THE IMPACT OF FINTECH INNOVATION ON DIGITAL FINANCIAL LITERACY IN

NIGERIA: A COMPARATIVE STUDY BETWEEN NIGERIA INDUSTRIES AND GHANA

INDUSTRIES.

1.0. Introduction

Fintech, short for financial technology, refers to the innovative use of digital tools and technologies to

provide financial services in a more efficient, accessible, and cost-effective manner. It covers a wide range

of services, including mobile banking, online payments, peer-to-peer lending, digital wallets, and

blockchain technologies. The goal of Fintech is to simplify financial transactions and make banking and

financial services more user-friendly, reaching individuals and businesses that may have limited access to

traditional banking.

Financial inclusion, on the other hand, is the effort to ensure that individuals and businesses, especially

those in underserved or low-income regions, have access to affordable and useful financial products and

services. These services include banking, credit, insurance, and payment systems. Financial inclusion is

critical because it enables people to save, invest, and protect themselves from financial risks, thereby

promoting economic growth and reducing inequality.

The advent of digital technologies has significantly transformed the financial industry, introducing

innovative products, services, and operators (BIS, 2018). The transition towards a digital economy,

accelerated by the Covid-19 pandemic, has revolutionized traditional financial transaction mechanisms

and highlighted the necessity for individuals to acquire digital financial literacy (DFL) to navigate this

evolving industry effectively. The OECD (2022) defines DFL as the skills required to utilize financial

products and services through digital channels. In the face of a rapidly changing global financial

environment, exogenous factors such as the rise of Fintech and the Covid-19 pandemic have compelled
banks to expedite their digital transformation strategies. These challenges underscore the importance of

ensuring financial inclusion and digital safety for customers (EBA, 2018; BIS, 2021). Policymakers and

public authorities must fully comprehend the benefits and risks associated with the widespread adoption of

digital financial technologies to assess their impact on customers and businesses (OECD, 2018).

Although digitalization has profoundly impacted the banking industry, the efficacy of intermediaries'

digital banking strategies hinges on customers' ability to use new products, services, and technologies.

Concurrently, the lack of digital skills among the population may impede the effectiveness of banking

digitization strategies (Sun et al., 2020). Exogenous events, such as the Covid-19 pandemic, have further

underscored the necessity of enhancing knowledge and skills in utilizing digital banking tools.

Consequently, the familiar concept of financial literacy (FL) has evolved into digital financial literacy

(DFL), encompassing individuals' ability to use digital devices and tools to conduct safe and sound e-

banking transactions.

The rapid evolution of financial technology (Fintech) has transformed the global financial landscape,

ushering in a new era of digital financial services. Fintech innovations have revolutionized transaction and

payment services, enhancing accessibility, efficiency, and convenience for users worldwide. Notably, the

advent of mobile money, digital wallets, and online banking platforms has significantly improved

financial inclusion by offering alternative solutions to traditional banking methods (Ozili, 2018).

In Nigeria, despite being the largest economy in Africa with a diverse financial sector comprising 24

commercial banks, 6 merchant banks, 887 microfinance banks, and 47 mobile money operators, a

substantial portion of the adult population remains financially excluded. According to the EFInA Report

(2022), approximately 36% of adult Nigerians lack access to digital financial literacy, contributing to the

pervasive digital divide in the country. This gap underscores the critical need for effective Fintech

solutions to bridge this divide and enhance financial inclusion (Akinola, 2020).
Conversely, Ghana has made notable strides in Fintech adoption, particularly with the widespread use of

mobile money services. In 2019, the Bank of Ghana reported 11 million mobile money account users, with

projections indicating an increase to 14.3 million users in the coming years. This growth reflects the

country's successful integration of Fintech solutions into its financial ecosystem, fostering greater financial

literacy and inclusion (Bank of Ghana, 2019).

Despite these advancements, both Nigeria and Ghana face challenges related to insufficient digital

financial literacy, which impedes the full potential of Fintech innovations. Previous studies have

highlighted the correlation between Fintech illiteracy and economic vulnerability, emphasizing the need

for comprehensive digital literacy programs to support financial inclusion efforts (Bruhn & Love, 2014).

This study aims to conduct a comparative analysis of the impact of Fintech innovation on digital financial

literacy in Nigeria and Ghana, focusing on various industries in both countries. By examining the factors

contributing to the digital divide and evaluating the effectiveness of existing Fintech solutions, this

research seeks to propose strategies for enhancing digital financial literacy and fostering greater financial

inclusion across these two West African nations.

