ABSTRACT

This study investigates the impact of fintech investments on the financial performance of listed deposit money banks (DMBs) in Nigeria. Utilizing panel data from selected listed banks over recent periods, including analyses spanning 2014–2023 and extending to 2024 perspectives, the research distinguishes between operational expenditure (FintechOpex) and capital expenditure (FintechCapex) on fintech. Key performance indicators examined include Return on Assets (ROA) and Net Interest Margin (NIM). Findings from scholarly panel regressions indicate that FintechCapex exerts a significant positive influence on ROA and NIM, reflecting long-term gains from strategic infrastructure investments, while FintechOpex shows no statistically significant effect, suggesting short-term operational spending yields limited immediate profitability improvements. Additional evidence highlights that fintech adoption positively affects bank performance in both short and long run, with a 1% increase in fintech services leading to notable enhancements (0.1% long-term to 1.2% short-term), though moderated by factors like bank size, capital adequacy, and infrastructure adequacy. The study recommends prioritizing capitalized fintech projects and aligning investments with regulatory frameworks to optimize efficiency and mitigate inefficiencies. These insights contribute to understanding digital transformation’s role in enhancing banking profitability in emerging markets like Nigeria.

1.1 Background of the Study

The Nigerian banking sector has undergone significant transformation as a result of financial technology (fintech) integration, with deposit money banks (DMBs) listed on the Nigerian Exchange Group increasingly directing resources toward digital innovations. These investments encompass mobile banking platforms, artificial intelligence analytics, blockchain applications, and strategic partnerships with fintech firms, aimed at enhancing service delivery, reducing operational costs, and expanding market reach within a competitive environment shaped by fintech startups and regulatory incentives for cashless policies.

Empirical research highlights the varying impacts of fintech investments. A panel data analysis of twelve listed Nigerian commercial banks from 2014 to 2023 demonstrates that capital expenditure on fintech (FintechCapex) exerts a positive and statistically significant effect on Net Interest Margin (NIM) and Return on Assets (ROA), indicating that sustained infrastructure investments yield measurable financial benefits (Alagbe & Yinus, 2025). Conversely, operational expenditure (FintechOpex) shows no significant influence on these performance metrics, suggesting that short-term spending fails to produce immediate improvements due to transitional costs and implementation barriers (Alagbe & Yinus, 2025).

Additional panel data studies covering 2012 to 2024 corroborate the positive influence of fintech adoption on bank performance in both short- and long-term contexts. Notably, a 1% increase in fintech services corresponds to a 0.1% long-term gain and a 1.2% short-term boost in performance metrics. However, accelerated growth, increased bank scale, and elevated capital adequacy ratios introduce adverse long-term effects associated with operational inefficiencies and infrastructural constraints (Assessing The Impact of Fintech Innovations, 2024). These results align with broader findings indicating that fintech enhances operational efficiency, revenue diversification, and competitive positioning, while established banks capitalize on institutional experience in adopting such innovations (Assessing The Impact of Fintech Innovations, 2024).

Academic discourse emphasizes the strategic imperative of prioritizing capitalized projects to optimize budgetary restructuring and integrate advanced technologies for long-term profitability (Alagbe & Yinus, 2025). This contextual framework underscores the evolving significance of fintech investments in reshaping the financial performance of listed Nigerian DMBs, necessitating empirical investigation to inform optimal resource allocation and regulatory policy.

1.2 Statement of the Problem

Despite the potential of fintech investments, listed deposit money banks in Nigeria encounter inconsistent financial performance outcomes. While digital innovations promise efficiency and market expansion, high initial costs, implementation delays, cybersecurity concerns, and regulatory demands often hinder immediate returns. Panel analyses from 2014–2023 show that operational fintech expenditures exert no significant impact on ROA or NIM, indicating inefficiencies in short-term budget utilization (Alagbe & Yinus, 2025).

In contrast, capital-intensive fintech investments positively affect performance, yet broader panel evidence from 2012–2024 reveals that while fintech boosts metrics (e.g., 1% adoption increase yielding 0.1–1.2% gains), factors such as rapid expansion, bank scale, and elevated capital ratios negatively influence long-term profitability due to cost burdens and inadequate supporting infrastructure (Assessing The Impact of Fintech Innovations, 2024). These mixed results raise questions about the overall effectiveness of fintech strategies in enhancing key indicators like ROA, ROE, and NIM.

Without precise insights into investment impacts and moderating factors, banks risk misallocated resources, persistent cost pressures, and diminished competitiveness amid fintech-driven disruptions. This problem highlights the urgency for research to clarify relationships and inform strategic decisions in Nigeria’s banking sector.

