Research Bites: Factors influencing fintech adoption in Nigeria

— This article is part of a series in collaboration with the African Journal of Science, Technology, Innovation and Development.

The financial industry is facing a dynamic and systemic change in financial technology (fintech) innovation globally, and Africa is not left out. However, very little is known about the perception of end users regarding fintech in Africa.

There is a need for the financial industry to firstly comprehend the level of acceptance of consumers concerning technology adoption of financial services prior to the actual adoption of the technology.

It is equally important to know that any technology or innovation developed, but not properly adopted by the end users, is deemed to fail.

Since Nigeria is ranked as the largest economy in Africa and Lagos State is the commercial hub of Nigeria, there is need to estimate the nature of fintech services adopted by the banking customers and the factors influencing their intention to adopt fintech services.

A survey conducted among 467 end users in Lagos State between the last quarter of 2019 and first quarter of 2020 found that perceived usefulness; perceived ease of use; service trust; and social influence from family and friends have positive and significant impacts on users' attitude towards adopting fintech services in Nigeria.

The results indicate that there is a need for regulatory agency in the financial sector to further improve security and safety around the fintech services to further boost the confidence and trust of the end users.

Family, friends and community are also very significant in influencing the users' attitude and intention to adopt Fintech services. It is important for the general public to be sensitized on the importance of financial technology products and services which could be done by banks through various channels such as television, radio and social media.

Popular use cases

The information from the survey respondents showed the nature of fintech services that customers used in the last three years in the commercial hub of Nigeria.

The result reveals that money transfer payments of various forms constitute the largest proportion of the fintech services being used by the respondents (83.3%), followed by savings and investment (75.4%), insurance (71.9%), financial planning (63%), borrowing (60.6%) and others (43.3%).

This indicates that most of the sampled respondents are aware and make use of fintech services, and these could not be separated from the fact that many Nigerian youths are familiar with financial transactions online.

Industry disruptors

Fintech encompasses a number of innovative services which utilize evolving information technologies like cloud computing, Internet of Things (IoT) and big data to widen financial product and service platforms.

This led to companies outside the conventional banks starting fintech services to compete with banks. These companies use technology for diverse financial solutions such as lending, payments, borrowing and personal financial management among others.

These companies aim to entice customers with products and services that are more efficient, user-friendly, automated and transparent than those currently available in the traditional banking system.

Different types of innovations which currently dominate fintech comprise peer-to-peer lending, mobile payment systems, artificial intelligence and machine learning, digital advisory and trading systems, crypto currencies and the Blockchain and equity crowd funding.

Fintech offers different opportunities to users through improvement in transparency, reduction of costs, eradication of middlemen and easier accessibility to financial information.

Banking battle

The fast innovations in the fintech industry pose challenges for banks as they need to adapt to this new technological wave if they want to remain in business.

In order to remain competitive and continue to have a greater market share in the financial industry, banks have started investing in fintech and at the same time acquiring some fintech companies.

Although a reasonable amount of attention has been devoted to fintech in the financial industry, many people still doubt the continuous use of fintech especially in Africa, as the end users are clouded with skepticisms due to the considerable risks attached to it.

This poses a great challenge to the fintech companies to increase the potential benefits of fintech products as well as limit the potential risks.

Fostering alliance between the regulators, the incumbent banks and the fintech companies is essential to reduce the potential financial risks that could emanate in the industry.

The rate at which new ICT and innovation are diffused and adopted goes beyond the features of the technologies and innovation themselves, but also of equal importance are the features of the users to whom it is directed.

While few countries such as China, Australia, United Kingdom, Korea and Finland among others have adopted fintech at a wider level, the rate of adoption still remains at the preliminary stage in many emerging and developing countries.

Continuous innovative technology has been shaping the financial sector and this creates a prospect for the banks and fintech companies to find better alternatives in satisfying the consumers' needs and convenience.

— To read more about this research, you can access the full academic research paper from the African Journal of Science, Technology, Innovation and Development.