1), there are several major factors affecting the integration of blockchain technologies into financial institutions, which include technological readiness, organizational governance and regulatory support. Technological readiness represents the presence of digital infrastructure and technological capabilities, whereas organizational governance is comprised of managerial structures that facilitate guidance for technology implementation. Technological Enablers: Regulatory support. Additionally, it is suggested by the study that integrating blockchain increases financial transparency in addition to operational efficiency through improved transaction traceability and lower operational complexity thereby improving overall financial system performance.

3.1 Technological readiness has a significant positive effect on blockchain integration in financial services

The state of technological readiness is considered one of the key factors behind the adoption and successful use of emerging digital technologies in financial institutions. In particular, with regard to the adoption of blockchain technology, technological readiness includes the level of access to sufficient IT infrastructure (including utilities), compatibility between systems and considerations for cybersecurity capabilities and technical expertise that are necessary prerequisites for distributed ledger technologies to function properly (Hughes et al., 2019; Wamba and Queiroz, 2020). More specifically, financial institutions that have achieved sophisticated levels of digital architecture and technology capabilities will be optimally positioned for piloting blockchain use cases as well as the integration of these solutions within legacy infrastructure. This level of readiness lowers implementation hurdles and increases the organizations capability to handle the technical complexity associated with blockchain-based platforms (Kamble, Gunasekaran and Sharma, 2020).

While it is expected that firms with higher technology capability are better positioned to integrate blockchain technologies within their business processes and reporting systems, new research revealed that existing active technological resources could limit successful implementation. Such organisations, typically have invested in modern IT systems, digital innovation capabilities and cybersecurity that enable a move toward Blockchain solutions (Lacity et al., 2021). Moreover, technological preparedness enables financial institutions to identify the fitment of blockchain systems with existing legacy financial infrastructures a major factor in ensuring a smooth transition to digitalisation (Queiroz et al., 2020).

Furthermore, additional technological readiness helps increase the probable extent of exploration of innovative blockchain technologies such as smart contracts, decentralized payment methods and automated settlement systems within an organization. The use of such mobile applications also improves the transaction security, reduces operational errors and service efficiencies in financial services (Kouhizadeh et al., 2021). Therefore, institutions with the necessary IT infrastructure and technical expertise are more likely to demand blockchain technologies that will advance financial operations and improve service delivery.

Likewise, an organization without organizational readiness with respect to technology fails at their organizations blockchain deployment due to incompatible and complex issues (Wang et al., 2019). Thus, banks that spend on the necessary digital backbone and a more integrated technological intensity are at an advantage toward better integrating blockchain technology into their overall financial service operations. In light of the above discussion, this study proposes the following hypothesis:

H1: Technology Readiness Has Positive Effect on Blockchain Integration in Financial Services.

3.2 Organizational governance has a significant positive effect on blockchain integration in financial services

Emerging digital technologies like blockchain do not simply align within financial systems; they are etched onto the lip of organizational governance scaffolding. Governance formations, made up of internal governance and business practices and information technology leads or external policymakers provide the administrative capacity needed to guide how things like technological innovation, asset dissemination and alignment between digital projects with organizational goals are handled. For financial institutions specifically, governance structures offer critical insight into decision processes around investing in technologies and help organizations to reduce operational risk and strategic risk that stem from the development of new technologies (De Filippi and Wright, 2018; Schmitz and Leoni, 2019). As such, strong governance is an internal environment for establishing the correct conditions in order to successfully implement blockchain technologies alongside financial functions.

Good organization governance depends on strong leadership commitment and strategic oversight. Financial institutions are better placed to harness digital transformation and promote experimentation with technology, thanks largely to mature systems of governance. According to Rauchs et al. (2018) show that specific governance arrangements allow an organization to innovate and cross departmental borders which can enhance its abilities to implement distributed ledger technology. Similarly, Sanka & Cheung (2021) find that stakeholder-oriented governance frameworks prompt financial institutions to investigate potential blockchain use cases than can improve transaction security, transparency and operational resilience.

Effective organizational governance will help manage through these complexities and ambiguities. The introduction of the blockchain technologies in an enterprise most often is accompanied by a very important procedure of internal restructuring, e.g. operational processes, the internal control system and information management structure. This indicates that these mechanisms of governance allow for the institutions to develop clear risk management procedures and then transparent aspects of policies, monitoring system, which translates into how they use their blockchain technologies safely (Treiblmaier, 2019; Kher et al., 2021). Third, governance capabilities determine whether blockchain initiatives align with institutional goals and regulatory parameters.

In addition, governance frameworks build teamwork among techies and financial managers as well as compliance departments when blockchain-based systems are implemented. The need for coordination reinforces the embedding of blockchain technologies in existing Tech financial infrastructures without undermining operational stability or regulatory oversight (Casino et al., 2019; Hileman and Rauchs, 2018). As a result, financial institutions with existing governance structures D4 have the advantage in being able to implement organizational changes required to enable successful blockchain projects and achieve potential benefits of distributed ledger technologies. Considering the above discussion, we propose the following hypothesis in this study:

H2: Organizational governance positively and significantly impacts blockchain integration in financial services.

