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

Effect of Financial Technology on Financial Sector Development in Nigeria

Nwadiogbu, Esther Nkolika, Z. H. Abdul PhD, S. A. Amana PhD

Abstract

This study examines the effect of financial technology on financial sector development in Nigeria using quarterly data. The study employs mobile phone transactions, point-of-sale transactions, and exchange traded fund market capitalization as fintech indicators, while a composite financial development index is used as proxy for financial development. The study employed econometric techniques including descriptive statistics, correlation analysis, Johansen co-integration test. Vector Error Correction Model , and diagnostic tests. The results reveal that POS transactions exhibit a positive and statistically significant impact on financial sector development, Mobile phone transactions show a positive and statistically significant effect. ETF market capitalization is found to have a negative and significant effect. The study concludes that POS transaction is the most influential drivers of financial development. It therefore recommends the expansion of digital payment infrastructure, improvement in mobile financial services, and policies aimed at deepening the investment segment of the financial market to fully harness the benefits of financial technology in Nigeria.

Keywords

Financial DevelopmentFinancial TechnologyFintech Investment Platforms Mobile Phone TransactionsPoint of Sales.

References

Aduba J. J., Asgari B., Izawa H. (2023). Does FinTech penetration drive financial development? Evidence from panel analysis of emerging and developing economies. Borsa Istanbul Review, 23(5), 1078-1097. Afaha, J. S. (2019). Electronic payment systems (e-payments) and Nigeria economic growth. European Business & Management, 5(6), 68-78. Agboola, O., Adelugba, I. A., & Eze, B. U. (2023). Effect of financial technology on the survival of micro-enterprises. International Journal of Entrepreneurial Knowledge, 11(1), 1-13. https://doi.org/10.37335/ijek.v11i1.188 Agwu, E., & Carter, L. (2018). Mobile phone banking in Nigeria: Benefits, problems, and prospects. International Journal of Business and Commerce, 3(6), 50-70. Ahmad, A. H., Green, C., & Jiang, F. (2023). Mobile money, ICT, financial inclusion and growth. Economic Modelling, 121(c) DOI: 10.1016/j.econmod.2023.106220 Ahmed, F., Nizam, K., Yasmen., Naz, S. T., & Ali, P. (2025). Transforming Banking Sector Through Fintech Adoption: Examining the Mediating Role of Financial Inclusion in Driving Economic Growth. Journal of Social Horizons, 2(2), 1-10. Aker, J. C., & Mbiti, I. M. (2010). Mobile phones and economic development in Africa. Journal of Economic Perspectives, 24(3), 207-232. Akinyede, R. O., & Eseseb, O. A. (2017). Development of a secure mobile e-banking system. International Journal of Computer, 26(1), 23-42 Andrea, I. B., Udeh, S. N., & Allison, P. U. (2022). Effect of e-payment systems on gross domestic product of Nigeria. British International Journal of Applied Economics, Finance and Accounting, 6(3), 24-39 Anucha, V. C. (2020). E-payment system and sales growth of retail outlets in Nigeria. African Journal of Innovative Research in Marketing and Management, 9(2), 9-15. http://www.bushwealthacademicjournal.com Arner, D. W., Barberis, J., & Buckley, R. P. (2016). The evolution of Fintech: A new post- crisis paradigm? Georgetown Journal of International Law, 47, 1271-1319. Ashiru, O., Balogun, G., & Paseda, O. (2023). Financial innovation and bank financial performance: Evidence from Nigerian deposit money banks. Research in Globalization, 6, 