The Effect of Financial Technology on Money Demand: Evidence from Selected African States

Abstract

Purpose: The study sought to test the effect of financial technology on money demand in selected African states. The study drew from the fact that there is significant latent demand for digital payments in many markets of sub-Saharan Africa, and widespread consumer acceptance of mobile-communications technology is highly encouraging. The study sought to examine the effect of technology, among other things, on money demand. Design/Methodology/Approach: The study used panel data and a GMM panel technique to analyse the study’s findings. Findings: Results showed that all variables that captured financial technology have a negative effect with money demand (MD). Both Mobile Subscriptions (MS) and ATM (Automated Teller Machines) have a negative relationship with money demand (MD). Practical implications: Based on the results obtained in this study, the study recommended that Central Banks need to monitor and predict the consequences of financial innovations. As African states proceed with reforms of its financial sector, the stability of the demand for money would have to be reexamined and instruments of the Central Bank modified to ensure an effective control of money demand. Originality/Value: A little has been done on the effect of technological developments on money demand in Africa. An understanding of the way technological developments may positively or negatively impact on money demand may guide Central banks in adopting and implementing appropriate monetary policies and actions.