The remainder of this paper is organized as follows. Chapter Two presents the literature review. Chapter

Three describes the data and methodology applied. Chapter Four analyzes the various literature used in the

comparative study and performs robustness checks, thus mapping out the findings. Finally, Chapter Five

draws conclusions from this paper.

1.1 Problem Statement.

Low financial inclusion in developing countries is a persistent challenge, particularly as millions of people

remain outside formal financial systems. This problem underscores the critical need for financial literacy,

especially in the era of rapid financial technology (FinTech) innovations. Financial literacy, defined as the
ability to understand and effectively use financial products and services, plays a pivotal role in

empowering individuals to access and benefit from FinTech solutions (Lusardi & Mitchell, 2014).

In many developing nations, low levels of financial literacy hinder the adoption of FinTech, which could

otherwise bridge the gap in financial inclusion. As FinTech innovations, such as mobile banking, digital

wallets, and peer-to-peer lending platforms, become more widespread, individuals with limited financial

knowledge may struggle to trust or engage with these technologies. This further perpetuates financial

exclusion (Zins & Weill, 2016). Without adequate financial literacy, even the most innovative FinTech

solutions may fail to achieve their potential in promoting financial inclusion.

Research has shown that when people are financially literate, they are more likely to engage in banking

services and adopt new financial technologies. In fact, a study by the World Bank (2018) highlighted that

financial literacy positively correlates with the adoption of mobile banking and other FinTech services,

particularly in regions where traditional banking infrastructures are weak. As FinTech continues to rise,

especially in areas where physical banking is scarce, financial literacy can help ensure that individuals are

not left behind in the digital financial revolution (Demirgüç-Kunt et al., 2018).

The burgeoning prevalence of technology-driven transaction and payment services has underscored the

immense potential for expanding digital literacy through Fintech innovation. These financial

transformations have significantly enhanced the lives of millions by mitigating the need to carry cash and

reducing the necessity for time-consuming travel to distant service points. Despite Nigeria's stature as

Africa's largest economy, boasting 24 commercial banks, 6 merchant banks, 887 microfinance banks, and

47 mobile money operators, a significant proportion—approximately 36%—of the adult population

remains financially excluded from digital literacy, contributing to a substantial digital divide (EFInA

Report, 2022).
In contrast, Ghana has witnessed substantial growth in mobile money account usage, with 11 million users

reported in 2019, a figure projected to escalate to 14.3 million (Bank of Ghana, 2019). This surge reflects

the integration of Fintech literacy and its role in fostering financial inclusion. The correlation between

Fintech illiteracy and socioeconomic vulnerability is evident, as limited digital literacy perpetuates

poverty and economic instability. Consequently, enhancing digital literacy through Fintech innovation has

become a cornerstone of financial inclusion initiatives in both countries.

Despite the proliferation of Fintech innovations and their attendant growth in Nigeria and Ghana, a

significant digital divide persists, stemming from inadequate digital literacy. This research seeks to

conduct a comparative analysis of the impact of Fintech innovation on digital literacy in Nigeria and

Ghana, aiming to elucidate the factors contributing to this divide and propose strategies to bridge it.

1.2. Objective of the Study

The major objective of this study is to investigate the impact of FinTech on digital financial literacy in

Nigeria and Ghana

1.3. Specific Objectives

1. To assess the current level of digital financial literacy in selected industries in Nigeria and Ghana.

2. To identify the key Fintech innovations influencing digital financial literacy in both countries.

3. To compare the effectiveness of Fintech innovations in enhancing digital financial literacy

between Nigerian and Ghanaian industries.

4. To assess the role of Fintech development in explaining the cross-country Digital Financial Divide

1.4. Research Questions

1. What is the current level of digital financial literacy in selected industries in Nigeria and Ghana?
 2. Which Fintech innovations have the most significant impact on digital financial literacy in Nigeria

and Ghana?

3. How does the effectiveness of Fintech innovations in enhancing digital financial literacy differ

between Nigerian and Ghanaian industries?

4. What is the role of Fintech development in explaining the cross-country Digital Financial Divide?

1.5. Significance of Study.

The significance of this study lies in its potential to contribute to the understanding and enhancement of

digital financial literacy through Fintech innovation in Nigeria and Ghana. As both nations strive towards

greater financial inclusion and economic development, this research can provide valuable insights and

practical recommendations that benefit various stakeholders.

Firstly, the study is significant for policymakers and regulatory bodies. By highlighting the current state of

digital financial literacy and the impact of Fintech innovations in Nigeria and Ghana, the research can

inform the development of targeted policies and regulations that promote financial inclusion.

Policymakers can leverage the findings to address gaps in digital literacy, create supportive regulatory

frameworks for Fintech companies, and ensure that the benefits of financial technology reach underserved

and unbanked populations.