3.3 Regulatory support has a significant positive effect on blockchain integration in financial services

One of the most important environmental enablers of adoption of Frontier financial technologies such as blockchain is regulatory support. Because financial institutions operate in heavily regulated environments where both the frameworks of policymakers and supervisory guidance are particularly influential when it comes to decisions about technological innovation—the question is also relevant for that sector. As defined by Auer, Cornelli and Frost (2020), block based technologies and the ecosystem that comes with it are more embedded in financial service operation when there is clear legal framework made by regulators that support fintech. When regulations are a bastardization of one another, it can leave firms with knowledge gaps that could result in hurting end users.

Positive regulatory settings further encourage innovation and creation in the financial services space. The data was collected from a period preceding October 2023. This enables institutions to line up the opportunities of blockchain-based financial services along with regulatory compliance and financial stability (Erel and Liebersohn, 2022). In addition, regulatory certainty in Blockchain projects helps financial institutions to gain confidence in the blooming technology and therefore allows investments to be allocated for a distributed ledger infrastructure (Cornelli et al., 2023). To motivate organizations to transfer from their traditional payment systems to new ones based on digital financial technologies like blockchain, studies show that the pro-innovation regulatory stance with active engagement by regulators in interacting with these institutions also play as important factor (Allen et al., 2022). In addition, the regulatory guidance from operating with digital assets, data governance, and cyber security promoting institutional confidence in using blockchain replacing thereafter some monitoring process (Chen et al., 2019).

Additionally, an essential piece of regulatory assistance is the establishment of legal structures acknowledging blockchain trading and virtual financial ecosystems. The legal recognition of blockchain-based financial transactions increases the practicability to integrate distributed ledger technologies into banking services and instills confidence in such technologies among establishments (Adrian and Mancini-Griffoli, 2019). As a result, financial institutions operating in supportive environments will be better prepared to introduce blockchain solutions and incorporate it into their regular processes (Auer et al., 2020; Cornelli et al., 2023). Based on the aforementioned discussion, this study proposes the following hypothesis:

H3: There is a significant positive effect of regulatory support on the integration of blockchain in the financial services.

3.4 Blockchain integration in financial services has a significant positive effect on financial transparency

The integration of blockchain in financial services gained a lot of attention because it has the potential for improving transparency and accountability in finances. Blockchain technology functions by means of distributed ledger systems which document deals in a decentralized and immutable way. This structure enables all network participants to verify the financial records of a single member, which minimizes data modification and supports the reliability of financial information (Cong et al., 2021). With the increasing integration of blockchain technologies into operational infrastructures, financial processes and reporting systems will ideally become significantly more transparent for financial institutions.

The unique feature of blockchain technology is that it creates immutable transaction records (unmodified after being validated). This feature helps in financial transparency as it gives stakeholders a clear track of transaction history that can efficiently timestamp and verify a history of an asset. Financial records are often being stored in centralized databases in traditional financial systems, which allows for manipulation and unauthorized access (Yaseen and Al Omoush, 2020; Alhur et al., 2022; Alshehadeh et al., 2022). Blockchain can overcome these limitations by allowing open and traceable transaction tracing over distributed networks (Liu et al., 2019). Thus; the integration of blockchain adds a lot to the credibility and integrity of financial information.

In addition, blockchain technologies help in real time access of financial data so that regulators or auditors or stakeholders can track the financial activity in a more efficient manner. According to studies, leveraging blockchain for financial systems strengthens auditing (Dai and Vasarhelyi, 2017; Yu et al., 2018), through convex digital trails of the financial transactions and enhancing the trustworthiness in financial reporting These features help financial institutions maintain transparent financial operations and comply with regulatory requirements.

The usage of blockchain also helps reduce info asymmetry b/w the financial establishments and the stakeholders. The transparency provided by distributed ledger systems enables market participants to receive reliable financial information, thereby increasing trust in both its transactions and institutions (Catalini and Gans, 2020). Furthermore, the transparency-based documentation of transactions through blockchain technology can de-risk fraud by enabling better observation of financial activities in multi-faceted financial ecosystems (Shahzad et al., 2022).

Another key element to this integration, is the fact that blockchain can increase regulatory transparency, as it has an intrinsic technology. Blockchain-based financial systems would improve regulatory surveillance and allow the instant detection of irregularities. This enables profound improvement of financial monitoring and regulatory reporting, especially in the case with financial institutions (Chiu and Koeppl, 2019).

Ultimately, integrating blockchain provides these financial institutions with a wider array of tools that can allow for more transparency in their transaction processing and accounting systems. Transparency in Financial SystemsBlockchain technologies play a vital role in increasing the transparency of financial systems as they enable greater traceability of transactions and accountability by ensuring that financial records cannot be tampered with. From the above discussion, we hypothesize as follows:

H4: Blockchain integration in financial services has a significant positive effect on the Financial transparency.

