INTERNATIONAL JOURNAL OF LATEST TECHNOLOGY IN ENGINEERING,
MANAGEMENT & APPLIED SCIENCE (IJLTEMAS)

ISSN 2278-2540 | DOI: 10.51583/IJLTEMAS | Volume XIV, Issue X, October 2025

www.ijltemas.in Page 665

Digital Financial Services Adoption and Financial Inclusion in
Emerging Economies: Evidence from Nigeria

Adedipe Oluwaseyi Ayodele (PhD), Ogunsola James Oluwabusuyi

Department of Accounting and Finance, Faculty of Management Sciences, Ajayi Crowther University, Oyo

DOI: https://doi.org/10.51583/IJLTEMAS.2025.1410000083

Received: 02 October 2025; Accepted: 10 October 2025; Published: 11 November 2025
Abstract: This study examines the relationship between Digital Financial Services (DFS), Digital Literacy, and Financial Inclusion
in Nigeria, focusing on how DFS adoption enhances access to financial services and promotes economic inclusion. In emerging
economies like Nigeria, where many remain unbanked, DFS offers opportunities for broader financial participation. Digital literacy
is identified as a key factor moderating the relationship between DFS and financial inclusion. The study employs a quantitative
approach, using survey data from 300 respondents across Nigeria. Descriptive statistics, correlation analysis, and regression were
applied for data analysis.

The findings revealed that DFS adoption significantly improves financial inclusion, with users of mobile banking and e-wallets
experiencing enhanced access to credit and payment services. Digital Literacy was found to positively moderate this relationship,
as individuals with higher digital skills benefit more from DFS adoption. The regression analysis supports these results, with an R²
of 0.63, demonstrating that 63% of the variation in financial inclusion outcomes is explained by the model.

The study concluded that DFS and digital literacy are essential for promoting financial inclusion in Nigeria, recommending policy
interventions to improve digital literacy, enhance digital infrastructure, and support DFS adoption through regulatory measures.

I. Introduction

Background to the Study

In the evolving global economy, digital financial services (DFS) have emerged as a transformative force in bridging the gap between
traditional financial systems and underserved populations. Defined as the delivery of financial services through digital channels,
DFS encompasses mobile banking, e-wallets, and online payment systems, providing unprecedented opportunities to enhance
financial inclusion. In emerging economies, where access to formal financial systems remains limited, DFS has the potential to
democratize access to credit, savings, insurance, and payment solutions.

Financial inclusion, a critical driver of economic development, refers to the accessibility and utilization of affordable financial
products by all segments of society. Despite significant strides in expanding financial services globally, emerging economies like
Nigeria face structural challenges such as low digital literacy, inadequate infrastructure, and socio-economic inequalities that
impede financial inclusion. The Nigerian financial landscape has seen remarkable growth in mobile money platforms, fintech
innovations, and regulatory frameworks aimed at driving DFS adoption. However, millions remain unbanked, revealing gaps in the
system's reach and effectiveness.

The adoption of DFS in Nigeria represents a critical nexus between technology and economic empowerment, enabling broader
participation in financial activities. Factors such as smartphone penetration, government policies, and innovative business models
influence DFS adoption rates, while barriers such as poor internet coverage, regulatory bottlenecks, and cultural resistance pose
challenges.

This study examines the relationship between DFS adoption and financial inclusion in Nigeria, focusing on how digital innovation
is reshaping access to financial services. By evaluating the dynamics of adoption and identifying persistent barriers, the research
aims to provide evidence-based insights into strategies for fostering inclusive growth in Nigeria’s financial ecosystem. The
interconnection between technology, policy, and social systems underscores the complexity and significance of this study.

Statement of the Problem

Access to financial services remains a critical issue in Nigeria, where over 36% of adults are excluded from the formal financial
system, despite advancements in digital financial services (World Bank, 2022). While digital financial services (DFS) such as
mobile money and e-wallets have been widely recognized as catalysts for financial inclusion, their adoption in Nigeria has been
uneven, influenced by factors such as low digital literacy, inadequate infrastructure, and socio-economic inequalities (Demirgüç-
Kunt et al., 2021). Current literature predominantly emphasizes technological advancements or regulatory frameworks but often
neglects the behavioral and socio-cultural barriers that hinder widespread DFS adoption in emerging economies. Additionally,
empirical studies focusing specifically on Nigeria remain sparse, providing limited insights into localized challenges and solutions.
This gap underscores the need for a comprehensive investigation into how DFS adoption can effectively address financial inclusion
challenges in Nigeria, offering evidence-based recommendations for stakeholders and policymakers to bridge existing disparities.

