CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

This chapter provides a comprehensive review of the literature on the effect of financial

technology (FinTech) on the performance and efficiency of the Nigerian banking sector. It aims

to establish a conceptual and theoretical foundation for the study, synthesize empirical findings

from existing research, identify gaps, and highlight the relevance of the topic to Nigeria's

evolving financial landscape.

The banking sector in Nigeria has undergone significant transformation since the early 2000s,

driven by technological advancements and regulatory reforms. FinTech, encompassing

innovations like mobile banking, automated teller machines (ATMs), point-of-sale (POS)

systems, and internet banking, has emerged as a key driver of change. According to the Central

Bank of Nigeria (CBN), FinTech adoption has facilitated financial inclusion, reduced transaction

costs, and enhanced service delivery. However, its impact on bank performance measured by

metrics such as return on assets (ROA), return on equity (ROE), and net interest margin (NIM)

and efficiency assessed through operational cost reductions and productivity gains remains a

subject of debate. This chapter draws on scholarly journals to explore these dynamics,

emphasizing Nigeria-specific studies while incorporating global perspectives for context.

2.1 Conceptual Framework

This section defines key concepts and explains their interrelationships. It begins with FinTech,

followed by banking performance and efficiency.

2.1.1 Concept of Financial Technology (FinTech)

Financial technology, commonly referred to as FinTech, represents a dynamic intersection of

finance and technology aimed at improving and automating the delivery and use of financial

services (Abdullahi & Umar, 2025). In the Nigerian context, FinTech has emerged as a pivotal

force in transforming the banking sector, particularly amid high mobile penetration rates and a

significant unbanked population. According to Klynveld Peat Marwick Geordeler (2022),

FinTech encompasses innovations such as mobile banking, online payments, peer-to-peer

lending, and investment platforms that streamline financial processes and enhance accessibility.

In Nigeria, the Central Bank of Nigeria (CBN) views FinTech as any technology-driven

innovation that results in new business models, applications, processes, or products with an

associated material effect on financial markets and institutions. This technology addresses

inefficiencies in traditional banking by reducing costs, increasing speed, and promoting financial

inclusion.

The evolution of FinTech in Nigeria can be traced back to the early 2000s with the introduction

of automated teller machines (ATMs) and electronic payments, but it accelerated post-2010 with

the rise of mobile money services like those offered by Paga and Opay (EFInA, 2022). FinTech

leverages technologies such as artificial intelligence (AI), blockchain, big data, and cloud

computing to facilitate seamless transactions. For instance, AI is used for credit scoring and
fraud detection, while blockchain ensures secure and transparent transactions (Gomber et al.,

2018).

In the banking sector, FinTech acts as both a disruptor and a collaborator. Traditional banks in

Nigeria, such as Zenith Bank and GTBank, have integrated FinTech solutions to enhance their

services, leading to improved customer satisfaction and operational efficiency (Pricewaterhouse

Coopers Nigeria, 2020). However, FinTech also poses competition from non-bank entities,

forcing banks to innovate or risk losing market share. Overall, FinTech is credited with

democratizing financial services, making them more inclusive for underserved populations in

rural areas where physical bank branches are scarce (Adeleke et al., 2021).

The concept of FinTech extends beyond mere digitization; it involves a paradigm shift in how

financial services are delivered and consumed. According to Deloitte (2021), FinTech

innovations differentiate themselves by focusing on user-centric designs that prioritize

convenience, security, and personalization. In Nigeria, this is evident in the rapid adoption of

mobile apps for banking, which allow users to perform transactions without visiting a branch.

FinTech's role in enhancing banking performance is comprehensive. It improves efficiency by

automating usual tasks, reduces operational costs through digital processes, and boosts revenue

by new service offerings like robo-advisory and insurtech (Omar & Hassan, 2022). However, the

incorporation of FinTech requires robust infrastructure, which remains a challenge in Nigeria

due to inconsistent internet access and power supply issues (CBN, 2023).

Scholars like Berger and Humphrey (1997) emphasize that FinTech's impact on performance can

be measured through metrics such as return on assets (ROA) and return on equity (ROE), where

technological adoption leads to higher profitability. FinTech in Nigeria is a transformative tool

that bridges the gap between traditional banking and modern digital finance, fostering economic

growth and financial stability.

2.1.2 Types of FinTech Solutions in Nigeria

FinTech solutions in Nigeria are diverse, catering to various aspects of financial services. These

can be categorized based on their functionalities and technologies employed. Understanding

these types is crucial for assessing their impact on banking performance and efficiency.

I. Mobile Banking and Payments

Mobile banking involves the use of mobile devices to access banking services, such as balance

inquiries, fund transfers, and bill payments. Mobile banking, often interchangeably used with

mobile payments in broader contexts, involves the use of mobile devices such as smartphones,

feature phones, or tablets to access and execute banking services remotely. In Nigeria, platforms

like GTBank's *737# USSD service and Zenith Bank's mobile app exemplify this type. These

solutions leverage mobile technology to provide anytime, anywhere access, significantly

reducing the need for physical branches (Segun, 2011). Mobile payments, a subset, include

services like those from Opay and PalmPay, which use QR codes and Near Field

Communication for transactions (Ondrus & Pigneur, 2006). According to GSMA (2022), mobile

money processed over $1 trillion globally in 2021, with Nigeria seeing substantial growth due to

its high mobile penetration.

According to Ondrus and Pigneur (2006), mobile payments encompass transactions facilitated

through technologies like Near Field Communication (NFC), Quick Response (QR) codes, and

mobile apps, allowing users to pay for goods, transfer funds, or manage accounts without

physical cash or cards. In the Nigerian context, the Central Bank of Nigeria (CBN) defines
mobile banking as an extension of electronic banking, enabling customers to perform financial

transactions via mobile networks, including Unstructured Supplementary Service Data (USSD)

codes and dedicated apps.

Mobile banking shifts the pattern from branch-centric models to customer-centric digital

ecosystems. It leverages mobile technology to enhance accessibility, particularly for underserved

populations. As noted by Chike and Ogba (2023), in Nigeria, where over 40% of the population

was unbanked prior to widespread FinTech adoption, mobile platforms have democratized

financial services by bridging geographical and infrastructural gaps. This aligns with the broader

FinTech ecosystem, where mobile solutions integrate with other innovations like artificial

intelligence for fraud detection and big data for personalized services, ultimately aiming to boost

banking efficiency through automation and cost reduction.

The framework for understanding mobile banking's impact on banking performance can be

viewed through efficiency metrics such as cost-to-income ratios and return on equity (ROE).

II. Peer-to-Peer (P2P) Lending and Crowdfunding

P2P lending platforms connect borrowers directly with lenders, bypassing traditional banks. In

Nigeria, examples include FairMoney and Carbon, which use AI for credit assessment (Phan et

al., 2020). These platforms enhance efficiency by offering quicker loan approvals and lower

interest rates compared to banks. Crowdfunding, such as through Farmcrowdy for agricultural

financing, allows collective funding for projects, promoting financial inclusion (Rogers, 2003).

