INTRODUCTION

1.1 Background of the study

In recent years, investment in financial technology (FinTech) has emerged as a central strategic

priority within the global banking sector, driven by rapid digital transformation and evolving

customer expectations. Banks across developed and developing economies are increasingly

allocating substantial financial resources toward digital infrastructure, including mobile banking

applications, electronic payment systems, artificial intelligence, blockchain technologies, and big

data analytics. These innovations are fundamentally reshaping the traditional banking model by

enhancing operational efficiency, reducing transaction costs, and enabling real-time financial

service delivery. Empirical evidence indicates that the pace of FinTech adoption accelerated

significantly in the post-COVID-19 era, as lockdowns and social distancing measures forced

financial institutions to rely heavily on digital channels to maintain service continuity (Pham et al.,

2025). Consequently, FinTech investment has become not only a tool for competitiveness but also

a necessity for survival in the modern financial ecosystem.

However, despite its transformative potential, FinTech investment presents a complex mix of

opportunities and risks. While digital technologies improve service delivery, expand financial

inclusion, and enhance profitability, they simultaneously introduce new vulnerabilities into

banking operations. These include heightened exposure to cybersecurity threats, increased

operational risks due to system failures, and complexities associated with integrating new

technologies into existing legacy systems. Studies have shown that although FinTech adoption
contributes positively to banking performance, it may also increase risk exposure, particularly in

environments with weak regulatory frameworks and limited technological capacity (Hassan et al.,

2025). This duality suggests that the benefits of FinTech investment are not automatic but are

contingent upon the quality of governance structures and the strategic management of

technological resources.

Across regions, the dynamics of FinTech investment vary significantly. In Europe, the growth of

FinTech has been largely supported by robust regulatory frameworks, such as open banking

initiatives and strong consumer protection policies. Countries like the United Kingdom and

Germany have led the development of digital financial ecosystems, fostering innovation through

regulatory sandboxes and collaboration between banks and FinTech firms. Nevertheless, recent

trends indicate that FinTech investment in the region is sensitive to macroeconomic conditions,

with fluctuations driven by rising interest rates, inflationary pressures, and global financial

uncertainties (KPMG, 2024). This underscores the importance of aligning FinTech investment

strategies with broader economic realities.

In Asia, FinTech investment has reached advanced levels, particularly in countries such as China,

India, and Singapore, where digital financial services are deeply integrated into everyday

economic activities. Empirical studies suggest that FinTech adoption in these economies has

significantly improved banking efficiency, risk management, and financial stability. However, the

impact on risk remains context-dependent, as rapid technological expansion can also amplify
systemic vulnerabilities if not properly regulated (Uddin & Barai, 2026). Thus, while Asia

demonstrates the potential of FinTech to drive financial sector development, it also highlights the

need for effective institutional frameworks.

In Africa, FinTech investment plays a critical role in addressing financial exclusion and promoting

inclusive growth. The widespread adoption of mobile money platforms has revolutionized access

to financial services, particularly among unbanked and underbanked populations. Despite these

advancements, the effectiveness of FinTech investment in Sub-Saharan Africa remains

constrained by structural challenges such as inadequate digital infrastructure, low levels of

financial literacy, and weak regulatory systems (Kamara & Yu, 2024). These limitations suggest

that FinTech investment alone is insufficient to achieve optimal outcomes without complementary

institutional support.

In the Nigerian context, the banking sector has witnessed rapid growth in FinTech investment,

with Deposit Money Banks (DMBs) deploying various digital platforms, including mobile

banking applications, USSD services, automated payment systems, and online banking solutions.

This growth is driven by increased competition, regulatory directives from the Central Bank of

Nigeria, and rising consumer demand for convenient digital services. Despite these investments,

the sector continues to face significant operational challenges, including frequent network failures,

delayed or unsuccessful transactions, and escalating incidents of electronic fraud. These persistent

issues raise critical concerns regarding the efficiency and effectiveness of FinTech investments
and suggest that increased spending on technology does not necessarily translate into improved

performance outcomes.

Given these contradictions, recent scholarly attention has shifted toward examining the internal

determinants of FinTech investment decisions, particularly corporate governance mechanisms.

Among these, ownership structure has emerged as a critical factor influencing strategic decision-

making within firms. Drawing from agency theory, ownership structure affects the alignment of

interests between managers and shareholders, thereby influencing investment decisions, risk

preferences, and resource allocation. Similarly, resource dependence theory suggests that certain

types of owners, such as institutional and foreign investors, provide access to valuable resources,

expertise, and networks that can support technological innovation.

Institutional ownership is often associated with effective monitoring and long-term investment

orientation, which may encourage sustained commitment to FinTech development. Foreign

ownership introduces international best practices, advanced technological knowledge, and

improved governance standards, potentially enhancing digital innovation. Managerial ownership

aligns managerial incentives with shareholder interests, which may either promote or constrain

FinTech investment depending on risk considerations. Ownership concentration, on the other

hand, reflects the dominance of large shareholders whose preferences may significantly shape

investment decisions, either by supporting innovation or prioritizing short-term returns.

likely to support sustained technological investments. Ownership stability, defined by the

consistency of ownership over time, facilitates long-term strategic planning and reduces

uncertainty in investment decisions. Collectively, these dimensions of ownership structure provide

important mechanisms through which FinTech investment behavior can be explained.

2 However, the influence of ownership structure on FinTech investment may not be direct but

contingent upon the internal capabilities of the firm, particularly the technological competence of

the board of directors. Board technological expertise reflects the ability of board members to

understand, evaluate, and guide digital transformation strategies. From a knowledge-based view,

boards with higher technological expertise are better positioned to provide effective oversight,

reduce information asymmetry, and support complex innovation decisions. In contrast, boards

lacking such expertise may fail to fully understand the implications of FinTech investments,

leading to suboptimal decision-making.

Recent developments in the Nigerian banking industry, including increasing cybercrime incidents,

regulatory pressures for digital compliance, and rising customer expectations for seamless digital

services, further emphasize the importance of effective governance. These developments suggest

that beyond financial investment, the success of FinTech initiatives depends on the interaction

between ownership structure and board capabilities.

First, existing studies have largely focused on the direct effects of FinTech on performance, with

limited attention given to the determinants of FinTech investment itself. Second, empirical

evidence on the role of ownership structure in shaping FinTech investment is still sparse,

particularly in emerging economies like Nigeria. Third, few studies have examined the moderating

role of board technological expertise in this relationship, thereby overlooking an important

mechanism through which governance influences technological outcomes.

Therefore, this study is motivated by the need to bridge these gaps by examining the effect of

ownership structure on FinTech investment among listed Deposit Money Banks in Nigeria, while

incorporating board technological expertise as a moderating variable. The study seeks to provide

empirical insights into why increased FinTech investment does not always translate into improved

outcomes and to identify the governance conditions necessary for achieving sustainable and

effective digital transformation in the Nigerian banking sector.

2.1