The importance of utilizing AI in the transformation and reformation of Iran's banking industry: a SD approach

Abstract

Iran’s banking sector faces structural inefficiencies, outdated infrastructures, and rising financial risks. This study examines how artificial intelligence (AI) can support its transformation using a system dynamics approach. Simulation results show that higher levels of AI adoption improve operational efficiency, reduce costs, strengthen fraud detection, and enhance customer trust. However, challenges such as regulatory constraints, high implementation costs, and resistance to change limit successful integration. The study concludes that targeted investments and supportive regulations are essential for leveraging AI’s full potential and enabling sustainable modernization within Iran’s banking system.