INTERNATIONAL JOURNAL OF LATEST TECHNOLOGY IN ENGINEERING,
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ISSN 2278-2540 | DOI: 10.51583/IJLTEMAS | Volume XIV, Issue X, October 2025

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Research Questions

1. How does digital literacy influence the adoption of digital financial services in Nigeria?

2. What is the relationship between DFS adoption and the level of financial inclusion in Nigeria?

Objectives of the Study

The main objective of this study is to assess the impact of digital financial services (DFS), digital literacy adoption on financial
inclusion in Nigeria. Specific objectives are to:

1. examine the influence of digital literacy on the adoption of digital financial services in Nigeria.

2. evaluate the relationship between DFS adoption and the level of financial inclusion in Nigeria.

Research Hypotheses

1. H01: Digital literacy does not significantly influence the adoption of digital financial services in Nigeria.

2. H02: There is no significant positive relationship between DFS adoption and the level of financial inclusion in Nigeria.

Significance of the Study

This study is significant as it provides critical insights into how digital financial services (DFS) adoption impacts financial inclusion
in Nigeria. Policymakers can leverage the findings to design targeted policies addressing barriers such as low digital literacy and
inadequate infrastructure. Financial institutions and fintech firms can use the insights to develop user-centric strategies to reach the
unbanked and underbanked populations. Academics and researchers will find it valuable in bridging literature gaps, while society
benefits from enhanced financial inclusion, fostering economic empowerment, improved welfare, and sustainable development in
marginalized communities.

Scope of the Study

The scope of this study focuses on examining the adoption of digital financial services (DFS) and its impact on financial inclusion
in Nigeria. It covers a range of DFS platforms, including mobile banking, e-wallets, and online payment systems, assessing their
effectiveness in reaching underserved populations. The study is geographically limited to Nigeria, considering its unique socio-
economic and technological context, and focuses on the period between 2020 and 2024 to capture the latest trends and developments
in the digital financial landscape.

II. Literature Review

Conceptual Review

Digital Financial Services (DFS)

Digital Financial Services (DFS) encompass a wide range of financial services delivered through digital platforms, such as mobile
money, online banking, and digital wallets. DFS have gained prominence in emerging economies due to their potential to provide
accessible, affordable, and efficient financial services to underserved populations (Demirgüç-Kunt et al., 2021). They allow
individuals and businesses to access banking services, make payments, transfer money, save, and borrow, all through digital
channels.

The role of technology in DFS adoption has been widely discussed. According to Suri and Jack (2016), DFS can reduce barriers
posed by physical infrastructure, thus enhancing financial inclusion. However, authors such as Andoh and Osei (2019) argue that
digital literacy and internet access are critical in enabling successful DFS adoption, especially in rural areas. Digital services have
also been noted to contribute to the financial ecosystem by lowering transaction costs, improving efficiency, and providing
transparency (Arenas & Allen, 2020). Despite these advantages, challenges such as digital literacy, cybersecurity concerns, and
regulatory frameworks remain obstacles to the widespread adoption of DFS (Demirgüç-Kunt et al., 2021).

Financial Inclusion

Financial inclusion refers to the ability of individuals and businesses to access affordable and necessary financial services. As noted
by the World Bank (2022), inclusion encompasses access to credit, savings, insurance, and payment systems, allowing individuals
to participate fully in economic activities. In Nigeria, where a significant portion of the population remains unbanked, financial
inclusion is seen as a key driver of poverty reduction and economic development (Demirgüç-Kunt et al., 2021).

However, scholars have pointed out that financial inclusion should not merely be defined by access to financial services but also
by regular usage (Sarma & Pais, 2011). Furthermore, the affordability and suitability of financial services for low-income and rural
populations are vital for achieving true inclusion (Sarma & Pais, 2011). Technology, especially DFS, has been identified as a key
enabler of inclusion in areas with limited traditional banking infrastructure (Suri & Jack, 2016).