100120. Asongu, S. A., & Nwachukwu, J. C. (2017). ICT, financial sector development and financial access. AGDI Working Paper No. WP/17/006, African Governance and Development Institute. https://hdl.handle.net/10419/173612 Beck, T., Demirgüç-Kunt, A., & Levine, R. (2010). Financial institutions and markets across countries and over time: The updated financial development and structure database. World Bank Economic Review, 24(1), 77-92. Bosire, J. M., & Ntale, J. F. (2018). Effect of mobile money transfer services on the growth of small and medium enterprises in the informal sector of Nairobi County, Kenya. International Journal of Information Research and Review, 5(3), 5326-5333. Bridges B. (2023). Africa FinTech funding report. https://briterbridges.com Cao, L., Yang, Q., & Yu, P. S. (2020). Data science and AI in FinTech: An overview. arXiv. https://doi.org/10.48550/arXiv.2007.12681 arXiv Central Bank of Nigeria . (2023). Electronic payment statistics. https://www.cbn.gov.ng Chatterjee, A., & Anand, N. (2017). Financial inclusion, ICT diffusion and economic growth: A panel data analysis. Madras School of Economics Working Paper 165/2017 Chemmanur, T. J., Imerman, M. B., Rajaiya, H., & Yu, Q. (2020). Recent developments in the FinTech industry. Journal of Financial Management, Markets and Institutions, 8(1), 2040002. https://doi.org/10.1142/S2282717X20400022 Chen, M. A., Wu, Q., & Yang, B. (2019). How valuable is FinTech innovation?. The Review of financial studies, 32(5), 2062-2106 Chukwu, K. O., Akunna, R. C., & Anaike, C. L. (2024). Financial technology and economic development of Nigeria. African Banking and Finance Review Journal, 10(10), 117- 134. http://www.abfrj.com/ Chukwunulu, J. I., & Ibenta, S. N. O. (2021). Financial innovation and efficiency of financial intermediation in Nigeria. African Journal of Accounting and Financial Research, 4(2), 77-87. https://doi.org/10.52589/AJAFR-MFZIZEEQ Demertzis, M., Merler, S., & Wolff, G. B. (2018). Capital markets union and the fintech opportunity. Journal of financial regulation, 4(1), 157-165 EFInA (Enhancing Financial Innovation & Access). (2023). A2F 2023 Survey Key Highlights [Slides]. https://efina.org.ng/wp-content/uploads/2024/03/A2F-2023-Event-Day- Presentation-Version4-1.pdf Enhancing Financial Innovation and Access . (2023). Access to Financial Services in Nigeria 2023 Survey. https://www.efina.org.ng Frank, B. P., & Binaebi, B. (2019). Electronic payment systems implementation and the performance of commercial banks in Nigeria. European Journal of Business and Management Research, 4(5), 1-15. https://doi.org/10.24018/ejbmr.2019.4.5.112 Gomber, P., Koch, J.-A., & Siering, M. (2017). Digital finance and FinTech: Current research and future research directions. Journal of Business Economics, 87(5), 537-580 Greenwood, R., Ialenti, R., & Scharfstein, D. (2025). The Evolution of Financial Services in the United States. Annual Review of Financial Economics, 17 Grossman, G. M., & Helpman, E. (1991). Innovation and growth in the global economy. MIT Press. Grzybowski, Ł., Lindlacher, V., & Mothobi, O. (2023). Mobile money and financial inclusion in Sub-Saharan Africa (Working paper). Toulouse School of Economics / FIT IN Initiative. Igwilo, J. I., & Sibindi, A. B. (2022). ICT adoption and stock market development: Empirical evidence using a panel of African countries. Risks, 10(2), 25 Imerman, P., & Fabozzi, F. (2020). Taxonomy of FinTech business models: Technology, revenue and service design. Journal of Financial Innovation. Islam, M. S. N., Ysuuf, A. A., & Shuaibu, H. (2022). The impact of financial technology (FinTech) on financial service delivery of deposit money banks in Nigeria. Sapientia