Abstract:

This study evaluated the relationship between financial innovation and financial intermediation in Nigeria. It seems that banks in Nigeria may have a problem of deposit-loan mismatch and losing customers to start-ups given increasing cost of deposits attributable to disruptive practice arising from financial innovations. The specific objectives of this study were to examine the relationship between financial innovation (value of the automated teller machine, internet banking, mobile banking, point of sale transactions) and financial intermediation (commercial banks deposit mobilization) in Nigeria for the period 2009–2018. This study was anchored on the financial innovation theory of Joseph Schumpeter, which states that technology creates opportunities for new profits and super profits as a result of increased investment by banks or financial institutions on products of innovation. The ordinary least square was used to estimate the parameters. The data used were extracted from the Central Bank of Nigeria statistical bulletin. The results showed that there is a positive and significant relationship between financial innovation (value of Automated Teller Machine) and financial intermediation (commercial banks deposit mobilization) in Nigeria; there is a positive but no significant relationship between financial innovation (internet banking) and financial intermediation (commercial banks deposit mobilization) in Nigeria; there is a positive but no significant relationship between financial innovation (mobile banking) and financial intermediation (commercial banks deposit mobilization) in Nigeria; and there is no positive and significant relationship between financial innovation (point of sale transactions) and financial intermediation (commercial banks deposit mobilization) in Nigeria. The f-test result showed that financial innovations proxies jointly related significantly to commercial banks’ deposits. The work concludes that financial innovations contributed to commercial banks’ deposits in Nigeria. The researchers recommended among others that banks should improve on the security of transactions done on their platforms, continue to improve and partner with start-ups in technological infrastructure, improve on power and network stability, deploy more innovative products, and improve on the efficiency of bank staff by regular training.