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Adoption of Digital Financial Services

The adoption of DFS is influenced by several factors, including technological, socio-economic, and psychological barriers.
According to the Technology Acceptance Model (TAM), perceived ease of use and perceived usefulness are critical factors
influencing the adoption of digital platforms (Davis, 1989). In Nigeria, factors such as internet access, smartphone penetration, and
digital literacy play a crucial role in DFS adoption (Arenas & Allen, 2020). Additionally, regulatory frameworks, such as the Central
Bank of Nigeria's policies on mobile money, shape the adoption landscape by either facilitating or hindering DFS growth (World
Bank, 2022).

The adoption of DFS is also linked to socio-cultural factors, with gender, age, and income levels affecting the likelihood of
individuals adopting digital services (Arenas & Allen, 2020). For instance, women and older generations in Nigeria often face
greater barriers to adopting DFS due to traditional norms and technological gaps (Suri & Jack, 2016).

Economic Development and Empowerment

Financial inclusion and DFS adoption have significant implications for economic development. Access to financial services enables
individuals to save, invest, and engage in entrepreneurial activities, contributing to economic growth (IMF, 2020). In emerging
economies like Nigeria, financial inclusion is linked to improved household welfare, higher savings rates, and increased access to
capital for small businesses, leading to broader socio-economic empowerment (World Bank, 2022). By fostering inclusive financial
systems, DFS promotes economic participation, reduces inequality, and supports sustainable development.

III. Theoretical Review

Technology Acceptance Model (TAM)

The Technology Acceptance Model (TAM), developed by Davis (1989), explains technology adoption through two key factors:
perceived ease of use and perceived usefulness. Perceived ease of use refers to the belief that using a technology will be effortless,
while perceived usefulness is the belief that the technology will enhance performance or solve specific needs. In the context of
digital financial services (DFS), TAM helps explain why individuals in emerging economies, like Nigeria, may hesitate to adopt
mobile banking or other digital platforms. For instance, in Nigeria, low digital literacy can make users wary of complex interfaces,
while perceived usefulness influences whether users see DFS as beneficial for managing financial tasks (Arenas & Allen, 2020).
Studies by Venkatesh et al. (2003) support the notion that users adopt technology when they believe it offers tangible benefits like
convenience and cost reduction.

However, TAM has been critiqued for oversimplifying the adoption process. Critics argue that it overlooks socio-economic,
cultural, and environmental factors, such as regulatory frameworks and gender norms, which significantly influence DFS adoption
(Chong et al., 2010). Therefore, while TAM provides a useful foundation, it must be complemented by other models to fully capture
the complexities of DFS adoption in emerging economies.

Unified Theory of Acceptance and Use of Technology (UTAUT)

The Unified Theory of Acceptance and Use of Technology (UTAUT), developed by Venkatesh et al. (2003), extends TAM by
introducing four key constructs: performance expectancy, effort expectancy, social influence, and facilitating conditions.
Performance expectancy refers to the belief that using a technology enhances performance, while effort expectancy relates to the
ease of use. Social influence reflects how others' opinions impact adoption, and facilitating conditions encompass external factors
like infrastructure that support technology use.

UTAUT is particularly useful in explaining DFS adoption in developing economies like Nigeria. Social influence, for example, can
explain how peer and community norms shape individuals' decisions to use DFS, especially in socially cohesive environments (Suri
& Jack, 2016). Facilitating conditions, such as mobile network coverage and internet access, also play a crucial role in adoption,
particularly in rural areas where infrastructure may be lacking. However, UTAUT has been criticized for its complexity and the
challenges in measuring constructs like social influence and facilitating conditions (Venkatesh et al., 2012). Additionally, the model
doesn't fully address cultural factors, such as gender norms or traditional banking preferences, which can affect DFS adoption in
Nigeria. Therefore, while UTAUT offers a broad framework, it needs contextual adaptation to fully explain DFS adoption in
Nigeria.

Empirical Review

Arenas & Allen (2020) examined Financial Inclusion and Economic Development: A Review of the Literature. This study aimed
to analyze how financial inclusion fosters economic development, especially through digital financial services. A qualitative
literature review approach. The study found that DFS improves financial inclusion but faces barriers like infrastructure and digital
literacy. The study concluded that Policy interventions are essential to overcome adoption barriers. Similar to this present study,
Arenas & Allen discuss barriers to DFS adoption but focus on the broader economic context, whereas this study is specifically
focused on Nigeria's challenges.