Foundation Journal of Education, Sciences and Gender Studies, 4(2), 83-93. Jack, W., & Suri, T. (2011). Mobile money: The economics of M-Pesa. NBER Working Paper 16721. https://doi.org/10.3386/w16721 Keliuotyte-Staniuleniene, G., & Smolskytė, G. (2019). Possibilities for financial technology sector development and its impact on banking sector profitability in Lithuania. Economics and Culture, 16(1), 13-23. https://doi.org/10.2478/jec-2019-0002 Khan, B. U. I., Olanrewaju, R. F., Baba, A. M., Langoo, A. A., & Assad, S. (2017). A compendious study of online payment systems: Past developments, present impact, and future considerations. International Journal of Advanced Computer Science and Applications, 8(5), 256-267. King, R. G., & Levine, R. (1993). Finance, entrepreneurship and growth: Theory and evidence. Journal of Monetary Economics, 32(3), 513-542. Kingiri, A. N., & Fu, X. (2020). Understanding the diffusion and adoption of digital finance innovation in emerging economies: M-Pesa mobile transfer service in Kenya. Innovation and Development, 10(1), 67-87. Koranteng B. & You K. (2024). Does P2P lending promote traditional bank-based financial inclusion? Spatial evidence from 34 developing economies. International business and finance Journal. https://doi.org/10.1016/j.ribaf.2025.102947 Kou, G., & Lu, Y. (2025). FinTech: A literature review of emerging financial technologies and applications. Financial Innovation, 11(1). https://doi.org/10.1186/s40854-024-00668- 6 Kumari, A., & Devi, N. C. (2022). The impact of fintech and blockchain technologies on banking and financial services. Technology Innovation Management Review, 12(1/2) Latif A. R., Alqudah M. Z., Samara H. & Alslaib N. (2025). Empowering the financial sector: The role of FinTech research development trends. Future Business Journal, 4(1), 45- 58. https://doi.org/10.1186/s43093-025-00512-y Lavrinenko, O., Edmunds C., Svetlana I., Alina D., & Krzysztof K. (2023). Financial Technology (FinTech) as a Financial Development Factor in the EU Countries. Economies 11: 45. https://doi.org/10.3390/ economies11020045 Leong, K., & Sung, A. (2018). FinTech (Financial Technology): What is it and how to use technologies to create business value in Fintech way? International Journal of Innovation, Management and Technology, 9(2), 74-78. Levine, R. (2005). Finance and growth: Theory and evidence. In P. Aghion & S. Durlauf (Eds.), Handbook of Economic Growth (Vol. 1, pp. 865–934). Elsevier. https://doi.org/10.1016/S1574-0684(05)01012-9 Muganyi, T., Yan, L., Yin, Y., Sun, H., Gong, X., & Taghizadeh-Hesary, F. (2022). Fintech, regtech, and financial development: evidence from China. Financial innovation, 8(1), 1-20 Musa, A., & Al-Sammarraie, N. A. (2024). Adoption of USSD mobile banking in Katsina State: A TAM-based analysis. FUDMA Journal of Renewable and Atomic Energy, 1(2), 120-132. https://doi.org/10.33003/fjorae.2024.0102.08 Nazrul Islam, M. S., Abubakar, A. Y., & Shuaibu, H. (2022). The impact of financial technology (FinTech) on financial service delivery of deposit money banks in Nigeria. Sapientia Foundation Journal of Education, Sciences and Gender Studies, 4(2), 83-93 Ngong, C. A., Thaddeus, K. J., & Onwumere, J. U. J. (2024). Financial technology and economic growth nexus in the East African Community states. Journal of Economics, Finance and Administrative Science, 29(58), 263-276. https://doi.org/10.1108/JEFAS- 01-2022-0009 Nigeria Inter-Bank Settlement System . (2023). Annual Electronic Payment Fact Sheet. https://nibss-plc.com.ng Nizam, K., Ahmed, F., Naz, S. T., Yasmen, & Ali, P. (2025). Transforming banking sector through Fintech adoption: Examining the mediating