Determinants of Financial Technological Innovation Adoption by Customers of Deposit Money Banks in Nigeria

Abstract

Financial innovation as a banking system has been around for a while in Nigeria. It has improved the quality of banks’ services and reduced the operational costs. However, despite gaining a lot of attention and its benefits, many consumers are still not willing to use it and there were few empirical studies on multiple financial innovations. Even few studies done in this area concentrated mainly on customers’ perception of adoption and almost none on real quantitative factors. The purpose of this study was to investigate the determinants of financial innovation adoption by bank customers. The study hypothesized that, financial incentives, transaction cost, turnaround time and fraud risk affects the adoption of financial innovation in Nigeria. A mixed design research approach was used employing both primary and secondary data. Questionnaire was used to gather primary data. This was given to five hundred and thirty six respondents. All customers of the 21 listed banks in Nigeria constituted the target study population for this research. The study sample size was chosen by purposive and systemic sampling techniques, made up of the selected senior management staff, personal and corporate customers of the banks. The data collected was analysed with the aid of descriptive statistical techniques such as frequencies and percentages. Multinomial logit regression was used to identify the determinant factors and to test the hypotheses using Statistical Package of Social Sciences Version 21. Diagnostic tests result confirming Authenticity, Acceptability and Usability of the data collected, before been used even in the Pilot test and main study are as follows: Cronbach’s Alpha Coefficient- Only coefficient above overall 0.74 – Accepted. On Principal Component Analysis, -Factor loading EFA >0.5 & KMO> 0.6 – Retained. Autocorrelation Test (Time Series Test) - Durbin Watson Test- 2.024-No autocorrelation. Normality Tests –Shapiro-Wilk Test, p-value=0.066>0.05- H1 accepted- Normal Distribution. Heteroscedasticity – Chi² 7.114, according to Breusch-Pagan Test-Accepted. Multicollinearity - For all independent variables, VIF<10; Tolerance Stat > 0.1- Used. There was evidence of Good model fit- (Pseudo R²) Values close to 1. Key findings from the study confirmed that, financial incentives have significant effect on the adoption of Internet Banking and Mobile Banking, but has no effect on Point of Sale terminals and Electronic Fund Transfer. The result concluded that fraud risk affects the adoption of all products of financial innovation. The result also confirmed that turnaround time is significant for the adoption of all financial innovation products Internet Banking. Transaction cost is generally significant on the financial innovation adoption of all products. Adoption of Automated Teller Machine is the most popular, followed by Point of Sales. It is expected that this study will assist in sharpening of strategic development focus in the banking industry. It amongst others recommended that Banks should reduce transaction cost, fraud and security risk, Intensify product promotion to stimulate customers’ patronage and loyalty. Same study could be replicated for other financial institutions, or comparative analysis carried out on financial quantitative variables and customer’s perception as determinant of financial innovation adoption in Nigeria.