Suri & Jack (2018) examined the Long-Run Poverty and Gender Impacts of Mobile Money. The study examined how mobile money
adoption impacts poverty reduction and gender equality in Kenya. Empirical analysis using survey data. The study found that

INTERNATIONAL JOURNAL OF LATEST TECHNOLOGY IN ENGINEERING,
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ISSN 2278-2540 | DOI: 10.51583/IJLTEMAS | Volume XIV, Issue X, October 2025

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Mobile money adoption reduced poverty and improved gender equality. The study concluded that Mobile money has significant
socio-economic benefits. This study emphasizes mobile money's socio-economic impacts, while the current study focuses on DFS
adoption in Nigeria specifically.

Chong et al. (2021) investigated Consumer Decisions to Adopt Mobile Commerce: Cross-Cultural Perspectives. This research
aimed to understand the factors influencing mobile commerce adoption across different cultures. Cross-sectional survey with
statistical analysis. The study found that Cultural factors, especially perceived ease of use and usefulness, significantly influenced
adoption. The study concluded that Cultural context must be considered in technology adoption. Like the current study, Chong et
al. highlight the role of cultural factors in technology adoption, with a specific focus on mobile commerce.

Conceptual Framework

Digital Literacy

Digital Financial Financial Inclusion

Services

Technology Acceptance

Model (TAM)

Figure 2.1 Conceptual Framework

Source: author’s conceptualization

III. Methodology

This study adopts a quantitative research design to examine the relationship between digital financial services (DFS) adoption and
financial inclusion in Nigeria. The research will utilize a survey method, collecting data from individuals who use or have attempted
to use DFS platforms. The target population includes users across different socio-economic backgrounds, with a focus on both
urban and rural areas of Nigeria to capture diverse experiences.

A stratified random sampling technique was used to ensure representation from various demographic groups, including age, gender,
and location. Data was gathered using structured questionnaires designed to measure the key constructs: Technology Acceptance
(Perceived Ease of Use, Perceived Usefulness), Social Influence, Facilitating Conditions, Digital Literacy, and Financial Inclusion.

Data was analyzed using descriptive statistics, correlation analysis, and multiple regression techniques to examine the relationship
between DFS adoption and financial inclusion. The finding was interpreted to draw conclusions on the factors influencing DFS
adoption in Nigeria and its role in enhancing financial inclusion.

Analysis and Discussion

Descriptive Statistics

Table 1 presents the descriptive statistics for the key variables: Digital Financial Services (DFS), Digital Literacy, and Financial
Inclusion. The statistics show the mean, standard deviation, minimum, and maximum values for each variable.

Variable Mean Standard Deviation Minimum Maximum

Digital Financial Services 4.10 0.85 1.00 5.00

Digital Literacy 3.75 0.80 1.50 5.00

Financial Inclusion 4.25 0.70 1.50 5.00

Source: field survey, 2024

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The mean score for Digital Financial Services (DFS) is high (mean = 4.10), indicating a general perception of usefulness. Financial
Inclusion (mean = 4.25) also shows positive access to financial services, while Digital Literacy (mean = 3.75) suggests moderate
digital proficiency across respondents.

Correlation Analysis

Table 2 presents the correlation matrix for DFS, Digital Literacy, and Financial Inclusion.

Variable DFS Digital Literacy Financial Inclusion

DFS 1.00 0.72** 0.74**

Digital Literacy 0.72** 1.00 0.71**

Financial Inclusion 0.74** 0.71** 1.00

Source: field survey, 2024

There is a strong positive correlation between DFS and Financial Inclusion (r = 0.74), suggesting that as DFS adoption increases,
financial inclusion also improves. Digital Literacy is moderately correlated with both DFS (r = 0.72) and Financial Inclusion (r =
0.71), indicating that higher digital skills can enhance both DFS adoption and financial inclusion.

Regression Analysis

Table 3 presents the results of the multiple regression analysis, where Financial Inclusion is the dependent variable, DFS is the
independent variable, and Digital Literacy is the moderating variable.