role of financial inclusion in driving economic growth. Journal of Social Horizon, 2(2), 1-10. https://doi.org/10.5281/zenodo.15235727 Okoli, C., & Tewari, D. D. (2021). Does the adoption process of financial technology in Africa follow an inverted U-shaped hypothesis? An evaluation of Rogers’ Diffusion of Innovation Theory. Asian Academy of Management Journal of Accounting and Finance, 17(1), 281-305. Okoli, T. T., & Tewari, D. D. (2020). An empirical assessment of fintech’s heterogeneous transmission channels to financial development among African economies. Cogent Economics & Finance, 8(1), 1829273. https://doi.org/10.1080/23322039 Oluyemisi, O. O., & Abba, R. (2024). Effect of POS terminal service quality on consumer satisfaction in commercial banks. International Journal of Financial Research and Management Science, 5(7), 213-220 Osei-Assibey, E. (2015). What drives behavioral intention of mobile money adoption? The case of ancient susu saving operations in Ghana, International Journal of Social Economics, Emerald Group Publishing Limited, 42(11), 962-979. DOI: 10.1108/IJSE- 09-2013-0198 Otonne, A., & Ige, O. T. (2023). Exploring the influence of financial technology on banking services in Nigeria. International Journal of Financial, Accounting, and Management, 5(3), 323-341. https://doi.org/10.35912/ijfam.v5i3.1513 Ozili, P. K. (2018). Impact of digital finance on financial inclusion and stability. Borsa Istanbul Review, 18(4), 329-340. https://doi.org/10.1016/j.bir.2017.12.003 Rogers, E. M. (2003). Diffusion of innovations (5th ed.). Free Press. Romer, P. M. (1990). Endogenous technological change. Journal of Political Economy, 98(5), S71–S102. https://doi.org/10.1086/261725 Schueffel, P. (2016). Taming the beast: A scientific definition of FinTech. Journal of Innovation Management. Statista. (2023). Digital payments Nigeria. https://www.statista.com/outlook/dmo/fintech/digital-payments/nigeria Suleiman, H., Nwala, N. M., & Jacob, Z. (2023). Effect of electronic payment system on economic growth in Nigeria. London Journal of Research in Management and Business, 23(7), 1-1 Suri, T., & Jack, W. (2016). The long-run poverty and gender impacts of mobile money. Science, 354(6317), 1288-1292. https://doi.org/10.1126/science.aah5309 Suryono, R. R., Budi, I., & Purwandari, B. (2020). Challenges and Trends of Financial Technology (Fintech): A Systematic Literature Review. Information, 11. https://doi.org/10.3390/info11120590 Svirydzenka, K. (2016). Introducing a new broad-based index of financial development. International Monetary Fund. https://doi.org/10.5089/9781513583709.001 Tembo, J. (2023). Mobile money and banking development in Sub-Saharan Africa. Scientific Annals of Economics and Business, 70(4), 629-650. https://doi.org/10.47743/saeb- 2023-0036 Venkatesh, V., Morris, M. G., Davis, G. B., & Davis, F. D. (2003). User acceptance of information technology: Toward a unified view. MIS Quarterly, 27(3), 425-478. https://www.jstor.org/stable/30036540 World Bank. (2023). Financial development and inclusion indicators. https://www.worldbank.org World Bank. (2025). Domestic credit to private sector by banks (% of GDP) Nigeria. https://data.worldbank.org/indicator/FD.AST.PRVT.GD.ZS?locations=NG Zavolokina, L., Dolata, M., & Schwabe, G. (2016). FinTech - What's in a name? In Proceedings of the International Conference on Wirtschaftsinformatik, 9, 8-16. Zwingina, C. T., Onoh, U. A., & Ezechi, C. P. D. (2023). Impact of electronic payment systems on economic growth of Nigeria. Asian Journal of Economics and Business, 4(1), 71- 88. https://doi.org/10.47509

More Articles from WORLD JOURNAL OF FINANCE AND INVESTMENT RESEARCH