3.5 Blockchain integration in financial services has a significant positive effect on operational efficiency

Blockchain integration is being recognized as a revolutionary innovation in recent years that can increase functionality and performance in financial sector. Operational Efficiency, this is differentiated by an organizations ability to offer financial services at lesser cost, minimum processing time and utilization of resources. Legacy finance is pathologically scabrous complex intermediaries, manual reconciliation processes, and distinct sets of information (all of which enlarge back-office costs whilst preventing frictionless efficiency). Blockchain systems can expand and streamline financial operations through secure and transparent transaction processing (Casey and Vigna, 2018).

Blockchain technology is by far the biggest value adds to operational efficiency, as it eliminates unnecessary intermediaries in financial transactions. Not only eliminating third-party intermediaries (clearing and settlement agents) as needed in conventional set up, reduces fraud but also enabling the peer-to-peer transactions verified automatically by consensus mechanisms. Thus, through this transaction can decrease much greater the time that and cost of overhead in regards to the financial services (Catalini and Gans, 2019). Therefore, interacting with blockchain technologies would help financial institutions improve their performance along the operational spectrum through quicker settlement and reduced costs for running the firm.

For example, blockchain technologies enable smart contracts that can automate the execution of financial agreements and transactions when defined conditions are satisfied. This allows organizations to improve the efficiency of services provided with smart contract, thus reducing manual verification and monitoring of financial transfers (Szabo, 2021). Blockchain has a lot of automation system that can help most financial institutions in streamlining their works to reduce processing errors or delays and also get better speeds for incoming and outgoing generation of currency.

The integration of blockchain in this domain also enhances data management and information exchange per financial networks. The traditional finance system typically results in data inconsistency, duplication, and the storage of transaction records with multiple databases by different institutions. In contrast, blockchain based systems maintain a single distributed ledger that ensures information is consistent and removes the need for reconciliation across institutions (Drescher, 2017). With United, this data structure allows financial institutions to interact with each other more effectively which provides a higher level of operational efficiency in the financial ecosystem.

If there is another major advantage of blockchain integration, it would be improved operational risk management. With Blockchain cutting down the cost along with offering transparent and tamper-proof records of all transactions, this helps financial institutions spot irregularities in their operations with ease. Through the utilization of improved monitoring and verification methods, organizations would have been able to lessen operational errors, fraud risk, and transaction disputes (Yli-Huumo et al., 2016). This advancement, in turn, empowers financial institutions to increase operational efficiency while maximizing the security and reliability of financial transactions. Taking into account the above discussion, we propose the following hypothesis:

H5: Blockchain-specific integration in finance has a strong positive impact on operational efficiency.

Although there is a significant amount of blockchain-related research, there are still many significant theoretical and practical gaps in terms of how organizations utilize blockchain. Many of the earlier studies focused primarily on blockchain technology in general, or on cryptocurrency and other digital assets. However, few have studied the process of integrating blockchain into routine financial operations and organizational processes within regulated banking environments. More importantly, most blockchain related studies examined either the intention to adopt blockchain, or a bank’s readiness to implement blockchain; however, these do not represent the same level of digital maturity as actually integrating blockchain into day-to-day financial activities. In addition, although researchers have explored various uses for blockchain across multiple areas of financial technology, they have generally done so without segregating specific use cases for banks, which may be impacted differently due to governance structures, regulatory requirements and institutional capacity. While the Technology-Organizations-Environment (TOE) model has been used extensively throughout technology adoption research, very little empirical evidence exists regarding the relationship between technical readiness, organizational governance and regulatory support as it relates to both the degree of blockchain integration, and resulting levels of organizational performance. Finally, since many emerging markets including Jordan face challenges in implementing blockchain due to varying degrees of technological readiness, organizational governance and regulatory frameworks, this study will investigate blockchain integration as an organizational capability that links technological, organizational and environmental factors to improve both financial transparency and operational efficiency.

4 Research methodology

4.1 Instrument development

A questionnaire was the main source of data collection for this study. It was created using the literature validated in advance (see Table 1) that was relevant to the thesis objectives and context. Beyond the primary demographic questions, the questionnaire consisted of five main dimensions corresponding to the variables of the research model: organizational governance, regulatory support, blockchain integration in financial services, financial transparency, and operational efficiency. Moreover, Table 2 shows the Measures of the current study.

TABLE 1. Measures sources.

TABLE 2. Measures.

The questionnaire described in Table 1 contained four (4) items for each dimension using a five-point Likert scale, where 1 = strongly disagree and 5 = strongly agree. Prior to the distribution of the survey, the questionnaire was reviewed by a panel of academic and industry experts in the fields of financial technology and banking to assess content validity and clarity of wording. Subsequently, construct validity and reliability were examined using appropriate statistical techniques during the data analysis phase.

4.2 Sampling and data collection

The intended population for the study included all licensed commercial and Islamic banks regulated by the Central Bank of Jordan. By the time of the data collection process there were 16 licensed banks operating within the Jordanian banking system. Formal invitation letters explaining the purposes of the study were mailed to senior management and personnel departments of all banks and requested that they participate in the research.

Eight banks accepted to participate in the study while the other 8 banks either declined participation or failed to respond during the data collection period. Purposive sampling strategy was used since it was necessary for researchers to obtain input from participants who have direct knowledge on blockchain initiatives, digital transformation, governance and financial technologies within their respective organizations.