P2P lending, also known as marketplace lending or crowdlending, is defined as a fintech

innovation that facilitates direct lending between individuals or entities through online platforms,
bypassing traditional financial intermediaries such as banks. According to Investopedia, P2P

lending connects borrowers seeking funds often for personal, business, or debt consolidation

purposes with investors willing to lend, typically offering lower interest rates to borrowers and

higher yields to lenders compared to conventional banking. This model relies on digital

algorithms for credit assessment, risk pricing, and transaction facilitation, making it accessible to

underserved populations with limited collateral or credit history. In academic terms, Tang (2019)

describes P2P as a form of disinter mediated finance that addresses asymmetric information by

using alternative data sources like social media and transaction histories for borrower evaluation.

Crowdfunding, on the other hand, is a broader fintech concept involving the collection of small

financial contributions from a large number of individuals, usually via internet-based platforms,

to support projects, ventures, or causes. As outlined by Mollick (2014), crowdfunding

encompasses various subtypes: donation-based (purely altruistic support), reward-based (backers

receive non-financial perks like products), equity-based (investors gain ownership stakes), and

debt-based (which aligns closely with P2P lending, involving repayable loans). The European

Commission (2016) emphasizes that crowdfunding democratizes funding by pooling resources

from the "crowd," often for startups, social initiatives, or creative endeavors. In Nigeria,

platforms like Farmcrowdy and GoFundMe exemplify this, where crowdfunding extends beyond

mere capital rising to include community engagement and validation of ideas.

Frameworks for P2P lending often center on economic theories of financial intermediation and

market segmentation. Tang (2019) proposes a framework where P2P platforms serve as either

substitutes or complements to banks. In the substitute model, P2P competes directly by offering

similar services to bank-eligible borrowers but with lower costs due to reduced overheads.
Conversely, the complement model positions P2P as a gap-filler for high-risk or small-loan

segments underserved by banks, such as low-credit individuals or micro-enterprises. This duality

is rooted in asymmetric information theory (Akerlof, 1970), where platforms mitigate adverse

selection through advanced screening using big data, machine learning, and social signals to

assess borrower quality. In Nigeria, this framework is relevant as P2P platforms like KiaKia and

FINT operate under CBN oversight, focusing on financial inclusion by targeting unbanked

populations.

Crowdfunding frameworks emphasize dynamic interactions and success determinants. Agrawal

et al. (2015) propose a model based on social capital, where external (pre-existing networks) and

internal (platform-built relationships) capital drive campaign outcomes. This dynamic view

explains how crowdfunding evolves from initial funding to sustained growth, with factors like

project transparency and backer engagement reducing uncertainty. In a Nigerian framework,

Aderemi et al. (2020) adapt these to local challenges, highlighting regulation, awareness, and

fraud as barriers. The framework positions crowdfunding as a tool for SME growth, with

platforms like NaijaFund enabling financial inclusion.

In Nigeria, P2P lending and crowdfunding intersect with the banking sector under the CBN's

fintech sandbox and SEC's crowdfunding rules, which cap investments and mandate platform

registration. These models enhance banking performance by promoting efficiency banks like

Access and GTBank have adopted digital lending to compete and inclusion, reaching 40%

unbanked Nigerians (EFInA, 2023). However, they pose challenges: P2P's high default risks (up

to 42% in some platforms, per Kauffman and Riggins, 2012) could spill over to banks if

integrated poorly, and crowdfunding's fraud incidents undermine trust.

III. Blockchain and Cryptocurrency

Blockchain is commonly defined as a decentralized and distributed ledger technology that

records transactions across a network of computers in a secure, transparent, and immutable

manner (Nakamoto, 2008). It operates on principles of openness, safety, and consensus, where

transactions are grouped into blocks linked sequentially and secured via cryptographic hashing

(Ghiro et al., 2021). In fintech, blockchain eliminates intermediaries, enabling real-time

processing and cost reductions, which can enhance banking performance by improving security

and efficiency (Kshetri, 2018; Chen et al., 2019). Cryptocurrency, often built on blockchain, is a

digital asset that uses cryptography for secure transactions and operates without central authority,

such as Bitcoin or Ethereum (Ubesie et al., 2023). It serves as a medium for payments and

investments, potentially aiding financial inclusion in emerging markets like Nigeria by bypassing

traditional banking barriers (Ahmed et al., 2024).

In Nigeria, blockchain adoption appears to positively affect operational efficiency by automating

processes and reducing costs, with studies showing up to 30% transaction cost savings

(Accenture, 2019). Regulatory frameworks from the Central Bank of Nigeria emphasize

balancing innovation with risks like fraud, suggesting cautious integration to improve sector

performance (CBN, 2020). They function as a medium of exchange, unit of account, and store of

value, but without sovereign backing, relying instead on consensus mechanisms like proof-of-

work or proof-of-stake (Bech & Garratt, 2017). In fintech, cryptocurrencies facilitate peer-to-

peer transactions, cross-border payments, and decentralized finance (DeFi), where users can

lend, borrow, or trade without traditional banks (Aquilina et al., 2024a). Their integration into
banking can reduce transaction fees and times, but introduces challenges like regulatory

ambiguity and market instability.

A SWOT analysis framework for blockchain in fintech underscores strengths like transparency

and automation, weaknesses such as scalability limits, opportunities in inclusion, and threats

from regulation (Renduchintala et al., 2022). Applied to Nigeria, strengths include fraud

reduction in a high-risk environment, while threats encompass CBN's cryptocurrency bans

(CBN, 2021). The National Blockchain Policy Framework emphasizes accountability and job

creation, aligning with banking needs for secure systems (National Blockchain Policy for

Nigeria, 2020).

IV. Artificial Intelligence and Big Data Analytics

AI is used in chatbots for customer service, fraud detection, and personalized financial advice.

Nigerian banks like Access Bank employ AI-driven systems to analyze customer data for better

risk management (Wang et al., 2021). Big data analytics helps in predicting customer behavior

and optimizing operations, leading to cost savings and improved performance (Fuster et al.,

2019).

AI is conceptually defined as the theory and development of computer systems able to perform

tasks that traditionally require human intelligence, including reasoning, problem-solving, and

learning (Acemoglu & Restrepo, 2020). In FinTech, AI extends to applications like machine

learning (ML) and natural language processing (NLP), which automate processes in banking,

such as credit scoring and customer interactions (Bavaresco et al., 2020). This definition aligns
with earlier views, where AI is seen as machines mimicking human cognitive functions. In the

Nigerian context, AI's conceptual role is amplified by its potential to address inefficiencies in a

developing market, such as fraud detection amid high transaction volumes, though limited by

infrastructural constraints (Adejola et al., 2024).

