Signaling Channels of Financial Service Digitalization for Financial Inclusion in Nigeria

Abstract

Drawing support from the technology diffusion theory and technology acceptance model, this study examined how financial service digitalization contributed to the process of financial inclusion in Nigeria. Three financial technologies, POS, ATM, and web payment services, were selected based on their dominance and availability to numerous bank customers in various locations, including rural areas. On the other hand, financial inclusion was measured by access to financial services, with a focus on the number of bank branches across Nigeria. An ex -post facto research design was followed with the application of the autoregressive distributed lag (ARDL) model to analyse the quarterly data obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin. The findings showed that the POS and web payment services increased access to financial services and, in so doing, reduced the number of bank branches. This finding suggests that the availability of POS and web payment services is a prerequisite for financial inclusion while abridging the cost of banking transactions. In addition, it was found that ATM service is significant in promoting access to financial services. The implication of this finding is that increased availability of ATM service is associated with an increase in the number of bank branches, as most banks tend to situate their ATM galleries in their various branches for security and cost-effectiveness. In light of the findings, it is concluded that ATM technology is the most outstanding channel of finance service digitalization for financial inclusion in Nigeria. Thus, it is recommended that deposit money banks prioritise the provision of financial technology, especially ATMs, while scaling up their operational efficiency to create more opportunities for financial inclusion in Nigeria