EFFECT OF FINANCIAL TECHNOLOGY ON THE PERFORMANCE OF BANKS IN NIGERIA
Abstract
ABSTRACT
The Nigerian banking sector faces uncertainty regarding the effect of fintech adoption on bank performance, with debates surrounding its benefits and drawbacks. Fintech's effect on Nigerian commercial banks' performance, particularly through ATM, POS, web pay, and mobile pay transactions, remains unclear.
The objective of this study is to assess the effect of the volume of Automated teller machine (ATM) transactions on the loan-to-deposit ratio of Nigerian banks, evaluate the influence of the volume of Point of Sale (POS) transactions on the loan-to-deposit ratio of Nigerian banks, determine the effect of the volume of Web pay transactions on the loan-to-deposit ratio of Nigerian banks, examine the extent to which the volume of Mobile Pay transactions affects the loan-to-deposit ratio of Nigerian banks.
This study adopt the Autoregressive Distributed Lag (ARDL) model to capture both short-run and long-run dynamics, complemented by diagnostic test to ensure robustness.
Findings revealed that ATM and POS transactions exerted no significant positive influence on banks' performance, reflecting infrastructural challenges, inefficiencies, and high operating costs. Web Pay transactions showed a significant but negative effect in both the short and long run, suggesting that online payments are associated more with fund outflows than deposit mobilization, compounded by regulatory and security concerns, Mobile pay transactions demonstrated a positive and significant effect in the long run, though their Short-run effect remained insignificant. This highlights mobile banking as a transformative driver of financial intermediation and bank efficiency in Nigeria's evolving fintech ecosystem.
The study concludes that fintech channels have transformed Nigerian banking, but their contribution to performance is uneven, with mobile banking showing the most potential. Traditional channels like ATMs and POS require improvement, while Web Pay needs stronger regulation. Recommendations include modernizing ATM infrastructure, enhancing POS reliability, strengthening Web Pay oversight, and deepening mobile banking investments. These actions can unlock fintech's full potential in Nigeria's banking sector.
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