Financial Technology and Bank Sustainability in Nigeria: Evidence from Efficiency, Financial Inclusion, and Dynamic Effects (2010–2024)
Article Sidebar
Main Article Content
This study examines the effect of financial technology (FinTech) adoption on the sustainability of deposit money banks in Nigeria over the period 2010–2024. Anchored on the Innovation–Stability Framework of Boot and Thakor (2019), the study investigates whether FinTech-driven channels improve bank sustainability directly and indirectly through operating efficiency and financial inclusion. Secondary data were obtained from the Central Bank of Nigeria, the Nigeria Inter-Bank Settlement System, the National Bureau of Statistics, and annual reports of selected banks. The study employs the Autoregressive Distributed Lag (ARDL) model to estimate short-run and long-run dynamics, while Structural Equation Modelling (SEM) is used to examine mediation effects. The findings confirm a long-run relationship between FinTech adoption and bank sustainability. Operating efficiency emerges as the strongest mediating channel and contributes positively to profitability and sustainability. By contrast, financial inclusion exerts a negative mediating effect, suggesting that rapid expansion without adequate risk management may strain bank resources. ATM and POS transactions show positive effects on efficiency and sustainability, whereas mobile banking produces mixed and largely negative outcomes. The study concludes that FinTech can support sustainable banking when supported by effective regulation, strong risk management, and adequate institutional capacity. It recommends policies aimed at improving digital literacy, strengthening cybersecurity, and deepening the regulatory framework for FinTech development in Nigeria.
Downloads
References
Adeleye, B. N., Ogbonna, C., & Ojo, A. (2021). Financial technology adoption and bank performance in Nigeria. Journal of Applied Finance & Banking, 11(5), 87–105.
Adeoye, A., & Osabuohien, E. (2022). Mobile banking adoption and financial inclusion in Nigeria: Opportunities and challenges. Journal of African Business, 23(4), 521–540. https://doi.org/10.1080/15228916.2021.1973812
Adu, D. A., Agyapong, D., & Kwaku, K. (2024). Bank sustainability, climate change initiatives and financial performance. Journal of International Financial Markets, Institutions & Money. https://doi.org/10.1016/j.intfin.2024.101123
Agyekum, F., Owusu, G., & Andoh, F. (2022). Digital finance, financial inclusion and bank performance in Ghana. International Journal of Finance & Economics, 27(4), 4125–4142. https://doi.org/10.1002/ijfe.2410
Alshater, M. M., Atayah, O. F., & Khan, M. (2022). FinTech and financial stability: A systematic literature review. Journal of Economic Surveys, 36(5), 1354–1386. https://doi.org/10.1111/joes.12490
Bonaccorsi, A., Ricci, F., & Rossi, L. (2024). Risks, regulations, and impacts of FinTech adoption on banks. Thunderbird International Business Review, 66(5), 1234–1251. https://doi.org/10.1002/tie.22404
Boot, A. W. A., & Thakor, A. V. (2019). Financial intermediation and regulation in the 21st century. Journal of Financial Intermediation, 39, 70–85. https://doi.org/10.1016/j.jfi.2019.01.001
Bueno, L. A., Gómez, M., & Rodríguez, P. (2024). Impacts of digitization on operational efficiency in the banking industry. Digital Business, 4(2), 100080. https://doi.org/10.1016/j.digbus.2024.100080
Central Bank of Nigeria. (2021a). Framework for regulatory sandbox operations. Central Bank of Nigeria.
Central Bank of Nigeria. (2021b). Regulatory framework for open banking in Nigeria. Central Bank of Nigeria.
Chao, L., Zhang, Y., & Sun, W. (2024). Sustainable performance evaluation of the banking industry: A multi-criteria perspective. Frontiers in Sustainability, 5, 1417512. https://doi.org/10.3389/frsus.2024.1417512
Dandapani, K., & Karels, G. V. (2024). FinTech, systemic risk, and the stability of financial institutions. International Review of Financial Analysis, 88, 102664. https://doi.org/10.1016/j.irfa.2023.102664
Dlamini, N., & Mbatha, P. (2023). FinTech adoption and bank efficiency in South Africa: A structural equation modeling approach. African Finance Journal, 25(2), 77–99.
Efuntade, A., & Okoye, P. (2024). FinTech adoption and digital financial inclusion in Nigeria: Policy and practice insights. Review of African Political Economy, 51(182), 305–322. https://doi.org/10.1080/03056244.2024.2321689
Elmahdy, A. H. A., & Hassan, S. (2025). Bridging the nexus between FinTech, operational efficiency, and bank performance. Future Business Journal, 11(1), 78. https://doi.org/10.1186/s43093-025-00478-x
Enhancing Financial Innovation & Access. (2023). Access to financial services in Nigeria 2023: Key highlights and snapshots. EFInA.
Feyen, E., Frost, J., Gambacorta, L., Natarajan, H., & Saal, M. (2021). FinTech and the digital transformation of financial services: Implications for market structure and public policy (BIS Papers No. 117). Bank for International Settlements & World Bank.
Gujarati, D. N., & Porter, D. C. (2022). Basic econometrics (6th ed.). McGraw-Hill.
Hair, J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, M. (2022). A primer on partial least squares structural equation modeling (PLS-SEM) (3rd ed.). Sage Publications.
International Monetary Fund. (2023). The dark side of the moon? FinTech and financial stability (Working Paper WP/23/253). IMF.
Ng, S., & Perron, P. (2001). Lag length selection and the construction of unit root tests. Econometrica, 69(6), 1519–1554. https://doi.org/10.1111/1468-0262.00256
Nguyen, H., Vo, D. H., & Le, T. (2021). FinTech adoption and bank performance: Evidence from Vietnam. Emerging Markets Finance and Trade, 57(9), 2685–2701. https://doi.org/10.1080/1540496X.2021.1894717
Ogunleye, O., Adebanjo, T., & Oladipo, B. (2022). FinTech penetration and financial inclusion in Nigeria: Empirical evidence. Cogent Economics & Finance, 10(1), 2081743. https://doi.org/10.1080/23322039.2022.2081743
Okorie, U., & Lin, B. (2021). Financial inclusion and bank profitability in Nigeria: A paradox of sustainability. International Journal of Emerging Markets, 16(6), 1234–1252. https://doi.org/10.1108/IJOEM-10-2019-0851
Oyewole, O., Adegbite, E., & Akintoye, O. (2023). FinTech adoption and bank profitability in Nigeria: ARDL approach. Journal of Banking Regulation, 24(3), 215–232. https://doi.org/10.1057/s41261-023-00194-1
Ozili, P. K. (2025). Financial inclusion and digital finance: A review and future research agenda. Finance Research Letters, 60, 104567. https://doi.org/10.1016/j.frl.2025.104567
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289–326. https://doi.org/10.1002/jae.616
Saunders, M., Lewis, P., & Thornhill, A. (2023). Research methods for business students (9th ed.). Pearson.
This work is licensed under a Creative Commons Attribution 4.0 International License.
All articles published in our journal are licensed under CC-BY 4.0, which permits authors to retain copyright of their work. This license allows for unrestricted use, sharing, and reproduction of the articles, provided that proper credit is given to the original authors and the source.