Electronic questionnaires delivered electronically to the banks’ employees’ work e-mail accounts; and, printed copies of the questionnaires distributed to participating banks where they could be filled out by employees of those banks. Bank coordinators assisted with identification of potential respondents and ensured that each employee participated voluntarily. There were 214 questionnaires returned. Of these, 22 questionnaires were removed from consideration due to issues related to incomplete surveys and low-quality survey responses. There were therefore 192 complete and usable questionnaires collected which corresponded to a usable response rate of 92.1%

Participants provided data that demonstrated a wide range of professional experience within banking institutions. Participants included executive directors, department managers, IT managers, branch managers, operational managers, compliance managers, and risk managers from both commercial and Islamic banks. Due to their level of professional experience, they were able to provide informed assessments about their organizational readiness to implement blockchain technology and practices associated with implementing blockchain.

Since integrating blockchain into an organization is viewed as an organizational capability, managerial respondents were identified as key informants. This methodology is widely recognized as acceptable in both organizational and information systems studies. Executive officers are typically considered the best respondents as they have broad knowledge about their organization’s overall strategic direction, existing organizational governance structures, degree of technological preparedness and degree of digital transformation initiatives.

It should also be noted that although multiple respondents were received from various participating banks, this study focused on analyzing relationships between organizational variables versus comparing specific individual banks. As such, each managerial respondent served as the unit of analysis. It is acknowledged that there may exist interbank dependencies as a limitation of the study. Interbank dependency can be addressed as an area for additional research utilizing multi-level or organization-based analytical models.

Prior to data collection, ethical approval was obtained from the Scientific Research Committee of Al-Zaytoonah University of Jordan (Approval No. 011a/02-2025/2026). Before completing the questionnaire, all respondents received an information sheet explaining the purpose of the study, the voluntary nature of participation, and their right to withdraw at any time without any consequences. Informed consent was obtained electronically or in writing before participation. No personally identifiable information was collected, and all responses were anonymized and treated confidentially. The data were used exclusively for academic research purposes and were securely stored on password-protected devices accessible only to the research team.

5 Data analysis

SmartPLS was chosen as a result of its excellent capability with component of structural equation models (PLS-SEM). It can easily be used with medium and small sized samples, particularly when the researcher needs to test a hypothesized model containing mediating and/or moderating hypotheses (Hair et al., 2019). Furthermore, SmartPLS is more appropriate for our study, although it has overlapping and heterogeneous variables, because it can be used to explore the relationships of the latent variables without the fundamental assumption of a normal distribution (Henseler et al., 2016). Also, SmartPLS contains an adequate set of tools for the assessment of the study. However, the users of SmartPLS need to understand it does have a two-stage process. After validation and reliability testing of the research model has been completed, the second stage is structural model testing. In structural testing, the focus is on the hypothesized relationships between latent variables in the model.

5.1 Research model

Table 3 contains data that attest to the reliability and validity of the scales utilized in this study. The procedures of measuring indicator reliability began by calculating the outer loading associated with each item and its construct. Per the criteria by Hair et al. (2019), item factor loadings that did not achieve the threshold value of 0.7 were considered for elimination. The ranges of the Cronbach’s alpha (alpha) were 0.787 to 0.868 which are all above the threshold of 0.70 indicating that such scales exhibit internal consistency (Hair et al., 2019). In summary, the composite reliability (CR) score for the indices measured was between 0.803 and 0.878, with all meeting the established threshold of 0.70, indicating that the measures are sufficiently reliable and can be used to evaluate the latent construct for the whole sample (Fornell and Larcker, 1981). In addition, all average variance extracted (AVE) values are also above the suggested threshold (0.50), indicating that the scale accounts for more than half of the variance of its dependent measures, which validates the convergent validity of the measures (Fornell and Larcker, 1981).

TABLE 3. Validity and reliability.

Although CR has the lowest value for Blockchain Integration (CR = 0.803), it is still above the threshold of 0.7 recommended by Hair et al. (2022). Thus, CR shows sufficient internal consistency. Additionally, Cronbach’s alpha (0.802) as well as convergent validity (AVE = 0.627) show a reasonable degree of consistency in measuring the intended latent construct through its indicators. Consequently, although significantly lower than those of other constructs, we consider the reliability of Blockchain Integration to be appropriate for estimating the structural model.

The results of the discriminant validity (Table 4) indicate a clear distinction between the six variables in the study. The values on the main diagonal represent the square root of the AVE value for each variable and are higher than the correlation coefficients between the different variables. This demonstrates that the discriminant validity condition has been met, meaning that each variable reflects an independent and distinct dimension. Therefore, these variables can be relied upon in statistical analysis, as they reflect different concepts without overlap that would affect the accuracy of the results and conclusions.

TABLE 4. Discriminant validity.