BDA involves the examination of large, diverse datasets characterized by the "5Vs" (volume,

velocity, variety, veracity, and value) to extract meaningful insights. In FinTech, BDA is

conceptualized as a tool for processing unstructured data from sources like social media and

transactions to inform financial decisions (Hassani et al., 2018). This extends traditional

analytics by incorporating real-time processing, enabling predictive modeling in banking

(Rehman et al., 2022). For Nigerian banks, BDA's definition emphasizes its role in fostering

financial inclusion through customer behavior analysis, despite challenges like data privacy

(Mhlanga, 2020).

A prominent framework is the AI Banking Service Framework, which categorizes AI utilization

into strategy (e.g., governance), processes (e.g., credit decisions), and customers (e.g., adoption

factors) (Payne et al., 2021). This bridges academic theory with industry practice, emphasizing

explainable AI (XAI) for stakeholder trust (Shin, 2021).

AI enhances performance through fraud detection and risk management, improving return on

equity (ROE) in Nigerian deposit money banks (DMBs) via efficiency gains (Adejola et al.,
2024). Studies show AI investments correlate with better financial outcomes, reducing costs by

15-20% (Kamble et al., 2020). In Nigeria, AI boosts customer satisfaction and decision-making,

though adoption lags due to skills gaps (Edibo et al., 2024).

BDA improves efficiency by enabling predictive analytics, enhancing financial reporting quality

in listed banks (Okafor et al., 2025). It supports risk management and lending, increasing

performance in Nigerian firms (Akinwale & Sanusi, 2025). Combined AI-BDA effects amplify

efficiency, with hybrid models achieving 90% accuracy in fraud detection (Alomari et al., 2024).

2.1.3 Benefits of FinTech to the Nigerian Banking Sector

FinTech offers numerous benefits to the Nigerian banking sector, driving performance and

efficiency improvements. These advantages stem from technological advancements that address

traditional banking limitations.

One of the most prominent benefits of FinTech to the Nigerian banking sector is its promotion of

financial inclusion, which refers to providing affordable and accessible financial services to all

segments of society. Traditional banking in Nigeria has been hampered by geographical

limitations, high costs, and inadequate infrastructure, leaving approximately 36% of the

population financially excluded, with higher rates in rural areas. FinTech addresses this by

breaking down barriers through digital platforms, such as mobile banking and digital wallets,

enabling unbanked individuals to access services via mobile phones.

FinTech's role in inclusion extends to economic empowerment, particularly for women and low-

income groups, aligning with Sustainable Development Goals (SDGs) by fostering growth,

employment, and poverty reduction (United Nations, 2023). During Nigeria's 2022-2023

demonetization crisis, FinTech filled vacuums left by collapsing traditional infrastructures,

enabling payments and loans when banks failed, though this sometimes led to coercive inclusion

via high-interest loans (up to 50%) and data surveillance. This highlights a dual-edged benefit:

while FinTech accelerates inclusion (mobile money adoption rose from 3% in 2018 to over 12%

in 2023), it can intensify vulnerabilities for the poor.

FinTech enhances the efficiency of Nigerian banks by automating processes, reducing

operational costs, and minimizing human error. Traditional banking relies on costly physical

branches and manual transactions, but FinTech shifts to digital rails, lowering transaction fees

and improving speed. For example, digital payments via FinTech are often 1-5% cheaper than

international money transfer operators (IMTOs), with average remittance costs for $200 at 10.4%

in 2020, partly due to spreads (Wezel & Ree, 2023).

Quantitative evidence shows FinTech's positive impact on bank performance. A 1% increase in

ATM transactions can raise earnings per share by up to N4, indicating efficiency gains (Otonne

& Ige, 2023). FinTech also reduces credit risk and enhances liquidity creation through data-

driven tools like AI and blockchain (Cheng & Qu, 2020; Guo & Zhang, 2023). In Nigeria, this

translates to streamlined lending and payments, with Nigeria Inter-Bank Settlement System

Instant Payment transactions surging 55% from 348 million in January 2022 to 541 million in

January 2023, driven by FinTech.

FinTech introduces competition that spurs innovation in the Nigerian banking sector. By offering

agile, customer-centric solutions, FinTech challenges traditional banks to digitize, leading to new

products like peer-to-peer lending and blockchain-based services. This competition is beneficial,

as it prevents monopolies and improves service quality (Navaretti et al., 2018).

Studies conceptualize this as symbiotic collaboration, where banks provide infrastructure and

FinTech offers agility, resulting in enhanced market efficiency (Alao, 2020). For example,

FinTech's ability to serve the underbanked (60 million Nigerians) disrupts status quo, with agility

rated highly (mean 3.98 in surveys) as a competitive factor. This has led to diversified offerings,

such as digital consumer lending, boosting bank resilience and profitability (Madugba et al.,

2021).

FinTech prioritizes convenience, allowing 24/7 access without physical visits, which aligns with

Nigeria's youthful, tech-savvy population (over 152 million internet users). Evidence from

ethnographic studies during demonetization shows FinTech as "reliable and efficient," with users

switching to apps like OPay for uninterrupted service (Akolgo, 2023). This convenience

enhances loyalty, as POS and mobile services meet preferences for speed and low costs.

FinTech's benefits extend beyond banks to Nigeria's economy, promoting growth through

inclusion and innovation. It creates jobs in the sector, empowers underserved groups, and

supports e-commerce via digital infrastructure investments (Kola-Oyeneyin et al., 2020). During

crises, FinTech mitigated GDP contractions (3.52% in Q1 2023) by enabling transactions.

2.1.4 Challenges of FinTech Adoption in the Nigerian Banking Sector

Despite its benefits, FinTech adoption presents several challenges that can impact banking

performance and efficiency.

Regulatory issues are central to FinTech adoption debates in Nigeria. The Central Bank of

Nigeria (CBN) plays a pivotal role, but fragmentation across agencies like the Securities and

Exchange Commission (SEC) and National Information Technology Development Agency

(NITDA) often leads to compliance burdens and uncertainties. For instance, regulatory lags can

delay the rollout of innovations like mobile money and open banking, as policies struggle to keep

pace with technological advancements (Akinbo et al., 2025). Nigeria's infrastructural challenges,

including intermittent electricity and limited broadband penetration, severely impact FinTech

scalability. Rural areas, in particular, face a digital divide that restricts access to services,

exacerbating financial exclusion (Nnaomah et al., 2024). Poor mobile reception and network

failures further complicate real-time transactions, making it difficult for banks to fully leverage

FinTech for efficiency gains.

As FinTech adoption grows, so do cybersecurity vulnerabilities, with risks of hacking, fraud, and

data breaches threatening system integrity. Weak enforcement and unskilled personnel in law

enforcement amplify these issues, leading to eroded trust (Udoma & Ogala, 2022). Banks must

balance innovation with robust security measures, but current gaps in standards heighten

systemic risks.

Skill gaps among bank staff and low digital literacy among consumers represent ongoing

challenges. Many users distrust FinTech due to inadequate understanding, while banks struggle

with talent shortages for integrating new technologies (Ogunsan & Ivy, 2025). This affects not

only adoption rates but also the overall performance improvements FinTech promises.
Integrating FinTech with legacy banking systems poses technical hurdles, often requiring

significant investments. Additionally, finding reliable partners and addressing customer

acceptance issues add layers of complexity (Konto, 2024).

