From AI Adoption to Digital Transformation: The Roles of AI Readiness, Digital Skills, and Digital Trust in Indian Financial Services

While artificial intelligence (AI) has quickly established itself as the backbone of digital transformation (DTx) in the realm of financial services, there remains a limited understanding of the organizational and human factors that affect the adoption of AI and its manifestations in transformation outcomes, particularly in emerging markets. This study, framed through the Technology–Organisation– Environment (TOE), Unified Theory of Acceptance and Use of Technology (UTAUT), and digital trust theories, proposes and tests an empirical model that confirms AI Readiness, Digital Skills, and Digital Trust as antecedent factors of AI Adoption, thus leading to DTx in Indian financial services organizations. Data were collected through a survey of 412 employees from public sector banks, private sector banks, non-banking financial institutions (NBFCs), and fintech companies across India. A measurement model revealed high reliability (Cronbach's α .862 ‒ .880) and validity (KMO = .924; Bartlett's χ²(300) = 5231.22, p < .001; five-factor model explaining 51.4% of variance). Data analysis using hierarchical multiple regression showed that AI Readiness (β = .28, p < .001), Digital Skills (β = .29, p < .001), and Digital Trust (β = .24, p < .001) made a significant impact on AI Adoption (R² = .306) with AI Adoption being the strongest predictor of DTx (β = .37, p < .001; R² = .425) controlling for the three predating factors. Bootstrapped mediation analysis (5,000 resamples) was conducted to confirm the mediating effects of AI Adoption on the impact of all three antecedents in terms of Digital Transformation. It also revealed no statistically significant differences in Digital Transformation outcomes across organization types or gender groups, indicating that the observed transformation outcomes did not significantly vary across these categories in the present sample.