Submit your papersSubmit Now
For Enquiries: [email protected]
IIARD LogoIIARD

Financial Technology and Profitability of Deposit Money Banks in Nigeria

Makwe, Emmanuel Uzoma, PhD, EME Onyekachi C. PhD Candidate, ANIGBORO, Godwin Simeon PhD

Abstract

This study investigates financial technology (FinTech) and the profitability of deposit money banks in Nigeria. With the rapid integration of technology in financial services, FinTech has transformed traditional banking operations through innovations such as mobile banking, digital payments, and blockchain technologies. This research employs a mixed-method approach, combining quantitative analysis of financial performance metrics and qualitative insights from industry stakeholders. Key indicators, including return on investment and net interest margins, are analyzed over a ten-year period to assess profitability trends. The findings reveal a significant positive correlation between FinTech adoption and improved operational efficiency, increased customer base, and enhanced revenue streams for Nigerian banks. However, challenges such as regulatory compliance, cybersecurity risks, and high implementation costs are also highlighted. The study concludes that while FinTech presents immense opportunities for profitability growth, strategic alignment and investment in technological infrastructure are critical for maximizing its benefits. This research contributes to the discourse on digital transformation in emerging markets and offers policy recommendations for sustainable FinTech integration in the banking sector.

Keywords

Financial TechnologyProfitabilityReturn on InvestmentDeposit Money Banks

References

Adiga, D. L., Adigwe, P. K., Okonkwo, V. I., & Ogbonna, K. S. (2022). Financial technology and the banking sector performance in Nigeria (20052020). Discovery I analysis article, (4), 349-360. Aduaka, U. and Awolusi, O. D. (2020). Electronic Banking and Profitability in the Nigerian Banking Industry. Information Management and Business Review, 12(1) Agboola, M. G., Awobajo, K. A., Oluwatobi, S. O., Akinbode, M. O., Fagbohun, M. O., Esse, U. C., ... & Betek, C. M. (2019). Effect of digitalization on the performance of commercial banks in Nigeria. IOP Conference Series: Earth and Environmental Science, 331(1), Article 012014. https://doi.org/10.1088/1755-1315/331/1/012014 Alexander, A. J., Shi, L., & Solomon, B. (2017). How FinTech is reaching the poor in Africa and Asia. International Finance Corporation. https://openknowledge.worldbank.org/server/api/core/bitstreams/0baad5fb-56f0- 564ebb69-69dd5c240934/content Babarinde, G. F., Gidigbi, M. O., Ndaghu, J. T., & Abdulmajeed, I. T. (2020). Digital finance and the future of Nigerian banking system: a review. Nile Journal of Business and Economics, 6(16), 24–35. Bessler, W., Kruizenga, D., & Westerman, W. (2020). Stock market reactions to financing and payment decisions for European mergers and acquisitions. Central European Review of Economics and Management, 4(2), 41-89. Central Bank of Nigeria (2022). Quarterly Statistical Bulletin. Central Bank of Nigeria. Retrieved December 1, 2022 from https://www.cbn.gov.ng/documents/QuarterlyStatbulletin.asp Chimaobi, C. M. (2018). Impact of internet banking on profitability of commercial banks in Nigeria: A study of Zenith Bank Plc (2005-2017). Godfrey Okoye University. http://eprints.gouni.edu.ng/id/eprint/565 Dorfleitner, G., Hornuf, L., Schmitt, M., and Weber, M. (2017). Definition of FinTech and Description of the FinTech Industry. FinTech in Germany, 5-10 Ibekwe, A. O. (2021). Financial innovation and performance of deposit money banks in Nigeria. International Journal of Business and Law Research.9 (1) 162-173. Kemboi, B. J. (2018). Effects of Financial technology on the Financial Performance of Commercial Banks in Kenya. Unpublished MBA