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Digital Payments and Financial Inclusion in an Emerging Economy: Evidence from Nigeria

Golley, Israel Tega, Okwuosa, Galeed Idowu

Abstract

Given the financial capability framework which provides a critical lens to understanding the true impact of digital payments on financial inclusion in an Emerging economy and applying the quantitative research design which is specifically an ex post facto time series research design, the study examined the relationship between digital payment systems and financial inclusion in Nigeria. The dependent variable of the study was the financial inclusion index which was the proxy for financial inclusion while the independent variables include volume of automated teller machine transactions, volume of electronic payment, volume of mobile transactions and volume of point of sale transactions. The data used in the study was the secondary quarterly from 2009Q1 to 2024Q4 obtained from Central Bank of Nigeria , Nigeria Inter-Bank Settlement System as well as relevant financial system stability reports on payment systems. The study used Augmented Dickey-Fuller unit root test to ensure data stationarity which was stationary after first differencing that necessitate the further application of Johansen Cointegration and the Parsimonious Error Correction Model for further estimation. Also, the descriptive statistics was used to determine the behavior of data set employed and results revealed that volume of automated teller machine transactions, volume of mobile money transactions and volume of point of sales transactions were statistically significant in explaining financial inclusion in Nigeria while volume of electronic payments were statistically insignificant. The Cointegration results indicated presence of Long run relationship between digital payment and financial inclusion. The study clearly concludes on the critical role digital payment systems in financial inclusion in Nigeria and recommends the need for policy makers and financial institutions to make extending ATM, mobile and POS infrastructure into underserved and rural areas a priority and ensure it is maintained among others.

Keywords

Financial InclusionFinancial Capability FrameworkDigital Paymentsand Innovation Diffusion TheoryTechnology Acceptance Model

References

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