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DETERMINANTS OF CUSTOMER ADOPTION OF VIRTUAL BANKS (e.g., Kuda, Moniepoint) IN NIGERIA: OPPORTUNITIES AND CHALLENGES
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The Nigerian banking sector has experienced significant transformation in recent years, primarily driven by advancements in financial technology (fintech) and the emergence of digital-only banking institutions (Ken Research, 2025). Virtual banks, also referred to as neobanks, operate exclusively online, eliminating the need for physical branches. These platforms provide a range of financial services, including account opening, transfers, payments, savings, and loans, accessible via mobile applications and web interfaces. Notable examples in Nigeria include Kuda Bank, which markets itself as a zero-fee banking solution, and Moniepoint, which focuses on business payments, POS solutions, and catering to the informal economy (Ken Research, 2025).
The transition toward virtual banking has been accelerated by increasing smartphone adoption, broader internet accessibility, and rising demand for cost-effective, efficient financial services (Ken Research, 2025). Traditional commercial banks have historically dominated Nigeria’s financial landscape, yet persistent issues such as excessive transaction fees, operational inefficiencies, and limited rural access have created opportunities for fintech disruptors (KPMG, 2025). Virtual banks like Kuda and Moniepoint have addressed these gaps by offering streamlined onboarding processes, instant transaction capabilities, minimal fees, and intuitive digital interfaces, contributing to rapid adoption, particularly among younger, tech-savvy demographics and small business operators (KPMG, 2025).
Industry reports indicate that fintech platforms such as Moniepoint, Opay, and Kuda have surpassed traditional banks in digital experience and customer satisfaction metrics (KPMG, 2025). Surveys highlight increasing reliance on these platforms as primary banking providers, attributed to frictionless account setup, competitive pricing, and high transaction reliability (KPMG, 2023; KPMG, 2025). This trend supports Nigeria’s financial inclusion objectives, given that a substantial portion of the population remains underserved by conventional banking systems (Mokuolu et al., 2025).
Nevertheless, virtual banking adoption faces obstacles, including regulatory compliance complexities, cybersecurity vulnerabilities, network instability, consumer trust deficits, and intermittent policy restrictions (TechCabal, 2024; Mokuolu et al., 2025). Despite these challenges, growth opportunities remain substantial, particularly in advancing financial inclusion, innovating services for the informal sector, and stimulating digital transformation among incumbent banks (Ken Research, 2025; KPMG, 2025).
This study investigates the determinants influencing customer adoption of virtual banks in Nigeria, focusing on platforms like Kuda and Moniepoint, while assessing associated opportunities and challenges. Insights from this research are critical for policymakers, fintech firms, and traditional financial institutions navigating Nigeria’s evolving banking ecosystem (Adetule, 2025).
1.2 Statement of the Problem
Despite rapid expansion, virtual bank adoption in Nigeria exhibits disparities across demographic groups, geographic regions, and user segments (KPMG, 2025). While urban, younger consumers have readily embraced platforms like Kuda and Moniepoint due to their convenience and affordability, barriers such as security concerns, low digital literacy in certain populations, unreliable internet infrastructure, and regulatory ambiguities constrain broader acceptance (Mokuolu et al., 2025).
Existing literature on digital banking adoption in Nigeria predominantly examines traditional internet or mobile banking services offered by established banks, with insufficient empirical focus on pure virtual banking models such as Kuda and Moniepoint (Awoniyi, 2022). A gap persists in understanding the specific factors influencing customer decisions to adopt these platforms as primary or secondary banking solutions. Furthermore, while opportunities for financial inclusion and innovation are evident, challenges such as regulatory penalties, infrastructure dependencies, and competition from traditional banks necessitate deeper analysis to inform sustainable development strategies (TechCabal, 2024; Ken Research, 2025).
This study aims to address these gaps by identifying key drivers and inhibitors of adoption, alongside exploring broader opportunities and challenges within Nigeria’s virtual banking landscape.
1.3 Objectives of the Study
The main objective investigates determinants of customer adoption of virtual banks (Kuda, Moniepoint) in Nigeria. It assesses opportunities and challenges.
The specific objectives are:
- Identify key determinants influencing customer adoption of virtual banks in Nigeria.
- Examine demographic factors shaping adoption behavior.
- Explore opportunities for financial inclusion, innovation, and economic growth.
1.4 Research Questions
- What primary determinants influence customer adoption of virtual banks like Kuda and Moniepoint in Nigeria?
- How do demographic variables affect adoption of these services?
- What opportunities do virtual banks offer for financial services and inclusion in Nigeria?
1.5 Significance of the Study
This study enriches fintech adoption knowledge in developing economies, focusing on Nigeria’s sector. Virtual bank operators gain insights for acquisition and retention strategies. Regulators like the Central Bank of Nigeria receive policy guidance balancing innovation and protection. Traditional banks identify competitive threats and collaboration prospects. Academically, it supports future African neobank research.
1.6 Scope of the Study
The study targets customer adoption of Kuda and Moniepoint in Nigeria. It emphasizes urban and semi-urban areas with higher digital penetration. It considers national trends. Analysis employs frameworks like the Technology Acceptance Model (TAM). Data draws from surveys, secondary sources, and reports.
1.7 Limitations of the Study
Limitations include self-reported data bias, fintech’s rapid evolution, and proprietary data access restrictions. Mitigation occurs through source triangulation and cautious interpretation.
1.8 Definition of Key Terms
- Virtual Banks/Neobanks: Digital-only institutions offering services via apps without branches (e.g., Kuda, Moniepoint).
- Customer Adoption: Acceptance and usage of virtual banking in financial activities.
- Determinants: Factors like perceived benefits and risks influencing decisions.
- Financial Inclusion: Access to affordable financial products for underserved groups.
1.9 Organization of the Study
The research work comprises five chapters. Chapter One introduces the topic. Chapter Two reviews literature and framework. Chapter Three describes methodology. Chapter Four analyzes data and findings. Chapter Five concludes with recommendations and future research suggestions.
References
KPMG. (2023). 2023 West Africa Banking Industry Customer Experience Survey. KPMG Advisory Services. https://assets.kpmg.com/content/dam/kpmg/ng/pdf/2023%20KPMG%20West%20Africa%20Banking%20Industry%20Customer%20Experience%20Survey.pdf
Science Publishing Group. (2025). Nigeria’s Fintech Conundrum: Weighing the Trade-offs Between Financial Inclusion, Innovation and Monetary Policy Effectiveness. International Journal of Finance and Banking Research, 11(6). https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20251106.16
Awoniyi, O. (2022). Digital banking adoption in Nigeria: The place of technology acceptance model. Asian Journal of Economics, Business and Accounting, 22(7), 59-72.
Ken Research. (n.d.). Nigeria Digital Banking and Neobanks Market. https://www.kenresearch.com/nigeria-digital-banking-and-neobanks-market