Fintech-driven sustainability: Examining the pathways to sustainable performance through innovation and circular practices in emerging market SMEs

Small and medium-sized enterprises in emerging economies face persistent sustainability constraints due to limited financial access, weak digital infrastructure, and mounting regulatory pressures. FinTech adoption emerges as a strategic enabler for sustainable performance, yet the operational mechanisms through which digital finance translates into sustainability outcomes remain underexplored. Grounded in innovation diffusion theory and the resource-based view, this research examines how FinTech adoption influences sustainable performance through green innovation, sustainable supply chain management, and circular economy practices, with digital transformation as a boundary condition. Analysis of survey data from 394 managerial respondents in Pakistan demonstrates that FinTech adoption significantly enhances sustainable performance through direct (β = 0.095, p < 0.05) and indirect pathways. Green innovation, sustainable supply chain management, and circular economy practices collectively mediate this relationship, with indirect effects ranging from β = 0.037 to 0.156 (p < 0.05). Digital transformation amplifies these pathways, yielding interaction effects between β = 0.156 and 0.209 (p < 0.05). The framework explains 58.4% of the variance in sustainable performance (R 2 = 0.584) and demonstrates predictive relevance (Q 2 = 0.286). The findings suggest that FinTech adoption alone is insufficient to generate sustainability gains; rather, value realization depends on embedding digital financial tools within structured organizational capabilities and sustainability-oriented routines. This research advances theoretical discourse by resolving the direct-effect bias in digital sustainability literature and provides actionable guidance for policymakers and managers seeking to align financial innovation with operational sustainability in resource-constrained emerging markets.