Impact of Financial Innovation on the Competitiveness of Deposit Money Banks in Nigeria
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Date
2023-10-27
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RSIS
Abstract
The world has changed dramatically, since the industrial revolution and innovation is now at the forefront of
every industry. Scholars have identified innovation as a critical factor that aids economic expansion,
accelerates financial development and facilitates investment diversification. However, despite the
undeniable importance of financial innovation in fostering growth, questions remain on whether such
innovation boosts competitiveness among banks in Nigeria. Therefore, this study investigated the impact of
financial innovation on the competitiveness of Deposit Money Banks (DMBs) in Nigeria. Ninety-six bank
officers were randomly selected from the twenty-four DMBs in Nigeria, to provide responses to a structured
questionnaire, developed in line with the objectives of the study. A Structural Equation Model (SEM) was
used to specify the relationship between the dimensions of financial innovation (mobile banking, internet
banking, ATM banking & CBN digital currency) and banks’ competitiveness. The model assessment was
done using the standard factor loading, composite reliability, construct and the discriminant validity tests.
The Partial Least Squares (PLS) technique was further used to estimate the model parameters and test the
research hypotheses, via the Smart-PLS 3 statistical software. The results revealed that both internet banking
and CBN digital currency directly and significantly affect banks’ competitiveness. The study concludes that
internet banking and CBN digital currency are key financial innovation tools influencing competitiveness
among DMBs in Nigeria. Therefore, it is recommended that management and stakeholders in Nigerian
DMBs should encourage frequent usage of their internet banking platforms by making it more customer friendly and enhancing its safety features. Furthermore, the government should by way of policy encourage
businesses and individuals to embrace the E-naira for carrying out financial transactions.