5.2 Structural model

Figure 2 represents the SmartPLS structural model output. Findings illustrate the explanatory potential of the introduced finance-blockchain model to review drivers and implications surrounding financial innovation integration. Technological preparedness, organizational governance, and regulatory support jointly account for 64.6% of the variance in blockchain integration in financial services (R ² = 0.646). It means that, alongside internal governance and regulatory framework conditions, it is the very mix of technological capabilities in place available to financial institutions both during operations as well as onboarding which are critical to opening up the floodgates for blockchain technology.

According to Hair et al. (2022); an R ² of .75; .50 and .25 represents substantial; moderate and weak levels of explanatory power; respectively. The R ² for Blockchain Integration (.646) represents a level of explanatory power for Technology Readiness; Organizational Governance; and Regulatory Support that is sufficient enough to demonstrate that these three constructs account for a significant portion of the variance in Blockchain Integration. The R ² for Financial Transparency (.487) accounts for a moderate amount of variance; while the R ² for Operational Efficiency (.352) provides a reasonable degree of predictive capability within the context of organizational research. These results are consistent with other recent blockchain adoption and digital transformation studies using PLS-SEM which provide evidence of satisfactory explanatory performance by the proposed model.

Furthermore, the path coefficients for structural model presented in figure depict that technological readiness (β = 0.415) had relatively high direct impact on adoption of blockchain technology than organizational governance (β = 0.330) and regulatory support (β = 0.209). This shows that integration of blockchain has a considerably positive impact on financial transparency (β = 0.698) and operational efficiency (β = 0.594). In summary, these results demonstrate the importance of technology readiness, governance structures and regulatory support in adopting blockchain and how its use can promote transparency and efficiency in financial systems.

Table 5 presents the more significant results of the structural model and shows how these hypotheses have been tested; it reports the path coefficients, t-values and level of significance. H1 Result imply that application of blockchain in financial services industry plays a significant role in efficiently improving financial transparency (R2), Which indicate the incorporation and integration of blockchain technologies opens up for safer transaction, maintaining proper record keeping as well as disclosure of information across various finance organization. H2 results show that the blockchain of financial services is a crucial driver of operational efficiency. It gives a way of lowering transaction time, operational malfunction and consolidating financial processes.

TABLE 5. Testing hypotheses.

Analysis also stands witness to the positive impact of organizational governance on blockchain integration in financial services (H3). This result emphasizes that applying comprehensive governance structures, internal policies and strategic leadership approaches can facilitate the initial implementation of blockchain technologies among financial organizations. Likewise, the regulatory support had a significant positive impact on blockchain technology integration in financial services (H4), implying that supportive government policies as well as regulatory frameworks significantly promotes the implementation of blockchain in FSs.

Lastly, the results validate that technological readiness has a strong influence on blockchain integration in financial service domain (H5). This effect means that an enhanced digital infrastructure, advanced technological capabilities and IT resources condition financial organizations to use blockchain technologies successfully.

It is important to examine whether multicollinearity can be observed in predictor variables. Independent variables having high correlation with each other is known as multicollinearity, which can distort the estimation of path coefficients and therefore reduce the usefulness of structural model results. The Variance Inflation Factor (VIF) is often used to detect this problem of PLS-SEM analysis Hair, 2019.

According to Table 6, all the relationships in the structural model exhibited a variance inflation factor (VIF) score between 1.000 and 1.714. More specifically, the path Organizational Governance→ Blockchain Integration in Financial Services (1.714) as well as Regulatory Support→ Blockchain Integration in Financial Services (1.630) and Technological Readiness→ Blockchain Integration in Financial Services (1.581), returned well below the recommended threshold values. The VIF value for paths Blockchain Integration in Financial Services → Financial Transparency (1.000) and Blockchain Integration in Financial Services → Operational Efficiency (1.000) also indicates acceptance range.

TABLE 6. Multicollinearity assessment (VIF).

The results further illustrate that multicollinearity is not a problem within the structural model as all VIF values are well below acceptable ranges. As a result, model predictor constructs are not correlated in problematic ways, and path coefficients can be estimated and interpreted with some confidence.

6 Discussion

The results for technological readiness and blockchain integration in financial services support existing studies confirming that the infrastructure capabilities are crucial factors influencing whether advanced digitalized financial technologies would be adopted. Banks that have adequate IT infrastructure, cybersecurity capacity and compatible digital architectures may find it easier to integrate blockchain solutions into existing financial systems (Hughes et al., 2019; Wamba and Queiroz, 2020). Our finding is in line with studies that highlighted organizations with advanced technological capabilities and modern digital platforms having higher capacity for implementing Blockchain-based applications and addressing technical complexity related to distributed ledger systems (Kamble et al., 2020; Lacity et al., 2021). In addition, technological readiness provides the compatibility of blockchain to legacy financial systems that support a more seamless digital transformation process riding organizations in experimenting with innovative solutions such as service delivery automation through smart contracts and settlement mechanisms (Queiroz et al., 2020; Kouhizadeh et al., 2021; Alhur, 2025; Shatat et al., 2025; Aljaloudi and Jaradat, 2025).