2.1.4 Banking Performance

Banking performance encompasses a bank's ability to achieve financial stability, operational

efficiency, and stakeholder value creation while navigating economic and regulatory

environments (Athanasoglou et al., 2008). In the Nigerian context, it is often viewed through the

lens of profitability, risk management, and service delivery, reflecting the sector's role in

economic growth (Adiga et al., 2022). Conceptually, performance is multidimensional: financial

aspects focus on profit generation, while non-financial elements emphasize customer

satisfaction, innovation adoption, and inclusivity (Oge, 2024).

In Nigeria, FinTech bridges gaps in financial inclusion, particularly in underserved rural areas,

by automating processes and reducing reliance on physical branches (Okoi et al., 2025). Banking

efficiency, a subset of performance, refers to optimizing resources to minimize costs and

maximize output, often measured by ratios like cost-to-income or transaction throughput (Akanbi

& Gbadegesin, 2025).

These concepts are interlinked, FinTech acts as a catalyst for performance by digitizing

operations, but its effectiveness depends on infrastructure, regulatory support, and user adoption.

For instance, Schumpeter's theory of innovation (1934) underpins this, positing that

technological advancements drive economic progress by fostering creative destruction in

financial services, leading to improved bank outputs (Udo et al., 2024).

It is typically measured using financial ratios, which includes:

Return on Assets (ROA): ROA measures a bank's ability to generate earnings from its assets,

computed as net income divided by total assets. It reflects operational efficiency and asset

quality, with values typically ranging from 1% to 2% in stable environments (Obeid, 2023). In

Nigeria, FinTech has generally improved ROA by streamlining processes and reducing costs,

though initial investments can temporarily depress it. For example, digital platforms enable

better asset allocation, leading to higher ROA in banks like Zenith and UBA (Otonne et al.,

2023). However, studies indicate that FinTech's impact on ROA is moderated by factors like

liquidity and economic growth, with positive effects more pronounced in larger institutions

(Onuorah & Okoh, 2021).

Return on Equity (ROE): ROE, defined as net income over shareholders' equity, evaluates

returns to equity holders and incorporates leverage effects. It often exceeds ROA due to debt

amplification, with benchmarks around 10-15% for healthy banks (Ichsani & Suhardi, 2015).

Fintech influences ROE by enhancing revenue diversification and operational leverage, but it can

introduce volatility through cyber risks. In Nigerian banks, ROE has risen with FinTech

adoption, as seen in improved equity returns from mobile banking and remittances (Osigbemhe

et al., 2023). Empirical evidence suggests a positive correlation, though excessive FinTech

reliance may erode ROE in volatile markets (Nwuba et al., 2021).

Net Interest Margin (NIM): NIM represents the core profitability from interest activities,

calculated as (interest income minus interest expense) divided by interest-earning assets. It is

sensitive to interest rate environments, typically 3-4% in emerging markets (Tan, 2019). FinTech

disrupts NIM by fostering competition from non-bank lenders, potentially compressing margins,
but it also allows banks to optimize funding costs. In Nigeria, FinTech has stabilized NIM

through innovative products, with studies showing a net positive effect despite initial pressures

(Obeid & Adeinat, 2017). For instance, digital deposits reduce funding costs, aiding NIM in

banks amid low-rate cycles.

Non-Interest Income (NII): Non-Interest Income diversifies revenue beyond lending,

encompassing fees, commissions, and trading gains. It mitigates interest rate risks and enhances

stability, often comprising 20-40% of total income in modern banks (Meslier et al., 2021).

FinTech significantly boosts this metric in Nigeria via platforms like POS and mobile transfers,

increasing fee-based earnings (Bilal et al., 2020). Research highlights its positive role in

performance during crises, though over-reliance can heighten operational risks (Weidman et al.,

2019).

Performance is influenced by internal factors like management efficiency and external ones like

economic conditions. FinTech enhances performance by expanding revenue streams and

reducing costs, but initial investments can strain short-term metrics.

2.1.3 Banking Efficiency

Banking efficiency refers to how effectively banks use resources to produce outputs like loans

and deposits while minimizing costs and maximizing profits. Research suggests that Nigerian

banks have shown moderate efficiency levels, often below full potential due to factors like

market structure and regulatory changes, though improvements have occurred post-reforms. It

seems likely that FinTech innovations, such as digital payments and mobile banking, enhance

operational efficiency by reducing costs and improving service delivery, but evidence indicates

mixed outcomes, with some technologies showing negative impacts on certain performance
metrics. The evidence leans toward FinTech promoting financial inclusion and transaction speed,

yet it may not uniformly boost overall bank profitability or stability, highlighting ongoing

debates on its net benefits in emerging markets like Nigeria.

Factors influencing efficiency include bank size, market share, ownership, and capital adequacy.

Larger banks with greater market share tend to be more efficient, while state-owned banks

underperform compared to private ones (Mutarindwa et al., 2021). Reforms, such as capital

requirement increases, have led to general efficiency gains, though not all banks benefit equally

(Okorie & Agu, 2015).

FinTech, including ATMs, POS terminals, and mobile banking, appears to streamline operations

and reduce overheads, potentially improving efficiency (Ekeh et al., 2019). However, some

analyses show negative associations with metrics like return on equity, suggesting challenges in

full integration (Udo et al., 2024). FinTech fosters innovation but requires supportive regulations

to maximize benefits.

Ownership and structural factors further modulate efficiency. Mutarindwa et al. (2021) analyzed

607 African banks (2005–2015) using true fixed-effects Sales Force Automation, revealing

privately owned banks outperform state-owned ones, with no efficiency edge for foreign banks.

In Nigeria-specific contexts, this aligns with findings that blockholding adversely affects

efficiency. Ojeyinka and Akinlo (2021) assessed bank size's role (2006–2018), concluding larger

banks lack cost advantages, with mean cost efficiency at 78% (22% input waste). Osuma et al.

(2021) linked efficiency to profitability via Data Envelopment Analysis on listed deposit money

banks, identifying efficient banks (e.g., Access, GTB) versus inefficient yet profitable ones (e.g.,

Zenith), emphasizing efficiency as a superior performance metric.

Broader FinTech studies highlight mixed outcomes. Oyadeyi (2025) examined innovations'

effects on money demand (banking/FinTech channels), noting positive impacts on reserve money

but adverse on narrow/broad aggregates, implying FinTech-induced instability in monetary

policy. Akanbi and Emmanuel (2025) linked FinTech to logistics efficiency (2000–2024) via

Autoregressive Distributed Lag, with long-run coefficients of 0.42 (FinTech) and 0.35

(accounting efficiency) on performance, though not directly banking-focused, it parallels

FinTech’s supply-chain analogies in banking operations. Otonne and Ige (2023) found FinTech

positively influences traditional/market-based performance, enhancing inclusion and reducing

costs. Varma et al. (2022) thematically analyzed FinTech’s global banking impact, noting

potentials in automation and blockchain but drawbacks like job losses, with indirect relevance to

Nigeria's emerging FinTech ecosystem.

