Financial innovation and bank financial performance : evidence from Nigerian deposit money banks

Since the global financial crisis of 2008, there has been increasing attention on the impact of financial innovation (FI) on the financial services industry. Despite wide consensus on the benefits of innovation to the real economy, the crisis made FI a focus of re-evaluation and re-conceptualization. FI can be accomplished through the deployment of a branchless banking system and technological adoption. The objective of this study is to investigate the impact of mobile, internet, and automated teller machines (ATMs) on banks' financial performance. Schumpeter's Theory of Innovation Diffusion and constraint-induced financial innovation theories underpin this study. Utilizing data for the 2012 to 2021 period because of data availability, this study considers the causal effect of innovation on commercial bank performance via Granger causality test. The entire 24 deposit money banks in Nigeria constitute the study's population. Secondary data were gathered over the study period from NDIC annual reports, the Nigeria Inter-Bank Settlement System (NIBSS), and the Central Bank of Nigeria statistical bulletins (2012-2021). Based on the ARDL model analysis, POS banking service has the greatest impact on deposit money bank performance because of large volume and value of transaction witnessed in the banking sector. Thus, more mobile and e-banking services should be made available. The usage of ATMs, mobile banking, credit and debit cards, online banking, and agency banking have a positive short run and long run substantial effect on deposit money bank performance in Nigeria, except National Electronic Fund Transfer (NEFT) and NIBSS Instant Payments (NIP) according to empirical results.