One key finding was that technological readiness proved to be the most significant determinant of blockchain adoption (β = 0.415), even greater than both organizational governance and regulatory support. Therefore it appears that in the case of the Jordanian Banking Sector; that the main constraint on implementing blockchain technology is a lack of digital technology (e.g., digital infrastructure, security, etc.), rather than a lack of management or regulation. The implementation of blockchain technology will require digital technologies that provide compatibility with existing systems, an appropriate level of cybersecurity to protect from potential cyber threats, the ability for digital technologies to communicate effectively with each other (interoperability), and technical expertise specifically related to digital technologies. If no such technological base exists then there will be very little to encourage the use of blockchain technology regardless of how strong a supportive governance structure or favorable regulations may exist. These findings reflect the present state of digital transformation in the Jordanian banking sector, at which point technological capabilities represent the major organizational resource that enables the implementation of blockchain technology.

Although governance (β = 0.330) is also shown to have some significance, this relates to coordinating activities involved in digital transformation, allocating resources, managing risk associated with implementation and generally facilitating the successful implementation of new technologies such as blockchain. Governance will only be able to positively affect blockchain adoption once the required technological infrastructure has been developed. Similarly while regulatory support (β = 0.209) will help to facilitate the adoption of blockchain technology, its relatively small effect size indicates that at present regulations governing the banking industry in Jordan act as enablers rather than as the primary driver of organizational activity.

The findings confirm that organizational governance positively and significantly influences the blockchain convergence in financial services. Sound governance frameworks not only provide the direction but also serve as oversight to emerging digital technologies and duplicate use cases that can genuinely advance institutional objectives. On the other hand, institutions who build good governance structures around these initiatives may provide more structure in regards to technological investments and risk management before adoption to maximize value realization from blockchain towards strategic goals of the organization (De Filippi and Wright, 2018; Schmitz and Leoni, 2019). In addition, governance structures fueled by leadership commitment foster experimentation, and cross-departmental cooperation (Buchanan et al., 2023; Rauchs et al., 2018), thus improving on the organization’s readiness to adopt distributed ledger technologies and explore novel financial applications (Sanka and Cheung, 2021). Governance mechanisms additionally outline a framework for policies, monitoring systems and risk-management processes that will help in the structuring of regulatory requirements and where operations should be aligned to securely implement blockchain into finance (Treiblmaier, 2019; Kher et al., 2021; Casino et al., 2019; Hileman and Rauchs, 2018; Zurigat and Khasawneh, 2026).

This new perspective is important as it provides evidence that there are at least two dimensions of regulatory support, namely positive and significant impact on assimilation of blockchain in financial services. This finding relates to previous literature on facilitating nascent financial technologies which describes how a supportive regulatory environment is key to fostering adoption of innovate-in relation to digital innovations. Experts believe clear legal frameworks and regulatory guidelines established by the policymakers provide assurance for financial institutions about adherence of blockchain applications and distributed ledger technologies with reduced risk of innovation based on technology (Auer et al., 2020; Cornelli et al., 2023). Additionally, regulatory measures like fintech sandboxes and innovation hubs enable financial institutions to pilot blockchain-driven financial services without compromising financial stability or regulatory oversight (Erel and Liebersohn, 2022; Alshouha et al., 2025; Khasawneh and Alhanatleh, 2025). This is also in line with the previous literature suggesting that pro-innovation regulatory policies and ongoing regulator-financial institution collaboration positively shape organization decisions towards adopting blockchain technolies and diffusing them into financial business lines (Allen et al., 2022; Chen et al., 2019; Adrian and Mancini-Griffoli, 2019).

As the findings suggest, financial transparency substantially fosters successful integration of blockchain applications within the realm of financial services. This finding is consistent with previous research that emphasizes that blockchain technology brings transparency, as it allows the decentralization of transaction records and enhances availability (Cong et al., 2021). By enabling stakeholders to validate financial transactions on distributed networks, blockchain technology reduces chances of manipulation and enhances the integrity of financial reporting processes (Liu et al., 2019). Additionally, the transparency feature of blockchain provides instant access to financial data and builds digitally verifiable audit trails thus increasing both auditing efficiency as well as regulatory monitoring within the institutions of finance (Dai and Vasarhelyi, 2017; Yu et al., 2018; Al Freijat et al., 2025). The transparency offered by blockchain reduces information asymmetry, promotes stakeholder trust and improves the control process on finances necessary to install this technology in operational and reporting systems of the financial institutions (Catalini and Gans, 2020; Shahzad et al., 2022; Chiu and Koeppl, 2019; Al-Omoush, 2024).

7 Implications and limitations

7.1 Theoretical implications

Rather than just validating the Technology-Organization-Environment (TOE) model this research extends the TOE model’s explanatory power in two significant ways. First, prior TOE based research has largely studied either a bank’s intention to adopt new technologies or their decision to implement those technologies; however, this study views blockchain integration as an organizational capability that transforms the organization’s technological, organizational, and environmental resources into tangible and quantifiable measures of organizational performance. Second, it is demonstrated that each of the three TOE dimensions are not equal contributors to blockchain integration. The technological readiness dimension provides the largest impact for blockchain integration with organizational governance providing the second largest impact, and regulatory support providing the third largest impact. Therefore, the results indicate that the contribution of each of the three TOE dimensions is dependent upon both the level of technological maturation within an organizations’ particular industry and the institutional environment in which they operate. As such, the study expands the application of the TOE model by demonstrating that organizational capabilities act as mediators of the relationships between the organization’s contextual conditions and organizational performance.

