Mobile money transactions and banking sector performance in Ghana

Abstract

This study examines the effect of mobile money transactions on banking sector performance in Ghana using monthly data for the period 2015–2020. A composite index of banking sector performance was created from three indicators namely; depth, stability and efficiency of the banking sector. Using the Autoregressive Distributed Lag (ARDL) bounds test for cointegration, the Error Correction Model (ECM) and impulse responses analysis, the findings revealed that mobile money transaction has a detrimental effect on banking sector performance. Findings from the disaggregated components indicate that mobile money transactions hurt banking sector efficiency, while its effect on banking sector depth and stability is insignificant in the long run. It is concluded that the implication varies from one indicator to another concerning the direction and magnitude of the influence. The study, therefore, recommends that banks exercise much caution in their decision to consider adopting mobile money-based services when designing their business models.