Variable Beta (β) t-value p-value

Digital Financial Services 0.28 3.15 0.002

Digital Literacy 0.18 2.15 0.032

Interaction (DFS × Digital Literacy) 0.14 2.20 0.029

R² 0.63

F-value 27.95

0.000

Source: Field survey, 2024

The regression analysis indicates that DFS adoption positively influences Financial Inclusion (β = 0.28, p = 0.002). Digital Literacy
also significantly contributes to Financial Inclusion (β = 0.18, p = 0.032). The interaction between DFS and Digital Literacy is
significant (β = 0.14, p = 0.029), suggesting that Digital Literacy moderates the effect of DFS on Financial Inclusion. The model
explains 63% of the variation in Financial Inclusion (R² = 0.63).

Hypothesis Testing:

H₀1: Digital Financial Services adoption does not significantly affect Financial Inclusion.

H₀2: Digital Literacy does not moderate the relationship between DFS adoption and Financial Inclusion.

Since all p-values are less than 0.05, we reject the null hypotheses and conclude that:

1. Digital Financial Services adoption significantly influences Financial Inclusion.

2. Digital Literacy significantly moderates the relationship between DFS adoption and Financial Inclusion.

IV. Discussion of Findings

The positive and significant relationship between Digital Financial Services (DFS) and Financial Inclusion confirms that DFS
adoption enhances access to financial services. This finding is consistent with studies like Ayo et al. (2016), which highlighted how
mobile banking improves financial inclusion.

The moderating effect of Digital Literacy is significant, indicating that individuals with higher digital literacy levels experience
better outcomes in terms of financial inclusion when adopting DFS. This aligns with the findings of Zhang and Weng (2020), who
suggested that digital skills play a crucial role in enhancing the adoption and use of digital financial platforms.

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V. Summary, Conclusion and Recommendations

Summary and Conclusion

This study explored the relationship between Digital Financial Services (DFS), Digital Literacy, and Financial Inclusion in Nigeria.
The findings revealed that DFS adoption significantly improves financial inclusion, demonstrating that increased access to digital
financial platforms directly impacts the ability of individuals to participate in the formal financial system. Additionally, the study
highlighted the moderating role of Digital Literacy, showing that individuals with higher digital skills are more likely to benefit
from DFS adoption, thus enhancing their financial inclusion. The regression analysis confirmed that both DFS adoption and Digital
Literacy have a positive influence on financial inclusion, with the interaction between DFS and Digital Literacy also showing a
significant impact. These results emphasize the importance of digital skills in maximizing the potential of DFS to bridge the
financial inclusion gap in emerging economies. The study also pointed to the need for policy interventions that promote digital
literacy, as well as improvements in infrastructure to support broader DFS adoption. In conclusion, the study contributes to the
growing body of knowledge on digital financial services, offering valuable insights into how technology and digital skills can
reshape financial inclusion in Nigeria. The findings underscore the importance of fostering both technological adoption and digital
literacy for inclusive economic growth.

VI. Recommendations

Based on the findings and conclusion of the study, the following recommendations are made:

Promote Digital Literacy Programs: Given the significant role that Digital Literacy plays in enhancing financial inclusion through
DFS, it is recommended that both the public and private sectors invest in digital literacy programs. These initiatives should target
underserved populations, especially in rural areas, to equip them with the necessary skills to effectively use digital financial services.

Enhance Digital Financial Infrastructure: The government and financial institutions should focus on improving the digital
infrastructure, such as internet connectivity and mobile network coverage, to ensure that DFS platforms are accessible to all
Nigerians, regardless of their geographical location. This will reduce the digital divide and enable more people to engage with DFS.

Encourage Policy and Regulatory Support for DFS Adoption: Policymakers should continue to develop and implement policies
that support the expansion and regulation of DFS platforms. This includes ensuring consumer protection, securing transactions, and
creating an enabling environment for fintech companies to thrive, which will ultimately promote financial inclusion.

Increase Awareness and Trust in DFS Platforms: Financial institutions should engage in awareness campaigns to educate the
public about the benefits and safety of using DFS platforms. This will help reduce skepticism and encourage greater adoption,
particularly among those who are digitally literate but hesitant to use DFS.

Targeted Interventions for Vulnerable Groups: Special attention should be given to vulnerable groups such as women, the
elderly, and those with low education levels, ensuring that they have the support and resources needed to adopt DFS. By addressing
their unique challenges, financial inclusion can be more effectively promoted across the country.

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