FINTECH DISRUPTION AND BANKING STABILITY IN NIGERIA
Abstract
The study examines the relationship between fintech disruption and banking stability in Nigeria using an Autoregressive Distributed Lag (ARDL) model over the period 1990–2024. The study incorporated key fintech indicators; mobile banking adoption rate, fintech transaction volume, mobile money accounts per 1,000 adults, and digital payment usage, as explanatory variables, while banking stability was proxied by the Z-score. The ARDL approach was employed due to its suitability for mixed-order integration and its ability to capture both short-run dynamics and long-run equilibrium relationships. Empirical findings from the long-run ARDL estimates revealed that fintech disruption variables exert a significant but mixed effect on banking stability. Specifically, mobile banking adoption and digital payment usage demonstrated a positive and statistically significant long-run relationship with bank stability, suggesting that increased digital financial participation enhances efficiency, improves risk diversification, and strengthens deposit mobilization in the banking system. Conversely, fintech transaction volume exhibited a negative, but statistically significant effect on banking stability in the short run, indicating that rapid increases in digital transaction activity may initially heighten operational risk, cybersecurity exposure, and competitive pressure on traditional banks. Mobile money penetration showed a positive and stabilizing effect over the long run, reflecting its role in broadening financial inclusion and improving liquidity flows within the financial system. Based on these findings, the study recommended that policymakers should strengthen regulatory technology (RegTech) frameworks, enhance cybersecurity infrastructure, and promote collaborative fintech–bank partnerships to mitigate short-run risks. Furthermore, the Central Bank of Nigeria should deepen policies that support digital financial inclusion, while ensuring adequate oversight of rapidly growing fintech transaction ecosystems to sustain long-term financial stability