Thesis University of Nairobi, Kenya. Kerényi, Á., & Molnár, J. (2017). The impact of the fintech phenomenon–radical change occurs in the financial sector. Financial and Economic Review, 16(3), 32–50. Kolesova, I. V., & Girzheva, Y. S. (2018). Impact of financial technologies on the banking sector. KnE Social Sciences, 3(2), 215–220. https://doi.org/10.18502/kss.v3i2.1545 Kshitika, R. D., Meena, V., Vinutha, V. and Kavitha, J. (2019). Fintech Innovations and Its Impact on the Profitability of Selected Banks. International Journal of Business and Management Invention, 8(1), 41-45. Lee, I., & Shin, Y. J. (2018). Fintech: Ecosystem, business models, investment decisions, and challenges. Business horizons, 61(1), 35–46. Leong, C., Tan, B., Xiao, X., Tan, F. T. C., & Sun, Y. (2017). Nurturing a FinTech ecosystem: The case of a youth microloan startup in China. International Journal of Information Management, 37(2), 92–97. Lin, Q. (2018). Expected profitability and the cross-section of stock returns. Economics letters, 183. Madugba, J., Egbide, B. C., Jossy, D. W., Agburuga, U. T., & Chibunna, O. O. (2021). Effect of electronic banking on financial performance of deposit money banks in Nigeria. Banks and Bank Systems, 16(3), 71–83. Mohammed, Z., Ibrahim, U. A., & Muritala, T. A. (2022). Effect of payments system innovations on the financial performance of commercial banks in Nigeria. Journal of Service Science and Management, 15(1), 35–53. Mustapha, S. A. (2018). E-Payment technology effect on bank performance in emerging economies– evidence from Nigeria. Journal of Open Innovation: Technology, Market, and Complexity, 4(4), Article 43. https://doi.org/10.3390/joitmc4040043 Nwaeze, N. C. (2021). Impact of financial technologies adoption on the performance of domestic systemically important banks in Nigeria. Economics and Finance, 9(3), 52– 67. Ogbuji, I. A., Ologundudu, M. M., & Oluyomi, O. O. (2020). Comparative analysis of financial technology and traditional bank performance in Nigeria: The CAMELS approach. UNILAG Journal of Business, 6(1), 145–168. Ojo, O. V., & Nwaokike, U. (2018). Disruptive technology and the FinTech industry in Nigeria: Imperatives for legal and policy responses. Gravitas Review of Business and Property Law, 9(3). https://dx.doi.org/10.2139/ssrn.3306164 Orji, A., Ogbuabor, J. E., Okon, A. N., & Anthony-Orji, O. I. (2018). Electronic banking innovations and selected banks performance in Nigeria. The Economics and Finance Letters, 5(2), 46–57. Pejkovska, M. (2018). Potential negative effects of Fintech on the financial services sector. Examples from the European Union, India and the United States of America. (Bachelor's thesis). Helsinki Metropolia University of Applied Sciences, Helsinki, Finland. Purnomo, H. and Khalda, S. (2019). Influence of Financial Technology on National Financial Institutions. IOP Science Publishing ltd Saksonova, S., & Kuzmina-Merlino, I. (2017). Fintech as financial innovation – The possibilities and problems of implementation. European Research Studies Journal, 20(3A), 961–973. https://doi.org/10.35808/ersj/757

More Articles from IIARD INTERNATIONAL JOURNAL OF BANKING AND FINANCE RESEARCH

Effect of Monetary Policy on Profitability of Deposit Money Banks in Nigeria

Author: Stephanie Nguhemen Gbande, Mike T. Soomiyol, Timothy Tyona, Gaius Msendoo Asombo

Cognitive Diversity and Performance of Deposit Money Banks in Nigeria

Author: 1Nwangwu, Okwudiri Iheanyi, 2 Pepple, Grace Jamie PhD

Banking Innovations and Industrial Sector Performance in Nigeria: Evidence from ARDL Model

Author: Peter Ngbede Ajam, Abiodun Edward Adelegan, Benson Emmanuel

Environmental Sustainability and Entrepreneurial Performance in Nigeria: A Case Study of Enugu State

Author: i, Azolike Nkiru Nkechi, ii, Okwor Emmanuel Ejimnkonye, iii, Eneaniofu Daniel Mmaduakonam