2.2 Theoretical Framework

This section provides a comprehensive exploration of the theoretical underpinnings guiding the

analysis of financial technology influence on the performance and efficiency of the Nigerian

banking sector. Drawing from established theories Diffusion of Innovation Theory (DOI),

Technology Acceptance Model (TAM), and Agency Theory, the framework elucidates how

FinTech innovations, such as mobile banking, automated teller machines (ATMs), point-of-sale

(POS) systems, and internet banking, integrate into banking operations. These theories are

contextualized within Nigeria's unique economic landscape, characterized by high mobile

penetration (over 80% as of 2023), regulatory reforms by the Central Bank of Nigeria (CBN),

and challenges like cybersecurity risks and infrastructural deficits. The discussion incorporates

empirical insights from journal articles, highlighting applications to banking efficiency, which
encompasses metrics like return on assets (ROA), return on equity (ROE), operational cost

reductions, and financial inclusion.

2.2.1 Diffusion of Innovation Theory (DIT)

Diffusion of Innovation Theory (DOI), first articulated by Rogers (1962) and refined in

subsequent editions (Rogers, 2003), describes the process by which new ideas or technologies

spread through social systems over time. The theory categorizes adopters into innovators (2.5%),

early adopters (13.5%), early majority (34%), late majority (34%), and laggards (16%), with

adoption influenced by five key attributes: relative advantage (superiority over existing

methods), compatibility (fit with current practices), complexity (ease of understanding and use),

trialability (ability to experiment), and observability (visibility of results). In the realm of

FinTech and banking efficiency, DOI provides a lens to understand how innovations like digital

payments and mobile wallets propagate, ultimately enhancing operational speed, reducing

transaction costs, and improving customer access in underbanked regions.

Diffusion of Innovation (DOI) Theory, which serves as a lens to explore how FinTech

innovations are adopted and disseminated within the sector. In the Nigerian context, where the

banking sector grapples with rapid digital transformation amid economic challenges, DOI

provides insights into the mechanisms driving FinTech adoption and its subsequent impacts on

key performance indicators such as operational efficiency, cost reduction, and customer

satisfaction.

The theory is particularly appropriate for this study because FinTech represents a disruptive

innovation that alters traditional banking models. As Nigerian banks integrate tools like mobile
banking, peer-to-peer lending platforms, and automated risk assessment systems, DOI helps

elucidate the pathways to enhanced efficiency.

DOI theory delineates five primary elements that influence the spread of innovations: the

innovation, communication channels, time, the social system, and adopter categories (Rogers,

2003). Each element is critical in understanding FinTech’s diffusion in the Nigerian banking

sector.

The innovation refers to the perceived new idea or technology. In FinTech, this includes digital

wallets, blockchain, and AI analytics. Rogers (2003) identifies five attributes affecting adoption:

relative advantage, compatibility, complexity, trialability, and observability. Relative advantage

the degree to which an innovation is seen as better than existing alternatives is key to banking

efficiency. For instance, FinTech's ability to reduce transaction times from days to seconds offers

a clear edge over manual processes, potentially lowering operational costs by up to 30% in

emerging markets (Bansal et al., 2019).

Communication channels involve how information about the innovation is disseminated. In

Nigeria, channels range from mass media (e.g., social media campaigns) to interpersonal

networks (e.g., banker-client interactions). Effective communication accelerates diffusion, as

seen in studies where targeted digital literacy programs enhanced FinTech uptake, leading to

improved banking efficiency through higher transaction volumes (Okiro & Ndungu, 2013).

The time dimension encompasses the innovation-decision process (knowledge, persuasion,

decision, implementation, confirmation) and the rate of adoption. Research indicates that banks
adopting FinTech early experience efficiency gains, such as reduced non-performing loans via

better data analytics (Adegboyega et al., 2021).

The social system includes norms, structures, and opinion influencing diffusion. In Nigeria's

banking ecosystem, regulators like the CBN and industry associations act as gatekeepers. Social

systems can either facilitate or impede efficiency; for example, cultural resistance to digital

transactions in rural areas slows diffusion, exacerbating urban-rural efficiency divides (Eze &

Chijioke, 2016).

Finally, adopter categories classify individuals or organizations based on adoption timing:

innovators (2.5%), early adopters (13.5%), early majority (34%), late majority (34%), and

laggards (16%) (Rogers, 2003). In banking, innovators like FinTech startups (e.g., Paystack)

pioneer efficiencies, while laggards traditional banks hesitant to invest risk performance lags.

Empirical studies show that early adopters in African banking sectors achieve higher ROA and

net interest margins (Bongomin & Munene, 2019).

Applying DOI to FinTech reveals its transformative potential for Nigerian banking performance

and efficiency. FinTech innovations diffuse through stages where banks assess relative

advantages, such as cost savings from automated processes. A study on mobile banking adoption

in Nigeria found that perceived compatibility with existing infrastructure significantly predicts

efficiency improvements, with banks reporting 20-25% reductions in branch-related expenses

(Agwu & Carter, 2018).

Complexity and trialability are barriers in Nigeria's context, where low digital literacy and

cybersecurity concerns prevent adoption. Research highlights that simplifying FinTech interfaces
enhances trialability, leading to broader diffusion and efficiency gains like faster loan processing

(Ovat, 2020). Observability seeing benefits in action further accelerates adoption; for example,

successful implementations by banks like GTBank demonstrate tangible efficiency boosts,

influencing peers (Adeyemo et al., 2022).

In terms of performance, DOI links diffusion speed to metrics like ROA, return on equity (ROE),

and cost-to-income ratios. Faster adoption correlates with superior performance, as FinTech

enables data-driven decisions and customer personalization. However, uneven diffusion due to

socioeconomic factors creates disparities, urban banks diffuse innovations quicker, achieving

higher efficiency than rural counterparts (Mustapha, 2021). Similarly, in Nigeria, Alade (2019)

used DOI to examine ATM diffusion, noting efficiency gains through reduced queuing times but

challenges from power outages affecting observability.

Numerous journal articles validate DOI's relevance to banking efficiency in developing contexts.

For instance, Mutua and Oduor (2020) explored fintech diffusion in Kenyan banks, finding that

relative advantage drives efficiency by minimizing human errors in transactions, a finding

extensible to Nigeria given similar economic structures. They reported a positive correlation

between adoption rates and performance indicators like net profit margins.

In a Nigerian-specific study, Okoye et al. (2019) integrated DOI with efficiency metrics,

showing that banks with high trialability in fintech (e.g., pilot programs) achieve better resource

allocation, reducing overheads by 18%. This aligns with Rogers' (2003) emphasis on

experimentation.
Asongu and Odhiambo (2020) applied DOI to African financial sectors, arguing that

communication channels like mobile networks facilitate diffusion, leading to efficiency through

inclusive banking. In Nigeria, this manifests as increased transaction efficiency in underserved

areas.