The present study builds on the nascent body of literature at the crossroads of blockchain, financial innovation and organisational processes of digital transformation. In doing so, it provides a theoretical contribution by integrating the Technology–Organization–Environment (TOE) framework with performance outcomes of organizations in financial services. While emerging studies are predominantly based on the technical architecture or cryptocurrency ecosystem, the research builds upon empirical evidence that views integration of blockchains as an organizational capability enhanced by technology readiness and governance structures and regulatory ecosystems. This allows the Study to relate these drivers to financial transparency and operational efficiency outcomes, thus gaining a more thorough understanding of how blockchain technologies affect institutional performance in financial ecosystems.

Another important aspect is of empirical theoretical contribution that provides explanation regarding the way in which technical, organizational and environmental factors are combined for blockchain integration across financial institutions. Overall, the results highlight that, despite being technologically prepared, blockchain alone might not lead to an effective deployment. Rather than discrete matters, these can be characterized as connective tissue that align the needs of technical capabilities and the high level goals of organizational mission and regulatory requirements. This integrative lens adds new elements to the strands of current literature on financial technology regarding digital innovation and adoption by showing how internal institutional affordance (capabilities) interacts with external environmental conditions.

The study expands on the second stage of blockchain adoption outcomes theory by examining its dimension through financial transparency and operational efficiency. It can be developing more know-how as an illustration of this technology can facilitate transparency and better processes, as well add up for a literature that helps tell us how such distributed ledger tech can enable harm due accounting, improve monetary reporting integrity, streamline financial transaction enabling it to reach standard. Thus, the results offer a theoretical basis for viewing blockchain as an architectural innovation that may ultimately be seen as a digital asset infrastructure# to facilitate speculative financial transactional and governance-related activities instead of merely being related to technology.

7.2 Practical implications

The mass adoption of revolutionary technology unleashed by the blockchain over just the last couple of years has resulted in a tremendous digital transformation in the financial services industry thanks to its ability to automate traditional processes and overhaul existing institutions. These findings are a roadmap for financial institutions that want to incorporate these blockchain technologies as an integrated part of their operational and strategic approach. However, the findings show that investment in technological readiness, robust governance frameworks and supportive regulatory regimes are important for successful integration of blockchain into financial service operations.

Hence, if we relate it back to management language, we know that the financial institutions should reengineer the technology around their businesses to adapt with blockchain. Building IT systems, cybersecurity infrastructure; and technical know-how expertise all of these are prerequisites for successfully transitioning distributed ledger technologies into the financial ecosystem. Such organizations with robust technology capabilities will be well positioned to tackle implementation challenges and effectively integrate blockchain into payment systems, financial reporting processes and transaction verification frameworks.

The study also introduces good communication patterns of blockchain adopters, indicating that there has to be some governance at the organizational level for appropriate adoption of blockchain technologies. Governance and governance bodies: Financial institutions should consider having well-defined governance frameworks, leadership models and decision-making bodies overseeing digital innovation initiatives. Narratives for blockchain programs should support the higher objectives of an enterprise or embed themselves within its risk culture; successful conduits are cross-discipline collaboration and commitment from leadership to coordinate a suite of technology investments.

In addition, the results reinforce regulators and policymakers need to create a conducive environment for blockchain Interoperability implementation in finance. So clarity on regulation, law and innovation including whatever legislation might emerge around financial technologies sandboxes will greatly help reduce uncertainty around blockchain technologies and at the same time facilitate experimentation by financial institutions into what they believe to be a potential use case of distributed ledgers. Therefore, policymakers have a key role to play in developing regulatory regimes that both protect financial and technical innovation while allowing for the safe and secure integration of block chain solutions by financial institutions while ensuring compliance with regulation.

Finally, the results matter to colleges and career training programs. If so, this study’s conceptual framework should be able to generate a practical guide of the relevant classes throughout fintech, along with digital finance and blockchain technology fields. We will need to pull together a model that explains how these factors combine to influence the outcomes of blockchain integration for students and practitioners, if they want or even need to understand what all this means strategically from the point of view of digital transformation in financial services.

7.3 Limitations and future research

While this study has provided some information about blockchain in banking, there are several limitations associated with the study that need to be identified. The first limitation is the use of a cross-sectional methodology to collect organizational perception data. Cross-sections are used for capturing an organization’s perceptions of a specific topic at a single point in time. Thus, cross-sectional methodologies limit the researcher’s ability to assess if changes occur as a result of introducing blockchain into their organizations (causality) and/or how the organization’s use of blockchain evolves during each stage of digital transformation. A longitudinal methodology will offer greater support for assessing organizational change due to the introduction of new technologies such as blockchain.