Despite the potential of fintech investments, listed deposit money banks in Nigeria exhibit inconsistent financial performance outcomes. Although digital innovations offer prospects for efficiency gains and market expansion, substantial initial costs, implementation delays, cybersecurity risks, and regulatory requirements frequently impede immediate financial returns. Panel analyses spanning 2014–2023 demonstrate that operational fintech expenditures exert no statistically significant effect on return on assets (ROA) or net interest margin (NIM), suggesting suboptimal short-term budget allocation (Alagbe & Yinus, 2025).

Conversely, capital-intensive fintech investments positively correlate with performance metrics; however, broader panel evidence from 2012–2024 indicates that while fintech adoption yields marginal improvements (e.g., a 1% increase in adoption generating 0.1–1.2% performance gains), rapid expansion, institutional scale, and elevated capital ratios negatively affect long-term profitability due to escalating cost burdens and insufficient complementary infrastructure (Assessing The Impact of Fintech Innovations, 2024). These divergent findings necessitate further examination of fintech strategies’ efficacy in enhancing critical indicators such as ROA, return on equity (ROE), and NIM.

Absent granular insights into investment outcomes and moderating variables, financial institutions face heightened risks of resource misallocation, sustained cost inefficiencies, and eroding competitive positioning within Nigeria’s increasingly fintech-disrupted banking landscape. This research gap underscores the imperative for empirical investigation to elucidate causal relationships and guide strategic decision-making processes.

1.3 Objectives of the Study

The general objective of this study is to examine the impact of fintech investments on the financial performance of listed deposit money banks in Nigeria.

The specific objectives are:

1. Identify the nature of fintech investments in listed deposit money banks in Nigeria.
2. Assess the effect of fintech investments on key performance indicators.
3. Evaluate factors moderating the relationship between fintech investments and financial performance.

1.4 Research Questions

1. What is the nature of fintech investments undertaken by listed deposit money banks in Nigeria?
2. What is the effect of fintech investments on financial performance indicators of listed deposit money banks?
3. What factors moderate the impact of fintech investments on financial performance?

1.5 Significance of the Study

This study offers practical guidance for bank management in optimizing fintech allocations to boost ROA, NIM, and related metrics. Regulators such as the Central Bank of Nigeria can draw on evidence to craft policies supporting innovation while ensuring stability. Academically, it fills gaps in Nigeria-focused empirical work using contemporary panel data. Investors benefit from clearer understanding of fintech’s influence on bank valuation and returns. Ultimately, the research advances sustainable digital strategies in Nigeria’s financial sectorThis study provides actionable recommendations for bank executives seeking to enhance financial performance metrics, including return on assets (ROA) and net interest margin (NIM), through strategic fintech investments. Regulatory bodies such as the Central Bank of Nigeria may utilize the empirical findings to formulate policies that balance innovation promotion with systemic stability. The research contributes to the academic literature by addressing Nigeria-specific knowledge gaps through analysis of recent panel data. Additionally, it offers investors enhanced insights into fintech’s impact on banking sector valuation and profitability. Collectively, these findings contribute to the development of sustainable digital transformation frameworks within Nigeria’s financial services industry.

1.6 Scope of the Study

This study concentrates on listed deposit money banks on the Nigerian Exchange Group. It analyzes fintech investments (operational and capital) and effects on indicators like ROA, NIM, and ROE. The scope draws from recent panel datasets primarily covering 2012–2024. It excludes non-listed banks, non-fintech elements, and non-performance metrics.

1.7 Limitations of the Study

Reliance on secondary sources from annual reports and publications may involve data inconsistencies or delays. Detailed proprietary breakdowns are often inaccessible. Fintech’s rapid evolution means findings capture trends up to 2024–2025, with potential post-period shifts. Nonetheless, peer-reviewed scholarly sources ensure robustness.

1.8 Definition of Terms

• Fintech Investments: Allocations to financial technology, differentiated as operational expenditure (FintechOpex) for ongoing activities and capital expenditure (FintechCapex) for long-term assets.
• Financial Performance: Assessed via Return on Assets (ROA), Net Interest Margin (NIM), and Return on Equity (ROE), indicating profitability and efficiency.
• Listed Deposit Money Banks (DMBs): Publicly quoted commercial banks under Nigerian Exchange Group oversight.
• Fintech Adoption: Incorporation of digital tools like mobile platforms, AI, and payment systems into banking operations.

References

Alagbe, E. A., & Yinus, S. O. (2025). Financial technology and financial performance: Experience from Nigeria deposit money banks. Asian Journal of Economics, Business and Accounting. https://journalajeba.com/index.php/AJEBA/article/view/1737

Assessing The Impact of Fintech Innovations On The Financial Performance of Nigeria’s Listed Deposit Money Banks: A 2024 Perspective. (2024). Journal of Applied Economics and Business Environment. https://journal.unm.ac.id/index.php/JAEBE/article/view/8249