Challenges are also documented. Ezeudu (2022) critiqued DOI in Nigerian banking, noting that

social system factors like corruption and regulatory delays prolong the late majority phase,

hindering overall sector efficiency. Conversely, opportunities arise from opinion leaders; banks

led by tech-savvy executives diffuse innovations faster, Nwaiwu (2020).

Comparative analyses provide depth. A cross-country study by Tchamyou (2017) used DOI to

compare FinTech adoption in sub-Saharan Africa, finding Nigeria's banking efficiency lags due

to slower diffusion rates compared to South Africa, attributed to compatibility issues with legacy

systems.

2.2.2 Technology Acceptance Model (TAM)

TAM, proposed by Davis (1989), posits that perceived usefulness and ease of use influence

attitudes toward technology adoption, leading to behavioral intention.

The Technology Acceptance Model (TAM) serves as a critical theoretical framework in

understanding the adoption and integration of financial technologies within the Nigerian banking

sector, particularly in relation to performance and efficiency. Originating from the work of Davis

(1989), TAM posits that the acceptance of new information systems is primarily determined by

two key constructs: perceived usefulness (PU), defined as the degree to which an individual

believes that using a particular system would enhance their job performance, and perceived ease
of use (PEOU), which refers to the extent to which a person believes that using the system would

be free of effort. These factors influence users attitudes toward the technology, which in turn

affect their behavioral intention to use it and, ultimately, actual system usage. In the context of

Nigeria's banking sector, where FinTech innovations such as mobile banking, internet banking,

point-of-sale (POS) terminals, automated teller machines (ATMs), automated clearing services,

and remittance platforms are rapidly evolving, TAM provides a robust lens to analyze how these

technologies impact operational efficiency, financial performance, and overall sector

productivity.

Historically, TAM evolved from the Theory of Reasoned Action (TRA) proposed by Fishbein

and Ajzen (1975), adapting psychological principles to technology adoption. Davis, Bagozzi, and

Warshaw (1989) refined it to focus on information systems, emphasizing that external variables

such as system design features or user training indirectly influence adoption through PU and

PEOU. Subsequent extensions, including TAM2 by Venkatesh and Davis (2000), incorporated

additional determinants like subjective norms, job relevance, output quality, and result

demonstrability, while TAM3 by Venkatesh and Bala (2008) added factors such as computer

self-efficacy, perceptions of external control, computer anxiety, and perceived enjoyment. These

extensions are particularly relevant to FinTech in developing economies like Nigeria, where

cultural, infrastructural, and regulatory factors play significant roles. For instance, in banking

efficiency studies, TAM has been extended to include perceived risk, trust, government support,

and brand image, as these elements address unique challenges in emerging markets (Hu et al.,

2019).
Adiga et al. (2022) anchored their study on TAM to examine the effects of FinTech components

payment systems, automated clearing services, and remittance services on key performance

metrics like return on assets (ROA), return on equity (ROE), interest income (II), and non-

interest income (NII) from 2005 to 2020. Using autoregressive distributed lag (ARDL) analysis

on data from the Central Bank of Nigeria (CBN) and Nigeria Deposit Insurance Corporation

(NDIC), they found that FinTech significantly explained variations in ROE and NII, with

positive but insignificant relationships for foreign remittances and automated clearing on ROA.

The study highlighted TAM's emphasis on PU and PEOU, noting that perceived ease of use

could mitigate negative relationships observed in payment systems, ultimately recommending

simplified, secure FinTech services to boost efficiency. This aligns with broader findings that

FinTech adoption improves banking operations by reducing costs and enhancing transaction

speed, though mixed outcomes suggest the need for infrastructure improvements to realize full

efficiency gains.

Similarly, (Iwegbu 2023) explored strategies for leveraging FinTech to improve retail banking

services in Nigeria, grounding the research in the diffusion of innovation (DOI) theory while

integrating TAM elements. Through qualitative multiple-case analysis involving bank managers

and customers, five themes emerged: relative advantage strategies (aligning with PU in TAM),

compatibility strategies, overcoming complexity (linked to PEOU), trialability, and

observability. Findings indicated that FinTech platforms like mobile banking and USSD services

reduced operational inefficiencies, with transaction volumes surging from ₦2 trillion in 2018 to

over ₦22 trillion in 2022. Efficiency improvements were evident in cost savings, 24/7 access,

and financial inclusion, positively impacting non-financial performance such as customer

satisfaction and work efficiency. The study recommended user-centric frameworks to capture

needs, echoing TAM's focus on perceptions to drive adoption and performance.

Bamanga et al. (2025) further applied regression analysis to evaluate FinTech's effect on

financial inclusion in Nigeria, finding mobile banking and POS terminals as significant drivers,

accounting for 83.7% of inclusion variance. Relating to efficiency, the study noted that these

tools facilitate seamless transactions, reducing operational bottlenecks and promoting loyalty key

for banking performance. In a dynamic context, Okoi et al. (2025) used ARDL to assess

FinTech's effect on financial development, revealing short-run positive impacts (6.57% increase

per 1% FinTech rise) on metrics like money supply to GDP, with tools like POS and mobile

banking enhancing access and efficiency. The study referenced TAM in keywords, underscoring

its utility in predicting adoption's role in development.

Nyanga and Eresia-Eke (2025) leveraged TAM to study FinTech adoption in South African

SMEs, with parallels for Nigeria, finding PU and PEOU significantly affecting adoption, which

in turn boosted organizational performance (0.795). This implies FinTech enhances productivity

and competitiveness, applicable to Nigerian banks where similar user-centric solutions could

improve efficiency metrics like profitability and decision-making quality.

Hu et al. (2019) extended TAM for FinTech services, incorporating innovativeness, government

support, brand image, and perceived risk into trust determinants, showing trust's strong influence

on adoption attitudes. This extension is pertinent to Nigeria, where perceived risks like cyber

threats could hinder efficiency gains unless mitigated.

2.2.3 Agency Theory

Agency theory, originally formalized by Jensen and Meckling (1976), provides a foundational

lens for understanding the dynamics between principals (such as shareholders or depositors) and

agents (such as bank managers or executives) in organizational settings. At its core, the theory

addresses the inherent conflicts that arise when one party (the agent) is delegated to act on behalf

of another (the principal), particularly under conditions of information asymmetry, divergent risk

preferences, and incomplete contracts. Principals seek to maximize returns and minimize risks,

while agents may pursue personal utility, leading to agency costs; these include monitoring

expenses incurred by principals to oversee agents, bonding costs paid by agents to assure

principals of their alignment, and residual losses from unresolved misalignments.

In the context of banking, agency theory is particularly salient due to the sector's unique

characteristics, including high leverage, opacity in operations, and the presence of multiple

stakeholders (e.g., shareholders, depositors, regulators). Banks act as intermediaries, managing

funds from depositors (principals) while making lending decisions through managers (agents).

This setup creates opportunities for moral hazard, where agents might engage in excessive risk-

taking, knowing that government-backed deposit insurance or bailouts could absorb losses. For

instance, managers may approve high-risk loans to boost short-term profits and personal

incentives, potentially jeopardizing long-term bank stability and efficiency.