The second limitation is that the study employed a non-probabilistic sampling strategy where managerial employees who were actively involved in the bank’s blockchain initiative(s) and digital transformation activities were selected to participate in the study. While using knowledgeable respondents in this manner will ensure that the study receives informed feedback from those most familiar with the bank’s blockchain initiative(s), there can be no guarantee that all managerial employees within the bank have participated in the study. Therefore, while the use of knowledgeable respondents does reduce potential biases related to respondents’ knowledge of the bank’s blockchain initiative(s), it also introduces the possibility of selection bias and reduces the statistical generalizability of the study’s results to the entire banking workforce.

The third limitation relates to reliance on self-reporting through questionnaire data. Self-reporting through questionnaires provides subjective assessments by individual respondents. Since the study relied solely upon a single respondent at one point in time, the study’s results may suffer from common method variance, social desirability bias and respondent subjectivity. As mentioned earlier, the researcher attempted to address these issues through various procedural methods but cannot eliminate them entirely.

Lastly, the empirical analysis conducted in this study is limited to licensed commercial banks operating in Jordan. As mentioned above, institutional environments, technological capabilities and regulatory requirements vary significantly among countries. Therefore, extreme caution should be applied when generalizing the findings reported here to other financial systems, especially emerging markets.

Future research will be directed toward extending this model in at least four ways. The first direction is to conduct longitudinal research that examines how blockchain adoption develops through the stages of an organization’s digital transformation as well as if the relative importance of technology, organizational and environmental factors evolve with each stage of the process.

The second direction involves comparative research across organizations from different countries and/or industries (i.e., insurance companies, fintech firms, investment firms and microfinance institutions) to further examine how different institutional and regulatory environments affect the implementation of blockchain by organizations.

The third area for future research involves adding other organizational capabilities such as digital innovation culture, leadership ability, cybersecurity maturity, organizational learning and strategic digital alignment to explain additional variation in blockchain integration.

In addition to examining current blockchain applications, future research may also need to examine new emerging blockchain applications such as blockchain-based AI systems, DeFi, CBDCs, tokenized financial instruments, and Smart-Contract Ecosystems to help understand how these technologies together can influence organizational performance.

Lastly, researchers are encouraged to use mixed methods approaches (such as using both qualitative and quantitative data), multi level analyses, or objective measures of organizational performance to supplement self reported survey responses to obtain a greater understanding of blockchain enabled digital transformation.

8 Conclusion

New technologies at the crest of rapid acceleration of digital transformation processes in banking, including blockchain technology, introduce new opportunities for institutional structures development and performance improving at banks. The financial institutions of today find themselves functioning in increasingly complex landscapes defined by technological disruption, regulatory scrutiny and competition that demand continuous innovation. Amidst this landscape, blockchain technology manifested as an immutable layer of digital infrastructure that complements the transparency, security and effectiveness of financial processes.

As a TOE-based study, it aims to explore the factors of technological, organizational, and environmental context that propel financial institutions to embrace blockchain based systems in their day-to-day operations, therefore illuminating how they present combination with blockchains resulting in greater levels of operational efficiency or significant status for finances. To a more specific extent, the paper aims to explore how technological readiness and organizational governance can be substantive drivers for a financial services firm to adopt blockchain with the mediatory role of regulatory support. The empirical evidence presented in the study was based on data collected from Jordan’s banking sector and analyses employing PLS-SEM, reinforcing the relationships outlined in the proposed research framework.

Three Determinants of Blockchain Implementation Within Financial Institutions: The first one is the development stage of technology, while the second and third are organizational governance and regulatory justification respectively. Financial institutions that are likely to have such applications of decentralized finance embedded in their daily working and transactions are those which have advanced digital infrastructure, strong governance mechanisms and an amiable regulatory environment. In addition, the blockchain-related study found that it substantially increases financial transparency and operational effectiveness. We conclude by discussing the implications of our findings for using distributed ledger technologies to increase transaction traceability in innovative validation of financial information, usurping operational complexity and speeding banking operations.

This research adds to the blockchain and digital transformation body of knowledge beyond validating the research hypothesis, by applying the TOE framework from understanding how technology is adopted in organizations to understand how an organization can develop new organizational capabilities and their impact on its performance. In addition, the results indicate that the integration of blockchain into financial institutions represents a strategic organizational capability that enhances the financial transparency and operational efficiency when three components are aligned; technological readiness, organizational governance, and regulatory support. Finally, the study provides strong empirical evidence that technological readiness has the greatest influence on the integration of blockchain, thus demonstrating that digital infrastructure and technical ability are critical to successfully implementing blockchain in regulated financial institutions.

Additionally, the results of this research will have practical implications for bank executive managers and policymakers. Bank managers need to first invest in their technological infrastructure, security capabilities, and related experience/expertise in blockchain before proceeding with large scale implementations. Regulatory bodies should also continue to create/expand and formalize regulatory structures (i.e., regulatory sandboxes, governance guidelines) to enable safe blockchain usage by banks while still protecting against financial instability.

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Footnotes

Edited by: Jhon Sanchez, University of Caldas, Colombia

Reviewed by: Dien Noviany Rahmatika, Universitas Pancasakti Tegal, Indonesia

Arva Athallah Susanto, Airlangga University, Indonesia