With the emergence of technological innovations, digital finance with a blend of new models and the development of inclusive financial innovation shows great significance for business firms to emphasize innovative and competitive product market competition. Thus, financial digitalization and business environment directives help improve the financial performance of business enterprises. This study assesses the role of product market competitiveness on firm performance through the mediating role of digital financial innovation. The annual data of 90 companies from 2014 to 2020 is taken from the Pakistan stock exchange market. The empirical results are estimated using three paths by the Structural Equation Model (SEM) regression approach. The study identifies that product market competitiveness positively contributed to determining the firm performance. Besides, digital financial innovation serves as the mediator in the study, which partially positively determines firm performance. It shows that firm financial innovation fails to account fully for firm performance. This study does not include several other factors determining firm performance. The research results deliver a useful empirical and theoretical contribution to digitalization and product innovation. The findings help to uncover the antecedents of financial innovation and firm performance. This research model can assist researchers in designing robust strategies to appraise the impact on firm performance. Investigators may advance valuable insights by integrating this methodology. Concerning originality, these results indicate that digitalized innovation positively influences firm performance by offering innovative products and digitalization. The outcomes contribute to the literature on digital innovation, and the study recommends that business organizations should pay particular attention to improving financial innovation and digitization in business firms.