Empirical applications of agency theory in banking efficiency reveal that governance

mechanisms play a critical role in mitigating these issues. Sukendri et al. (2024) argue that

agency theory informs the design of incentive contracts, such as performance-based

compensation and share ownership, which align managers' interests with those of shareholders,

thereby reducing opportunistic behavior and enhancing operational efficiency. In their analysis,
transparency in financial reporting and robust risk management committees are highlighted as

tools to minimize information unevenness, leading to better decision-making and lower agency

costs. This alignment can improve banking performance by fostering stability and value creation,

as evidenced in capital structure decisions where debt serves as a monitoring device to curb

managerial excesses.

However, the theory's predictions are not always straightforward in practice. (Palia and Porter

2007) conducted an empirical study unifying moral hazard from deposit insurance with incentive

compensation, finding that higher capital requirements reduce risk-taking, while pay-

performance sensitivity increases it. Their simultaneous equations model, accounting for

endogeneity, suggests that while incentives align interests, they may elevate agency costs

through heightened risk, impacting efficiency negatively if not balanced with regulation.

In terms of banking performance measurement, Hughes and Mester (2008) integrate agency

theory into efficiency analyses, noting that sub-par managerial performance stems from agency

problems, measurable through stochastic frontiers that compare actual outcomes to best-practice

benchmarks. They argue that utility-maximizing managers may trade off profit for risk reduction,

resulting in X-inefficiency lost value due to agency costs. Governance variables, such as

managerial ownership, are incorporated to assess how they correlate with inefficiency, with

evidence showing optimal ownership levels minimize profit shortfalls.

The 2007-2010 financial crisis offers practical lessons, as explored by Donnellan and Rutledge

(2016), who apply agency theory to operational risks in U.S. banks. They highlight how

government safety nets exacerbated moral hazard, leading to increased credit and liquidity risks,

particularly in state-chartered banks. Post-crisis adaptations, including regulations like Dodd-

Frank, improved risk management, suggesting that agency-aligned governance enhances long-

term efficiency.

Onuora (2016) examines agency theory's impact on financial performance in Nigerian

businesses, including banks, revealing a positive relationship between compensation packages

and outcomes, with adequate incentives reducing control burdens. Firm size emerges as a

predictor of success, enabling better agency cost management through scale economies.

In Nigeria, where banking efficiency is challenged by infrastructure gaps and inclusion barriers,

FinTech emerges as a potential mitigator of agency issues. Ferilli et al. (2024) link FinTech

governance to performance, finding that board characteristics (e.g., size, age) influence risk and

profitability, contributing to stability echoing agency theory's emphasis on oversight. FinTech

reduces information asymmetry through real-time data and digital transparency, aligning agents

actions with principals interests.

2.3 Empirical Review

Empirical reviews on the global impact of financial technology (FinTech) on banking

performance and efficiency provide a rich foundation for understanding how digital innovations

reshape the sector. This section synthesizes key studies from various regions, drawing on

quantitative analyses such as data envelopment analysis (DEA), stochastic frontier analysis

(SFA), quantile regression, and panel data models. These investigations often measure efficiency

through metrics like cost reduction, total factor productivity (TFP), return on assets (ROA), and

liquidity ratios, while performance encompasses profitability, competitiveness, and risk

management. Findings reveal a predominantly positive but context-dependent influence of

FinTech, with variations influenced by bank size, regulatory environments, and economic

development levels. The review is organized thematically, starting with overarching systematic

reviews, followed by region-specific insights, and concluding with cross-cutting themes like

profitability versus efficiency trade-offs.

Ogbuji, Ologundudu, and Oluyomi (2020) examined the effects of FinTech operations on bank

performance at Wema Bank using Capital Adequacy, Asset Quality, Management, Earnings,

Liquidity and Sensitivity to Market Risk descriptive and composite ranking methods drawing on

data from 2012–2018. The study found that digital FinTech operations had a consistently

positive impact on performance relative to traditional payment systems, suggesting that digital

channels can enhance efficiency and inclusion in bank operations. This study is relevant because

it directly compares traditional banking models with FinTech-amplified models in a real

Nigerian context, indicating that digital transformation can drive performance outcomes in

practical settings. However, the study’s reliance on a single bank case constrains its

generalizability across the entire banking sector in Nigeria.

Ojor, Nwoha, and Okwo (2023) investigated specific FinTech channels including Automated

Teller Machines (ATMs), mobile pay services, and National Electronic Funds Transfer (NEFT)

on Return on Assets (ROA) for commercial banks in Nigeria from 2009 to 2021. Using ex-post

facto design and Ordinary Least Squares regression, they found that ATM, mobile pay, and

NEFT had negative and statistically insignificant effects on ROA, suggesting that these FinTech

components alone did not significantly improve corporate performance in the period studied.

This empirical insight challenges the assumption that all FinTech adoption clearly enhances

performance, though the focus on ROA alone may overlook other dimensions of operational

efficiency such as cost ratios.

Using Johansen Co-integration and Vector Error Correction Model (VECM) techniques with

data from 2009 to 2017, Onabanjo et al. (2023) explored the link between electronic banking

variables such as Automated Teller Machines and point-of-sale transactions and overall bank

performance indicators. They identified a long-run statistical relationship between electronic

banking activities and performance, showing that FinTech adoption correlates with performance

trends over extended periods, pointing to sustained improvements in service delivery and

operational outcomes when FinTech adoption is integrated into bank strategies. The study

highlights long-term efficiency dynamics that cross-sectional analyses might miss, though it does

not isolate individual channels’ independent effects on efficiency.

Adewumi, Melikam, and Ige (2023) investigated the impact of payment FinTech such as digital

and mobile payment channels on performance indicators including return on equity and return on

assets for United Bank for Africa (UBA) and Zenith Bank over the period 2012–2019. By

applying an ARDL estimation, the study found that while FinTech channels had both positive

and negative effects, the positive influences outweighed the negative effects on key performance

outcomes. Their findings suggest that payment technology adoption can bolster bank efficiency

and financial outcomes, though the impact varies across metrics. Because the study focused on

only two banks, it limits broader Nigerian banking sector generalizations. Nonetheless, it

presents a nuanced view that not all FinTech elements are uniformly beneficial, calling for

targeted strategies in optimizing digital channels.

Jackson, Kumshe, Dalha, and Hamidu (2025) examined FinTech’s impact on the financial

performance of selected commercial banks (including Zenith, UBA, Access, and Wema Bank)

from 2013 to 2022 using Pooled Ordinary Least Squares (POLS) regression. Their findings show
that newer FinTech channels such as Point of Sale (POS) and Mobile Banking had significant

positive effects on profitability metrics, whereas the ATM network had a negative impact and

internet banking had no significant effect. This study contributes by comparing multiple banks

with panel data and identifies which FinTech mechanisms most clearly drive performance and

operational outcomes in Nigeria’s competitive banking environment.