Secondly, the study holds importance for financial institutions and Fintech companies. Understanding the

effectiveness of various Fintech solutions in enhancing digital financial literacy can guide these

organizations in refining their products and services to better meet the needs of their customers. The

comparative analysis between Nigeria and Ghana can also offer valuable lessons and best practices that

Fintech companies can adopt to improve their outreach and impact in similar markets.
Thirdly, the research is relevant to educational institutions and training providers. By identifying the key

challenges and barriers to digital financial literacy, the study can inform the design and implementation of

educational programs and initiatives that equip individuals with the necessary skills to navigate the digital

financial landscape. This is particularly crucial in ensuring that the benefits of Fintech innovations are

accessible to all segments of society, including those in rural and low-income areas.

Furthermore, the study is significant for the broader academic and research community. It contributes to

the growing body of literature on Fintech and digital financial literacy, offering a unique comparative

perspective between two prominent West African countries. The findings can serve as a foundation for

future research, encouraging further exploration into the relationship between Fintech innovation and

financial literacy in other contexts and regions

On a societal level, the study holds the potential to impact economic development and poverty reduction.

By enhancing digital financial literacy through Fintech innovations, individuals can gain better access to

financial services, improve their financial decision-making, and participate more actively in the economy.

This, in turn, can lead to increased financial stability, reduced economic vulnerability, and overall

improved quality of life for many people in Nigeria and Ghana.

Lastly, the study's significance extends to the global development community. As digital financial

inclusion is a key component of sustainable development goals (SDGs), particularly those related to

reducing poverty and inequality, the insights from this research can inform international development

strategies and programs. Organizations working to promote financial inclusion globally can benefit from

the findings and apply the lessons learned to other regions facing similar challenges.

1.6. The Scope of Study.

The scope of this study is centered on a comprehensive examination of the impact of Fintech innovation

on digital financial literacy within Nigeria and Ghana, specifically comparing the Fintech industries in

both countries. This study aims to provide an in-depth analysis of how Fintech innovations are influencing

digital financial literacy and, consequently, financial inclusion in these two West African nations from the

year 2015-2024.

The research will explore the current state of digital financial literacy in Nigeria and Ghana, identifying

the key Fintech innovations that have emerged in recent years. This includes an extensive review of

mobile money services, digital wallets, online banking platforms, and other relevant Fintech solutions.

The study will assess how these technologies are being adopted across different sectors such as banking,

telecommunications, and retail, and their role in enhancing digital financial literacy among the population.

An essential part of the scope involves investigating the socio-economic factors contributing to the digital

divide in both countries. The study will analyze demographic variables, including age, education, income

levels, and geographic location, to understand the barriers to digital financial literacy and Fintech

adoption. This analysis will highlight the challenges and opportunities for improving digital financial

literacy in Nigeria and Ghana, providing a nuanced understanding of the digital landscape in both

countries.

Moreover, the research will evaluate the effectiveness of existing Fintech solutions in addressing the

digital divide. This includes examining government policies, regulatory frameworks, and private sector

initiatives aimed at promoting financial inclusion through digital means. The study will assess the impact

of these measures on increasing access to financial services, reducing economic vulnerability, and

fostering a more inclusive financial ecosystem.

The comparative aspect of this study is crucial, as it seeks to identify the differences and similarities in

Fintech adoption and digital financial literacy between Nigeria and Ghana. By contrasting the experiences

of these two countries, the research aims to provide valuable insights into best practices and strategies that

can be employed to enhance digital financial literacy across diverse contexts. This comparison will also

shed light on the unique challenges faced by each country and the potential for cross-learning and

collaboration.

Furthermore, the study will delve into the specific contributions of Fintech companies in both Nigeria and

Ghana, examining how their innovations are tailored to meet the unique needs of their respective markets.

The research will explore the role of Fintech startups, established financial institutions, and regulatory

bodies in driving digital financial literacy and inclusion. By understanding the dynamics within the

Fintech industries of both countries, the study will offer a comprehensive view of the factors that facilitate

or hinder the effective implementation of digital financial solutions.

Ultimately, the study aims to propose actionable recommendations for policymakers, financial institutions,

and Fintech companies to improve digital financial literacy and foster greater financial inclusion in

Nigeria and Ghana. By addressing the gaps in digital literacy and leveraging Fintech innovations, the

research seeks to contribute to the development of a more equitable and inclusive financial landscape in

these two nations. Through a thorough and nuanced exploration of the impact of Fintech on digital

financial literacy, this study aspires to inform future initiatives and drive meaningful change in the

financial sectors of Nigeria and Ghana.

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