Alagbe and Yinus (2025) used a survey design with data from 150 respondents across six banks

to assess the relationship between digital banking adoption and Return on Assets (ROA). Their

multiple regression results indicated a significant positive association between digital banking

adoption and profitability, with about 74% of ROA variation explained by digital banking

variables. This customer-centric empirical approach demonstrates that FinTech adoption at the

user level translates into measurable corporate performance gains, supplementing event-based

and panel data analyses. However, the reliance on survey data introduces subjective bias and

may not capture complete operational efficiency measures.

Oyetoyan and Ajiboye (2025) explored how the regulatory environment of FinTech services

influences performance in Deposit Money Banks. With a quantitative design and regression

modeling of responses from 220 bank employees, they found that FinTech services provided

through platforms like Paystack and Branch were positively related to bank performance

measures, especially when paired with effective regulation. While not strictly isolating efficiency

statistics like transaction processing speed or cost ratios, this study underscores that regulatory

support is a key moderator in how FinTech adoption affects bank outcomes, a critical insight for

policy and practice.

Omole, Adewumi, and Fakunle (2023) assessed FinTech services impact focusing on variables

like ATM, POS, and other digital services on financial performance of selected Deposit Money

Banks between 2018 and 2022 using descriptive and correlation techniques. They reported a

generally favorable impact of FinTech services on financial health indicators, suggesting that

broader FinTech adoption supports stability and profitability in the sector. While the study’s

descriptive correlation approach limits causal inference, it reinforces the view that FinTech

correlates positively with key performance measures in Nigerian banks.

2.4 Gaps in Literature and Summary

Over the past decade, scholars have begun to examine how FinTech tools (e.g. ATMs, POS

terminals, mobile and online banking) affect Nigerian banks’ performance and efficiency. Many

studies report positive effects. For example, Otonne and Ige (2023) find that greater FinTech

activity (such as higher ATM transactions) is associated with higher earnings per share and

overall bank efficiency. Similarly, Madugba et al. (2021) conclude that expanded electronic

banking usage (ATMs, POS, NEFT) significantly boosts Nigerian banks’ ROA and EPS.

However, these findings are not universal. Torutein (2025) finds the opposite for some channels

over 2009–2022, higher usage of ATMs, internet banking and mobile banking reduced bank

performance. Yua et al. (2023) likewise report that mobile banking had a negative effect on ROA

(while POS had a positive long-run effect). These divergent results suggest that the literature still

lacks harmony on how FinTech adoption translates into profitability. In particular, Nigerian

studies to date tend to focus on a few profitability metrics (ROA, ROE, EPS) and a small set of

channels, often with limited bank samples or timeframes. This leaves a gap in understanding

when and why FinTech boosts profit, for example, whether effects differ by bank size, region, or

market conditions. Otonne and Ige explicitly note significant research gaps in understanding
FinTech’s impact on bank performance in emerging economies like Nigeria. In short, existing

work lacks clarity on the conditions and mechanisms through which FinTech influences Nigerian

banks profitability, indicating a clear research gap.

Studies of operational efficiency (cost reductions, productivity gains) from FinTech in Nigeria

are even scarcer. A recent review finds that FinTech’s impact on banks cost efficiency is context-

dependent; some studies (e.g. Liao 2023) report improved efficiency with FinTech, while others

(Lee et al. 2023) find efficiency declines. In particular, Said (2025) emphasizes that, globally,

FinTech’s effect on efficiency remains ambiguous and heavily dependent on how well FinTech

is integrated. Crucially, Said’s survey points out a thematic gap; most research focuses on

technical/financial metrics and largely ignores customer-centric outcomes (such as user

satisfaction or retention). In Nigeria, almost no study has applied frontier methods (DEA/SFA) to

measure banks’ technical efficiency under FinTech adoption. Owusu, Agyei & Amanor (2019)

used DEA to link IT efficiency with bank performance in Ghana and found that efficient IT use

significantly improves performance. However, an equivalent Nigeria-specific efficiency analysis

is lacking. Likewise, Yang et al. (2018) show for Chinese banks that e-banking raised ROA/ROE

but had minimal effect on net interest margins or cost-income ratios. This suggests that improved

profitability does not automatically translate to greater cost-efficiency, a shade not yet explored

for Nigerian banks.

There is a notable gap in empirical work on how FinTech affects Nigerian banks’ operational

efficiency (e.g. cost ratios, processing speed, and branch efficiency). Researchers have yet to

quantify whether Nigerian banks truly save costs or improve throughput when deploying new

digital technologies.
Beyond profitability and efficiency metrics, several important sub-themes remain under-

explored. First, prudent performance indicators like liquidity or risk are rarely examined. For

example, Kolawole et al. (2024) highlight that while many studies report FinTech improves

profitability (ROA, ROE), they ignore banks liquidity ratios a key regulatory metric. In Nigeria’s

fast-evolving FinTech landscape (e.g. open banking, USSD transfers), no study has yet assessed

how digital transactions impact banks’ deposit bases or loan-to-deposit ratios. Similarly, the

effects of FinTech on risk and security are largely anecdotal. Some authors (e.g. Torutein 2025)

mention challenges like cybersecurity and regulatory uncertainty as barriers to FinTech adoption,

but there is no systematic analysis of how cyber-attacks or compliance costs might offset

efficiency gains.

Second, new FinTech innovations and channels are often omitted. Most research treats FinTech

as mature channels (ATM, POS, internet banking). There is little to no literature on emerging

technologies in Nigeria for instance, blockchain-based systems, AI-driven banking apps, or

FinTech lending platforms and their efficiency effects. For example, no published study

measures how blockchain or cryptocurrency integration might alter Nigerian banks’ cost

structure or performance. This is a gap, given Nigeria’s strong FinTech startup activity.

Third, customer-centric impacts are virtually ignored. The systematic review by Said (2025)

found that no studies (globally) have examined FinTech’s effect on customer satisfaction or

retention. In Nigeria, this gap persists: we do not know how digital banking affects customers’

service perceptions, and in turn how that feedback loop influences banks’ efficiency.

Finally, methodological gaps persist. Most Nigerian studies rely on macro or panel regressions

with aggregate indicators. Few employ micro-level panel data or qualitative methods (e.g.
interviews) to understand bank operations. There is a lack of comparative studies across banks or

periods (for example, pre- versus post-COVID or demonetization). The systematic review

suggests future work should use case studies or meta-analyses to capture contextual nuance, but

such approaches are missing in Nigeria. Overall, the literature heavily emphasizes quantitative

profit measures and neglects qualitative and cost-efficiency dimensions.

While recent Nigerian research has begun to show how FinTech relates to bank performance,

key gaps remain. These include contradictory findings on profitability, a dearth of efficiency

analyses (DEA/SFA) for Nigerian banks, and little attention to liquidity, risk, or customer

outcomes. Addressing these gaps for instance by studying FinTech’s impact on efficiency ratios

or customer satisfaction in Nigerian banks is essential to fully understand FinTech’s role in the

sector.
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